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High Court of New Zealand Decisions |
Last Updated: 10 December 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2011-004-000239 [2012] NZHC 3180
BETWEEN WARWICK JOHN MORTIMER AND LESLEY ERIN MORTIMER IN THEIR PERSONAL CAPACITIES AND AS TRUSTEES OF THE KARAMAROA FAMILY TRUST AND TEKAI INVESTMENTS LIMITED AND MORTIMER MOTOR SPORTS LIMITED First Plaintiffs
AND SEFTON CLINTON GIBB Second Plaintiff
AND ANTHONY EDWARD LE MESSURIER Third Plaintiff
AND NEIL MCCRUDDEN Fourth Plaintiff
AND GREGORY THORNTON Fifth Plaintiff
AND MOTORSPORT LOGISTICS LIMITED Defendant
Continued:.../2
Hearing: 2-5 July, 6 August, and 27 September 2012
Appearances: JEM Lethbridge and JMJ Calder (2-5 July), T Allan (6 August), JEM Lethbridge (27 September) for Plaintiffs
S Hamilton for Defendant
M J Francis and H W King for First Third Party (given leave to withdraw)
C J Hlavac for Second Third Party (given leave to withdraw)
Judgment: 28 November 2012
(RESERVED) JUDGMENT OF ANDREWS J
This judgment is delivered by me on 28 November 2012 at 3:00pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
MORTIMER AND MORTIMER & ORS V MOTORSPORT LOGISTICS LTD HC AK CIV 2011-004-000239 [28 November 2012]
.../2
AND GULL NEW ZEALAND LIMITED First Third Party
AND THE HISTORIC RACING CLUB INCORPORATED
Second Third Party
Solicitors:
Grove Darlow & Partners: DX CP24049, Auckland - Plaintiffs:jacquel@grovedarlow.co.nz
Kennedys: DX CP20542, Auckland – Defendant:s.hamilton@kennedys-law.co.nz
Table of Contents
Para No.
Introduction ..........................................................................................................[1] The plaintiffs’ claims ............................................................................................[6] The supply of fuel at Hampton Downs ...............................................................[9] Admissions and concessions made by Motorsport ..........................................[18] First cause of action: breach of contract ..........................................................[21] Second cause of action: breach of the Sale of Goods Act 1908.......................[29] Third cause of action: Consumer Guarantees Act ..........................................[34] Fourth cause of action: breach of s 9 of the Fair Trading Act 1986 ..............[35] Fifth cause of action: negligence .......................................................................[38] The position of the first plaintiffs .....................................................................[40] Conclusion as to liability....................................................................................[45] Quantum .............................................................................................................[46] First plaintiffs .......................................................................................................[47] (a) The repair costs .........................................................................................[48] (b) The Melbourne trip....................................................................................[58] Second Plaintiff ....................................................................................................[64] Third plaintiff .......................................................................................................[70] Fourth plaintiff .....................................................................................................[71] Fifth plaintiff ........................................................................................................[77] Result ...................................................................................................................[81]
Introduction
[1] An historic racing car is one which was manufactured before 1985. Within the general category of historic racing cars, Formula 5000 (“F5000”) cars are those manufactured between 1968 and 1976, which have five litre engines.
[2] Historic racing cars are tuned to run on leaded, high octane fuel. The fuel most commonly used is aviation gas (“Avgas”), a leaded fuel with an octane rating of over 100, used in the aviation industry. Alternatively, a lower octane fuel may be used if it has had a lead additive added to it, to increase the octane rating. Such a “blended” fuel is commonly sold as “race gas”, or “Avgas equivalent”.
[3] Neither Avgas nor race gas contain ethanol. Ethanol is suitable only for use in modern cars, which are built with components which can withstand the corrosive effect of ethanol. Ethanol can cause significant damage to the components of historic racing cars.
[4] The plaintiffs are owners of historic racing cars, which raced at a motorsport event (under the banner of New Zealand Festival of Motor Racing, Celebrating Bruce McLaren) run by the Historic Racing Club Inc (“HRC”) at Hampton Downs Motorsport Park between 22 and 24 January 2010. They purchased fuel for their cars from a supply depot at Hampton Downs. The fuel was supplied by the defendant, Motorsport Logistics Ltd (“Motorsport”). Soon after they began racing, the plaintiffs experienced difficulties with their cars’ engines, described variously as “misfiring”, “fuel surging”, “running erratically”, “seizing up”, and “failing” or “dying”. The plaintiffs were not able to complete their events. Subsequent examination of the cars revealed that the fuel the plaintiffs had purchased contained ethanol, and that their cars’ engines were substantially damaged. They required a complete strip down and repair or replacement of damaged parts.
[5] The plaintiffs now claim against Motorsport for the costs of repair and incidental costs. Motorsport acknowledges that it supplied fuel which contained
ethanol, and that the fuel caused damage to all of the plaintiffs’ cars. However,
Motorsport disputes liability and it disputes the quantum of damages claimed.
The plaintiffs’ claims
[6] The plaintiffs claim under five causes of action, which are pleaded in the alternative: breach of contract, breach of the Sale of Goods Act 1908, a claim under s 9 of the Consumer Guarantees Act 1993, breach of s 9 of the Fair Trading Act
1986, and negligence. Although the causes of action are framed somewhat differently, they all raise the following key issues:
(a) Did Motorsport make a representation to the plaintiffs as to the type of fuel being supplied?
(b) Did Motorsport know what fuel was required to be fit for the purpose for which it was purchased?
(c) Was the fuel supplied by Motorsport fit for the purpose it was intended to be used for?
(d) Did the plaintiffs rely on Motorsport’s expertise when buying fuel?
[7] I record at this point that the defendant issued third party claims against the HRC, and Gull New Zealand Ltd (“Gull”), from which it had purchased the fuel. During the course of the hearing, leave was given for both of the third party claims to be discontinued.
[8] Before turning to consider the causes of action individually, it is necessary to set out the evidence relating to the supply of fuel at Hampton Downs in some detail.
The supply of fuel at Hampton Downs
[9] Except where indicated, the following narrative was agreed.
[10] The HRC was to run a meeting at Pukekohe Park the weekend after the Hampton Downs event. In December 2009, a member of the HRC organising committee (Mr Ellis) asked the director of Motorsport (Mr Hodder) if Motorsport could supply 30,000 litres of Avgas for the Hampton Downs and Pukekohe events. Mr Hodder agreed to supply the fuel, subject to the payment of a retainer. The HRC was not prepared to pay a retainer, so declined the offer.
[11] On about 19 January 2010, Mr Ellis again contacted Mr Hodder and asked Motorsport to supply Avgas for the events. Mr Hodder agreed that Motorsport would supply Avgas, or a suitable equivalent fuel.
[12] Motorsport subsequently obtained fuel for the Hampton Downs event from Gull. Gull advised Mr Hodder that it did not sell Avgas. However, the Gull representative subsequently offered an alternative fuel blend, referred to as “E25”, which contained 75 per cent premium unleaded fuel and 25 per cent ethanol. As the fuel was unleaded, Gull recommended the addition of a lead additive.
[13] It will be obvious that the E25 blend offered by Gull differed materially from Avgas, in that it contained ethanol, and was unleaded. Mr Hodder and Mr Ellis differed in their evidence as to whether the HRC was made aware of the makeup of the fuel to be supplied and, if so, gave its approval for the blended fuel to be supplied. I accept Mr Ellis’ evidence that he told Mr Hodder that the fuel had to be suitable for historic racing cars, that Mr Hodder told him that Gull would supply Avgas-equivalent fuel, and that Mr Hodder did not tell Mr Ellis that the fuel contained ethanol. I also accept Mr Ellis’ evidence that the HRC approved the use of the fuel supplied by Gull on the basis of Mr Hodder’s advice that an Avgas- equivalent fuel that was suitable for historic racing cars would be supplied.
[14] Motorsport sold the fuel from a designated area at Hampton Downs. The
HRC “briefing sheet” for the event stated, in relation to fuel:
Race Fuel Hampton Downs – 100/130 Octane leaded race gas may be obtained from Hampton Downs. The fuel dump is location [sic] in the lower car park on the lefthand side of the roadway after coming through the infield vehicle tunnel.
[15] The fuel depot was operated by Mr Bruce MacDonald, with two assistants. Mr MacDonald’s evidence was that, for most of the day, the assistants dispensed fuel, while he dealt with the payment forms. Fuel was purchased for the plaintiffs’ cars before the practice laps.
[16] The evidence for the plaintiffs as to their purchases of fuel was as follows: (a) Andre Mortimer (purchased fuel for the first plaintiffs):
(i) Evidence-in-chief:
There were signs up advertising race fuel for sale. I then proceeded to fill up our fuel containers which took 150 litres of fuel. This was the total amount we needed for the entire weekend of racing.
While filling up the fuel containers I had a conversation with an employee where the makes, models and class of vehicles were discussed. I inquired whether this fuel was the right fuel for the vehicles. I specifically asked whether the fuel was AVGAS.
He replied: “Yes, it is, it is a special blend that we had to make up in Christchurch to get it here in time”. I again inquired by asking whether it was the right fuel to run these cars on. The attendant confirmed to me that it was AVGAS. I made the inquiry because the smell of the fuel was different to AVGAS. I also noticed that the colour of the fuel was different. It was a yellow to brown colour and AVGAS is blue.
...
Based on the attendant’s confirmation to me that the fuel was AVGAS I proceeded to purchase the fuel.
(ii) Cross-examination:
Q. The attendant, Mr MacDonald, his evidence will be that he didn't tell anyone that this fuel was Avgas?
A. He told me it was Avgas, specifically.
Q. Okay. His evidence will be that if he was asked what the fuel was, he told competitors that it was a blended fuel?
A. He did say it was a blended fuel but he said it was a race gas and it was a “special blend”. Sorry, that was Avgas, not race gas. He said, actually he specifically said it was Avgas.
(b) Sefton Gibb (second plaintiff):
(i) Evidence-in-chief:
When I attended at the fuel dump there was an attendant who was dispensing the fuel. I noted that the fuel drums that the attendant was dispensing from were Gull-labelled drums. I noted this with interest because in my entire racing career I had not ever seen Gull-labelled Avgas before. This observation is what led me to ask the attendant, more than once, to confirm that the fuel being supplied was Avgas. The attendant assured me that the fuel was Avgas each time I asked the question. Based on those assurances I had no further reason to suspect that the fuel was anything other than Avgas and so purchased the fuel.
...
If I had the slightest idea the fuel I was buying was not Avgas I would never have purchased it much less contemplated using it in my racecar. ... My Formula 5000 race vehicle MUST run on Avgas. ...
(emphasis as in original)
(ii) Cross-examination:
Q. The attendant, Mr [MacDonald] didn’t –
A. I – I can’t say it was Mr [MacDonald], it was a, it was a younger attendant.
Q. Okay, so the attendant didn’t tell you that it was
Avgas did he?
A. He absolutely did because I asked him on a number of occasions.
(c) Anthony Le Messurier (third plaintiff):
(i) Evidence-in-chief:
As far as I was concerned [Motorsport] as the fuel supplier at the event was the expert in fuel. There was no question in
my mind that the fuel it would be supplying would be the appropriate fuel for the cars at the event, namely Avgas.
I went to purchase the fuel with Mark Goldsmith. I had in fact forgotten my wallet so he needed to pay for the fuel for me (which I subsequently reimbursed). Because of this I was not listening to what the attendant was saying to Mark. However, I believed we were purchasing race gas or Avgas, namely leaded aviation fuel. Mark told me that the attendant said the fuel was an equivalent fuel to Avgas they had made up especially for the event.
(ii) Cross-examination:
Q. ... so Mark bought the fuel off the attendant? A. Correct.
Q. And you, you didn’t really have any interaction with
the attendant?
A. No, there was a lot of people standing around, there was a big queue there. As I said, it was all over the shop.
Q. So there’s people milling around and you're just not really paying attention to what the attendant’s saying?
A. No because I'm relying on him.
Mr Goldsmith (purchased fuel for third plaintiff):
(i) Evidence-in-chief:
When I arrived there were a small group of other competitors also waiting in a loose queue to be served. A conversation ensued at the time of filling between a few in the group and the attendant about the pressure [Motorsport] was under in meeting the fuel demands of the event organisers.
I noticed at this time a measuring jug and numerous smaller bottles (some empty and some with liquid in them) sitting on top of the 205L drums that the attendant was dispensing fuel from.
While I was there the pump was transferred to a new Drum. Before doing so I observed the attendant pour some additive into the Measuring Jug and then transfer it to the 205L fuel drum. The pump was re-installed by the attendant and the transfers continued.
While standing there I overheard the attendant say that there was no Racing Fuel (or Avgas) available in the North Island and that [Motorsport] had, at the last minute, produced an equivalent.
This comment obviously concerned me as I understood that we were purchasing actual racing gas (Avgas). When it was my turn to be served and because I had overheard the comment about the equivalent fuel, I questioned the attendant about the fuel on offer. The attendant said to me that there was no Racing Fuel available but assured me that they had made an equivalent “that was identical” to Racing Fuel to help out the event.
Based on this representation that the fuel was an identical equivalent to Avgas I purchased 80L of the fuel for me and on [Mr Le Messurier’s] behalf. Had I known that the fuel was in fact not a suitable equivalent and in particular that it contained ethanol, I would not have purchased it.
(ii) Cross-examination:
Q. And you're aware from [the HRC briefing sheet] that
... “100/130 octane leaded race gas may be obtained
in Hampton Downs ...”
A. That’s right.
Q. Yes. That, that’s how you knew there would be
Avgas at the event?
A. Ah, either Avgas or racing gas or racing fuel, whatever the country.
Q. Yes but you, you understood those terms to be equivalents?
A. Yes.
Q. As in if it was called Avgas it would be racing gas and if it was called racing gas it would be Avgas, that was your understanding?
A. Yes, yes.
Q. So when you went to purchase fuel, you followed those directions, that are in the briefing sheet.
A. Oh yes, there was only one fuel dump.
Q. Yes and when you went there, you assumed what you were purchasing was Avgas?
A. Yes.
Q. Because of what's in this document? A. Yes.
Q. And you weren’t told that the fuel was Avgas were
you?
A. No I wasn’t, I assumed it.
...
(iii) Re-examination:
Q. My friend asked you a question about the, the briefing sheet.
Once you were aware that the fuel was not Avgas as set out in the – or racing gas, as set out in the briefing sheet –
A. Yes.
Q. – was, what was the reason that you purchased the fuel?
Once you were at the fuel dump, what was the reason that you –
A. There was no, no reason to doubt the fuel because I was assured by the attendant it was, the identical to racing fuel or racing gas.
Q. And did you rely on what the attendant told you? A. Absolutely, absolutely.
(d) Mr McCrudden (fourth plaintiff):
(i) Evidence-in-chief:
The fuel that was purchased for my vehicles was purchased by Robin Ozanne from the fuel supplier at the event. I later learnt that the fuel supplier was [Motorsport].
Mr Ozanne (purchased fuel for the fourth plaintiff): (i) Evidence-in-chief:
I was a member of the Western Australian contingent that participated in the McLaren Festival held at Hampton Downs and Pukekohe in January 2010. This included Neil McCrudden, the fourth plaintiff.
...
On the first practice day at Hampton Downs I went down to the fuel distribution point with jerry cans to get fuel for the
cars in our group. One of the competitors I was purchasing fuel on behalf of Mr McCrudden. The fuel depot was about
1km from the pits.
There was an attendant dispensing the fuel. When the attendant started to fill the jerry cans with fuel I noticed that it was not the colour of AVGAS. AVGAS has a green tinge to it. This fuel was blue-purple tinge and quite a different smell to AVGAS.
For these reasons I questioned the attendant and asked him whether the fuel was AVGAS. He gave an assurance to me that the fuel was AVGAS. I went on to say that it did not smell or look like AVGAS. He responded to me by saying that AVGAS in Australia is a different colour to AVGAS in New Zealand. I said to him that I had been involved in aviation for 30 years and I thought it was an international norm. The attendant responded by saying that was not the case. He was adamant that the fuel was Race Gas (Avgas).
Based on his assurance as to the type of fuel I purchased the fuel on behalf of the competitors.
(ii) Cross-examination:
Q. And in this instance you were presented with a fuel that had a, I think you said a substantially different smell, would that be fair to say?
A. The, this, it’s hard to describe the smell. Avgas is much more volatile than ordinary unleaded fuel that you’d use in your car. So when Avgas is being dispensed, the, you can smell the fuel straight away.
Q. Right.
A. Whereas with automotive fuel, you don’t cop that
smell.
Q. So there’s a much more pungent –
A. Yes.
Q. – scent? A. Yes.
Q. And in this instance, you didn’t perceive that?
A. That’s correct.
Q. And when you saw the fuel, you say it was a different colour?
A. Yes.
Q. So you must have doubt in your mind that this
wasn’t Avgas?
A. That’s correct.
...
Q. ... Mr [MacDonald], the attendant at the pumping station will say that he didn’t tell any competitors that the fuel was Avgas. His evidence will be that he told competitors that the fuel was a blend. So what do you say to that?
A. Well I know what he said to me, and the reason – I know it was two and a half years ago but the reason I remember it is because he made the statement that Avgas in Australia must be a different colour, which I thought was an absurd statement to make, based on the fact that, um, aviation fuel, the colouring, is an international standard.
...
A. And I do remember it because of the drawn out nature of the conversation. He was extremely hassled I might – I’m not sure whether the person that – I mean, I couldn’t identify the person. It was two and a half years ago and, um, you know, I went down there and this person that was dispensing the fuel, um, if it was Mr MacDonald, yes, I’m not sure who it was. I mean if you asked me to point out Mr MacDonald, I couldn’t do that.
(e) Laird Thornton (fifth plaintiff)
(i) Evidence-in-chief:
I purchased the fuel from a gentleman at the fuel dump who advised me that the fuel I was purchasing was suitable for use in my F5000 vehicle. He told me this after I asked him if the fuel I was buying was suitable for use in my F5000 vehicle. When he confirmed this to me I assumed that the fuel being supplied was therefore either AVGAS or a suitable equivalent. The attendant filled my fuel cans and took payment from me by credit card. I had no reason to question the answer of the attendant or to believe that what I was purchasing was anything other than AVGAS. I was also standing in a queue with other local competitors who were also purchasing the fuel. My thoughts were that if the local drivers were purchasing the fuel then it must be the right fuel.
I relied on [Motorsport] as the supplier of the fuel to be supplying me with the correct fuel for my race car. Any fuel other than AVGAS is simply not fit for use in historical racing cars.
Given my extensive racing experience and knowledge of the makeup of AVGAS (namely, it being a leaded, aviation fuel) had I been told I was purchasing a fuel other than AVGAS I would not have purchased it and sourced actual AVGAS from elsewhere. Had I known that the fuel contained ethanol I definitely would have stayed well clear as I know that ethanol in particular has a very corrosive effect on the components of the engines of these Formula 5000 vehicles.
(ii) Cross-examination:
A. ... I don’t normally do the fuelling, it was the beginning of racing in New Zealand, it was the first day, I met brand new engineers who would be looking after my car for the first time. Instead of mulling around like a spare part at the wedding, I said, “Is there anything I can do?” They said, “Yes sir, would you take these jerry-cans that have come out of the container with your name on, would you go over there and down the hill, that’s where you’ll find the fuel dump. Would you join the queue, would you set up an account using your credit card so that we can get fuel all through the weekend and would you mind filling the two up?” I did that. I joined the queue, I got to the front, I asked for fuel for my F5000 car, it was filled up for me, the two jerry-cans, I turned around, I brought it back, I gave it to the engineers. I can’t tell you more than that because that’s what happened.
...
Q. Now the truth is that when you went to the fuel dump on the first day of the event to purchase fuel, you simply lined up, asked for a quantity of fuel and paid for it, that’s what happened isn’t it?
A. No, I think you’re missing something very fundamental. I am a pilot, we don’t have old pilots and bold pilots, you have one or the other. I’m alive because I specifically request things and I expect to be given specifically what I ask for. I didn’t ask for
150,000 octane fuel or Mickey Mouse juice, I said, “I want to fuel for the F5000, is this the right fuel?” I was told, “Yes”. No more complicated than that.
[17] Evidence for Motorsport as to the sale of fuel at the Hampton Downs event was given by Mr Hodder and Mr MacDonald:
(a) Mr Hodder:
(i) Evidence-in-chief:
Because I would not be at the event, Motorsport needed someone on site with fuel handling qualifications. Motorsport engaged Bruce MacDonald to help out with this event. Bruce co-owns the BP Service Station in Ohakune, so I knew that he had all of the necessary fuel-handling qualifications.
As we opened each drum of E25 after it had been delivered, Bruce and I added about 500mL of Nulon to the drum. This involved removing the lid, pouring in the lead substitute and shaking the drum gently to ensure that the lead substitute mixes in. I treated the first 8 to 10 drums with Bruce. I knew from what [the Gull representative] had told me that it was important that the lead substitute was added to each drum.
Bruce and I treated the drums of E25 in front of competitors and their crew members, who had already started to queue up to purchase fuel.
By the time I left to catch my flight, several competitors had already purchased fuel from us. I did not tell any of them that we were selling Avgas. I did not hear anyone else telling any of the people that had purchased fuel that it was Avgas.
I left Bruce in charge of the pumping station. Bruce was to supply competitors with the quantity of fuel they requested, and to take payment on behalf of Motorsport. Bruce was only there to dispense fuel. He had nothing to do with organising it.
I told Bruce that the E25 fuel, which was in large Gull drums, was a petrol/ethanol blend with the same octane rating as Avgas. I did not tell Bruce that the fuel was Avgas. I wouldn't have done this, because I knew that the fuel wasn't Avgas.
(ii) Cross-examination:
Q. Right so – but you know, but [Motorsport], when you agreed to supply the Avgas –
A. Yes?
Q. – you knew that the people purchasing this fuel were going to rely on the fact that the fuel being supplied was fit for the purpose?
A. Fit for the purpose, exactly.
Q. Yes. And you knew that Avgas – I mean you knew when you’ve organised to, you agreed to supply the fuel that it was Avgas that was required, didn’t you?
A. Yes.
...
Q. Well, could I just put it this way, do you accept that you just perhaps were – I mean as a supplier, you were careless as to, as to really what you were supplying these people. You didn't really understand what your – you've allowed a fuel to be supplied to the plaintiffs and other competitors –
A. Yes.
Q. – really not understanding the full extent of what was going to – of what damage could be caused, is that correct?
A. Not really. I s’pose it – I s’pose it is in some ways,
yes, yes to be honest.
(b) Mr MacDonald:
(i) Evidence-in-chief:
[Mr Hodder] told me earlier that week that the event organisers had contacted him on the Tuesday to see if he could arrange 30,000 litres of Avgas by the Friday. I remember him saying that the timeframe was tight. But, I also remember [Mr Hodder] telling me that he had arranged a blended fuel from Gull.
I recall that [Mr Hodder] was also supplying the fuel for a V8 event in the South Island that weekend. I agreed to help [Mr Hodder] out by operating the fuel station at the Hampton Downs event.
I arrived on the Thursday evening to help set up. We continued setting up that night, as well as early the following morning. From memory, Friday was a practice day with racing on the Saturday and Sunday.
Gull delivered the fuel early on the Friday morning. The fuel was unleaded, and I remember [Mr Hodder] and I were treating the fuel with a lead additive called Nulon as we were opening each drum. We added about a bottle and a bit to each drum. We were doing this while people were waiting to purchase fuel. [Mr Hodder] stayed at the venue for a little
while, but because he had to catch a flight to the South Island to be at the V8 event, he left fairly early on the Friday. [Mr Hodder] left me in charge of the fuel station.
Motorsport was only selling one type of fuel for this event. This was the blend that [Mr Hodder] had sourced from Gull with the words E25 printed on the drums. All I was to do was supply competitors with the requested amount of fuel they had asked for, and take payment.
All [Mr Hodder] told me about the fuel was that it was a blended fuel with an octane rating the same as Avgas. He didn’t tell me that it was Avgas. [Mr Hodder] told me that he hadn’t been able to source enough Avgas from the big oil companies in the time available. He told me that Gull had blended this fuel especially for him.
I didn’t tell any of the competitors that the fuel was Avgas. I wouldn't have done this, because [Mr Hodder] hadn’t told me that the fuel was Avgas. He told me that it was a blended fuel with the same octane rating as Avgas.
(ii) Cross-examination:
Q. Now when the competitors were asking you, or the competitors were asking you whether what was being supplied was Avgas?
A. Mhm.
Q. Which is your evidence.
A. Mmm. Some of them, not all of them, that’s for
sure.
Q. Sure, so when some of those –
A. So you're talking a few yeah.
Q. When some of those competitors asked you, you know, whether the fuel that was being supplied was Avgas.
A. Mhm.
Q. And you answered, although it's actually a special blend that we’ve been given by Gull, that’s, that was the answer that you gave to them?
A. Mhm, that’s correct.
Q. You would accept that they would take that to mean,
“I'm getting a fuel equivalent to Avgas.”
A. I guess so.
Q. And in fact it's logical that at the time you thought when [Mr Hodder] told you, “Hey, I couldn’t get Avgas but I got this special blend,” that the special blend he got was actually equivalent to Avgas?
A. That would be my presumption.
Admissions and concessions made by Motorsport
[18] As recorded earlier, Motorsport admitted that it supplied the fuel (which contained ethanol) to the plaintiffs, and that the fuel caused damage to the plaintiffs’ vehicles.
[19] I accept Ms Lethbridge’s submission that Mr Hodder made key concessions
in the course of his evidence, namely:
(a) Motorsport was an approved supplier of fuel for “tier 1” motorsport racing events, and for Motorsport New Zealand.
(b) Motorsport knew that Avgas or a suitable equivalent fuel, was required and agreed to supply it.
(c) Motorsport knew that competitors (in particular the plaintiffs) purchasing fuel would be relying on the fuel being fit for the purpose for which it was to be used.
(d) As a supplier of fuel, Motorsport knew that people who purchased from it relied on it to supply them with the correct fuel.
(e) Motorsport had a duty to tell competitors (in particular the plaintiffs)
that the fuel being supplied contained ethanol.
(f) Motorsport had a duty to ensure that the plaintiffs were not misled either by inference or expressly as to what they were buying.
(g) Motorsport incorrectly supplied fuel other than Avgas, or a suitable equivalent fuel.
[20] Those admissions and concessions are of significance for each of the
plaintiffs’ causes of actions.
First cause of action: breach of contract
[21] Motorsport admitted in its statement of defence that there was a contract between it and each of the plaintiffs for the sale of fuel. The plaintiffs pleaded that it was an express or implied term that the fuel supplied would be Avgas or a suitable equivalent.
[22] Ms Lethbridge submitted that this cause of action was made out on the evidence. She referred in particular to the plaintiffs’ evidence as to representations made to them at the time the fuel was supplied, Mr Hodder’s concessions as to Motorsport’s knowledge of what fuel was required, and Mr MacDonald’s acknowledgement that competitors (in particular the plaintiffs) would have believed they were being supplied a fuel that was a suitable equivalent to Avgas.
[23] Mr Hamilton submitted that this cause of action was untenable for the reasons that the plaintiffs had not pleaded that they had expressly asked Mr MacDonald (nor any other agent of Motorsport) for Avgas, and neither Mr MacDonald (or any other agent of Motorsport) had expressly agreed to supply Avgas. He also submitted that there was no pleading of an implied term that Avgas would be supplied.
[24] I reject Mr Hamilton’s submission. In the plaintiffs’ amended statement of
claim it is pleaded that:1
It was an express or implied term of the contract for the sale and purchase of fuel that the defendant would provide Avgas fuel (or a suitable equivalent) and to ensure that the fuel provided at the Hampton Downs event was fit for the plaintiffs’ purposes.
...
The particular purpose of the fuel was made known by the plaintiffs’ and/or plaintiffs’ agents, expressly or by implication, to the defendant. It was a term of the agreements between the plaintiffs and the defendant that the fuel supplied by the defendant was Avgas fuel.
[25] Further, I am satisfied, in the case of each of the plaintiffs, that when fuel was purchased it was made clear to the Motorsport representative that Avgas, or a suitable equivalent fuel, was required, and that the fuel had to be fit for the purpose for their historic racing cars.
[26] Even if I had not been satisfied that it was an express term of the contract that Avgas or a suitable equivalent fuel, fit for use in the plaintiffs’ historic racing cars would be supplied, I am satisfied that such a term should be implied. That is, I am satisfied that in this case all of the conditions set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings,2 are satisfied: an implied term that Avgas or a suitable equivalent fuel would be supplied is reasonable and equitable, is necessary to give business efficacy to the contract, goes without saying, is capable of clear expression, and does not contradict any express term of the contract.
[27] Further, I am satisfied that in supplying fuel that contained ethanol (and was not Avgas or a suitable equivalent fuel), Motorsport was in breach of contract. As Motorsport has admitted that the fuel supplied by it caused damage to the plaintiffs’ racing cars, the plaintiffs must succeed on their first cause of action.
[28] In the light of that finding, it is not necessary to deal extensively with the remaining causes of action. However, for completeness, I turn to consider each one, briefly.
Second cause of action: breach of the Sale of Goods Act 1908
[29] Although the plaintiffs’ amended statement of claim does not expressly refer
to s 16 of the Sales of Goods Act, the pleading clearly alleges a warranty that Avgas,
or a suitable equivalent fuel, would be supplied, and a breach of that warranty.3 I reject Mr Hamilton’s submission that this cause of action has not been adequately pleaded.
[30] The plaintiffs were required to establish that:
(a) the goods sold by Motorsport are of a description that it is in the
course of Motorsport’s business to supply;
(b) the plaintiffs made known to Motorsport expressly or by implication the particular purpose for which the goods were required; and
(c) the plaintiffs communicated that purpose so as to show they relied on Motorsport’s skill and judgment as to the suitability of the goods for their purposes.
[31] I am satisfied that each element has been established on the evidence. Mr Hodder accepted that Motorsport is in the business of supplying fuel for “tier 1” motorsport events. The plaintiffs’ evidence establishes that each of the plaintiffs communicated the purpose for which the fuel was required (which was, in any event, evident from the circumstances), and each of the plaintiffs made it clear that they relied on Motorsport’s skill and judgment.
[32] I do not accept Mr Hamilton’s submission that Motorsport was not aware of the specific purpose for which the fuel was required. Mr Hodder acknowledged that he knew that Avgas, or a suitable equivalent fuel, as required. I also reject his submission that the plaintiffs did not rely on Motorsport’s skill and judgment. That they did rely on Motorsport is clear from the plaintiffs’ evidence.
[33] As was the case with the first cause of action, there is no dispute that neither Avgas nor a suitable equivalent fuel was supplied. Accordingly, the plaintiffs have also made out their case for the second cause of action.
Third cause of action: Consumer Guarantees Act
[34] Ms Lethbridge accepted that the plaintiffs could not succeed on both the second (Sale of Goods Act) and third (Consumer Guarantees Act) causes of action. In the light of my finding as to the second cause of action, I will not consider the third cause of action any further.
Fourth cause of action: breach of s 9 of the Fair Trading Act 1986
[35] In Red Eagle Corp Ltd v Ellis,4 the Supreme Court set out a two-stage approach to claims of a breach of s 9 of the Fair Trading Act. Thus in this case, the first stage is to determine whether the plaintiffs have proved a breach of s 9 by Motorsport, and the second stage is to determine whether the plaintiffs have suffered loss or damage “by” Motorsport’s conduct. It is necessary to consider whether the plaintiffs were misled or deceived, and whether Motorsport’s conduct was the effective cause, or an effective cause, of the plaintiffs’ loss or damage.
[36] Regarding the first stage, the Supreme Court observed that the question is whether a reasonable person in the plaintiffs’ position would likely have been misled or deceived, and that it is not necessary to prove that the defendant’s conduct actually misled or deceived the particular plaintiff, or anyone else. In this case, I am satisfied that the evidence already referred to satisfies me that Motorsport’s conduct was likely to mislead a reasonable person in the position of the plaintiffs. As already noted, Motorsport was the official supplier of fuel, it knew that Avgas or a suitable equivalent fuel was required, Mr Hodder has admitted that he knew he had a duty to advise purchasers that the fuel contained ethanol, none of the plaintiffs were advised that the fuel contained ethanol, and Mr MacDonald accepted that purchasers would have believed they were receiving a fuel that was a suitable equivalent to Avgas.
[37] With respect to the second stage of the inquiry, I am satisfied on the evidence that each of the plaintiffs actually believed that they were being supplied with Avgas or a suitable equivalent. I am in no doubt that had there been any suggestion that
they were not being supplied with such a fuel, not one of the plaintiffs would have purchased it. Further, with respect to the second part of the second stage of the inquiry, it has been accepted that the fuel supplied by Motorsport caused damage to the plaintiffs’ cars. Accordingly, I am satisfied that the plaintiffs have made out the fourth cause of action.
Fifth cause of action: negligence
[38] This cause of action may be dealt with very briefly. Mr Hodder acknowledged that Motorsport owed the plaintiffs a duty of care to supply the appropriate fuel. Motorsport did not supply the appropriate fuel, and the plaintiffs’ cars were damaged as a result of that fuel being supplied.
[39] The plaintiffs have, accordingly, made out the fifth cause of action.
The position of the first plaintiffs
[40] Before concluding this discussion of liability, it is necessary to refer to the position of the first plaintiffs. The plaintiffs’ original and amended statements of claim named Warwick John Mortimer and Lesley Erin Mortimer “as trustees of the Karamaroa Family Trust” as first plaintiffs (“the original first plaintiffs”). In the course of the trial, Ms Lethbridge sought and was granted leave to join Mr and Mrs Mortimer in their personal capacities, Te Kai Investments Ltd, and Mortimer Motorsports Ltd (formerly called Mead International Ltd) as further first plaintiffs (“the further first plaintiffs”). This joinder was sought when issues were raised in Mr Hamilton’s cross-examination of Mr Warwick Mortimer as to the entity which had been invoiced, and/or paid, for the cost of repairs.
[41] At trial, Mr Hamilton did not challenge evidence given by Mr Mortimer that the original first plaintiffs owned the two cars that were damaged, or that Mr Mortimer’s son, Andre, was instructed to, and did, purchase fuel for the two cars from Motorsport, on behalf of the original first plaintiffs. However, in his closing submissions, Mr Hamilton submitted that Motorsport could not be held liable to any of the further first plaintiffs, on any of the causes of action.
[42] In particular, Mr Hamilton submitted that there was no contract between any of the further first plaintiffs and Motorsport, and therefore no possible claim in contract, under the Sale of Goods Act, or under the Consumer Guarantees Act. He further submitted that no actionable representation had been made to any of the further first plaintiffs, and no duty of care was owed to them, so no cause of action could arise under the Fair Trading Act or in negligence.
[43] In response, Ms Lethbridge submitted that there was no impediment to a finding that Motorsport is liable to the first plaintiffs, as they are presently named. She submitted that Motorsport had admitted in its statement of defence to the plaintiffs’ amended statement of claim that “the plaintiffs” had purchased fuel from it; that “the plaintiffs” experienced difficulties with their engines as a result of the fuel “they” purchased; that “the plaintiffs” had to repair the damage to “their” vehicles; and that the fuel supplied to “the plaintiffs” caused damage to “the plaintiffs’” engines.
[44] The admissions Ms Lethbridge referred to were made in response to the plaintiffs’ amended statement of claim, in which only the original first plaintiffs were named as parties. Notwithstanding that, I am satisfied that any concerns as to the ability of the further first plaintiffs to establish a cause of action against Motorsport do not preclude me from finding that Motorsport is liable to the original first plaintiffs. The position of the further first plaintiffs will require further consideration in the context of quantum.
Conclusion as to liability
[45] I find that Motorsport is liable to each of the plaintiffs (including the further plaintiffs).
Quantum
[46] Whether assessed in the context of the contractual claims or the claims in tort, Motorsport must be ordered to pay the plaintiffs’ damages for losses incurred by the plaintiffs that were the reasonably foreseeable consequences of Motorsport’s
breaches. In the case of each of the plaintiffs, I am satisfied that has been established for the claims that I hold in the following paragraphs must succeed. The question of quantum is best considered in relation to each of the plaintiffs, individually.
First plaintiffs
[47] The first plaintiffs claimed losses totalling $74,606.40, comprising repair costs of $64,709.21 and the costs of a planned trip to compete at the Melbourne Grand Prix in Melbourne in March 2010, of $9,897.19. In his evidence at trial, Mr Mortimer claimed $8,134.20 for the Melbourne Trip, making a total claim of
$72,843.41. I will proceed on the basis of the lower claim.5
(a) The repair costs
[48] Mr Hamilton submitted that none of the invoices for repair work were made out to the original first plaintiffs. They were made out to Te Kai Investments Ltd, Mortimer Motorsports Ltd, and to a company (Speed Source Ltd) which itself had rendered invoices to “Mortimer Motorsport c/- Te Kai Investments Ltd”. He submitted that Motorsport could not be held liable to the original first plaintiffs, as they had incurred no loss. Mr Hamilton further submitted that as neither Te Kai Investments Ltd nor Mortimer Motorsports Ltd had an independent claim against Motorsport, Motorsport could not be held liable for any invoices paid by either of these entities. Mr Hamilton also submitted that there was, in any event, no certainty as to which entity had paid particular invoices.
[49] Finally, Mr Hamilton submitted that the first plaintiffs had wrongly claimed for work done on vehicles other than the first plaintiffs’ two F5000 cars.
[50] In response, Ms Lethbridge submitted that Motorsport had not pleaded any defence as to the particular entities to which invoices were rendered and by which they were paid. Having failed to raise the issue in the pleadings, Motorsport should not be permitted to advance it now as a defence. She further submitted that, in any
event, there is no basis for such a defence.
5 All amounts are GST inclusive.
[51] The first plaintiffs’ quantum claim, at [21] of the amended statement of claim was:
The first plaintiff’s loss amounts to not less than $74,606.40 and is calculated as set out in Schedule 1.
Schedule 1 contains a list of the invoices (identified by invoice number, date, and amount) that made up the claim for repair costs. In its statement of defence, Motorsport said:
It denies paragraphs 21 to 25.
[52] Rule 5.48 of the High Court Rules sets out the requirements of a statement of defence. These include:
(2) A denial of an allegation of fact in the statement of claim must not be evasive. Points must be answered in substance.
...
(5) The statement of defence must give particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances sufficient to inform the court, the plaintiff, and any other parties of the defendant’s defence.
[53] Motorsport’s simple denial of the first plaintiffs’ claimed loss does not comply with the High Court Rules. The claim was set out with full particulars as to the individual invoices, and the defence should have been likewise particularised. I accept that Motorsport should not now be permitted to advance the defence it seeks to advance.
[54] In any event, I also accept Ms Lethbridge’s submission that the defence has no merit. I accept that Mr Mortimer, in his answers to Mr Hamilton’s questions in cross-examination, gave clear evidence that, irrespective of who paid the invoices, the Karamaroa Family Trust ultimately bore the loss.
[55] Mr Mortimer’s evidence was supported by evidence given by Ms Carter, a chartered accountant, who is the accountant for Mr and Mrs Mortimer, and the Mortimer Group of companies and trusts. The group includes the Karamaroa Family Trust, Te Kai Investments Ltd, and Mortimer Motorsports Limited. Ms Carter’s
evidence was, in essence, that where any entity or person had paid a particular invoice, the Karamaroa Trust owes a debt to that entity, and the debt is recorded in the Trust’s statement of financial position.
[56] Accordingly, I accept that the Karamaroa Trust has sustained loss by paying for repairs to the two F5000 cars. I hold that the first plaintiffs succeed in their claim against Motorsport for repair costs, except as to:
(a) A claim for $820 paid on a Speed Source invoice 186 dated
2 March 2010, which is allowed as $439.99. The balance of the invoice relates to repairs to another vehicle.
(b) A claim for $376.45 paid on “Cardwell Racing Supplies” invoices dated 20 and 23 September 2010 is not allowed. There is no evidence showing these claims were for work done on the F5000 cars.
[57] I calculate the first plaintiffs’ award of damages to repairs to the F5000 cars as being $63,952.75 (GST inclusive).
(b) The Melbourne trip
[58] The first plaintiffs’ claim (as set out in Mr Mortimer’s evidence) was
$8,134.20. It comprises airfares, travel agent’s costs, accommodation costs and rental car costs. In his evidence, Mr Mortimer said that he had entered to race one of the F5000 cars at the Melbourne Grand Prix in March 2010. He had booked and paid for himself and seven crew members to attend the event on the basis that the car would be in a condition to race at the event. However, because of the damage caused to the car at the Hampton Downs event, he was not able to race in Melbourne.
[59] However, as both the airfares and accommodation costs were non-refundable, Mr Mortimer and his crew travelled to Melbourne. The first plaintiffs claimed the costs of the trip as “wasted costs”. Mr Mortimer said that he would not have
purchased the tickets and paid for accommodation unless he was competing, and this was particularly so in respect of the costs for his crew.
[60] Mr Hamilton submitted that, as Mr Mortimer and his crew had in fact travelled to Melbourne for the Grand Prix, there were no “wasted costs” despite the fact that Mr Mortimer was not able to compete. He submitted that Mr Mortimer had “always intended” to go to Melbourne to watch the Grand Prix, as evidenced by the fact that the airfares were bought in November 2009. Accordingly, he submitted, the first plaintiffs had suffered no loss.
[61] I cannot infer from the date the airfares were paid whether they were paid with the intention of travelling to Melbourne to watch or to compete in the Grand Prix event. The fact that all eight airfares were paid on the same day in fact leads me to conclude that all airfares were bought with the intention that Mr Mortimer would be racing, and needed to pay for his crew to travel with him.
[62] I therefore accept that when he was not able to race his F5000 car at Melbourne, Mr Mortimer was faced with the crew members’ airfares and accommodation, already paid for and non-refundable. I also accept Mr Mortimer’s evidence that he would not have paid for his crew members to travel to Melbourne just to watch the racing. However, the position is different as regards Mr Mortimer himself. I am not satisfied on the balance of probabilities that he would not have travelled to Melbourne for the Grand Prix, whether or not he was competing.
[63] I have concluded that the first plaintiffs’ claim in respect of the Melbourne trip succeeds insofar as it is for the “wasted costs” of Mr Mortimer’s crew’s non- refundable airfares and accommodation costs. It does not succeed in respect of any other amounts claimed. The information set out in Schedule 1 to the amended statement of claim does not enable me to calculate the quantum of this award.
Second Plaintiff
[64] In the plaintiffs’ amended statement of claim, Mr Gibb’s claim is pleaded as
being for $34,558.00, comprising $22,397.80 for parts, storage costs, airfares and
accommodation (“the parts, etc claim”), and $12,160.20 for his own labour, and for spark plugs, racing engine oil, and Avgas taken from his own on-hand supplies, and telephone calls (“the labour, etc claim”). In his evidence, Mr Gibb claimed
$23,088.09 for parts, etc, and $12,173.21 for labour, etc (a total of $35,261.30). I am satisfied that the amendment from $22,397.80 to $23,088.09 for the parts, etc claim simply corrects an arithmetical error in the amended statement of claim. The increase in the claim for labour, etc is minor, and is accounted for by additional spark plugs used.
[65] Motorsport did not dispute Mr Gibb’s claim to $23,328.09, comprising the parts, etc claim ($23,088.09), together with $240 (Avgas) of the labour, etc claim. However, he submitted that Mr Gibb could not claim for the spark plugs and racing engine oil used from his own on-hand supplies, or for his own work (costed out at
$75 per hour). As to the former, he submitted that there was no supporting documentation for the cost of the spark plugs and oil. As to the latter, he submitted that Mr Gibb was not out of pocket, so could not claim.
[66] Ms Lethbridge submitted that if Mr Gibb had not carried out the repair work (he is an A-Grade mechanic and able to do so), he would have had to pay another mechanic. She submitted that there was no evidence, or submission, that the hours Mr Gibb worked on the car, or the claimed charge-out rate, were unreasonable.
[67] I accept Ms Lethbridge’s submissions. There are no grounds on which I should conclude that Mr Gibb should not be paid for working on the car. As Ms Lethbridge submitted, if he had not done the work, another mechanic would have had to.
[68] I reject Mr Hamilton’s submission that Mr Gibb cannot claim for spark plugs and racing engine oil taken from his on-hand stock. I accept Mr Gibb’s evidence that these items were from existing stock. The amounts involved are relatively minor. I would not expect Mr Gibb to have to produce receipts for them.
[69] Accordingly, Mr Gibb’s claim succeeds in its entirety. Motorsport is liable to
pay him $35,261.30 (GST inclusive).
Third plaintiff
[70] Mr Le Messurier claimed AUD13,047.76 (converted in the plaintiffs’ amended statement of claim to NZD16,657.42) for repairs to his engine. Motorsport does not dispute the quantum of Mr Le Messurier’s claim. Accordingly, Mr Le Messurier’s claim succeeds in its entirety. Motorsport is liable to pay him
$16,657.42.
Fourth plaintiff
[71] Mr McCrudden is the owner of the Western Australian Racing Museum (“the museum”). In response to an invitation from the HRC, Mr McCrudden arranged for
13 cars to be brought from Western Australia, in two containers. Seven of these were historic racing cars from the museum, and Mr McCrudden was to drive two of them.6 The two cars raced by Mr McCrudden required Avgas, and were fuelled with fuel bought from Motorsport. When the engines of both cars failed during practice laps, replacement engines were fitted. These also failed. Mr McCrudden claimed AUD45,901.50 for repair costs, freight, and airfares and accommodation, amended
to AUD46,701.50.
[72] Motorsport did not challenge the claim for AUD29,001.50, for repairs carried out by engine builders in Western Australia. However, he submitted that Mr McCrudden was not entitled to recover freight costs, for work carried out by himself, assisted by a mechanics employed by the museum, or for airfares and accommodation for himself and a mechanic.7
[73] Regarding the freight costs, Mr Hamilton submitted that, because the two containers were always going to be freighted to and from New Zealand, whether or not the two damaged cars were included, it could not be said that the freight costs were “wasted”. I reject this submission. Mr McCrudden’s claim is for the two
damaged cars’ share of the total freight costs. The cars were freighted to New
6 Other drivers were to race the other cars.
Zealand for the purpose of racing at Hampton Downs. They were not able to be raced, because they were damaged by the fuel supplied by Motorsport. The wasted freight costs were a consequence of the damage, and were reasonably foreseeable.
[74] Similar reasoning applies to Mr McCrudden’s claim for airfares and accommodation. He was to race the two cars which were damaged, and his mechanic was to work on those cars. Because of the damage sustained, neither Mr McCrudden nor the mechanic was able to complete the intended purpose of their visit to New Zealand.
[75] Mr Hamilton also submitted that Mr McCrudden was not entitled to recover for work carried out by himself, assisted by mechanics employed by the museum. I reject this submission. There was no evidence, or submission, suggesting that the work was not in fact carried out, or that the cost was not reasonable. I accept Ms Lethbridge’s submission that if Mr McCrudden and the museum mechanics had not done the work, other mechanics would have had to do so, and would have to have been paid.
[76] Mr McCrudden’s claim succeeds in its entirety. Motorsport is liable to pay him AUD46,701.50.
Fifth plaintiff
[77] Laird Thornton claimed $27,646.45, comprising $12,343.24 for repair work done on his car in New Zealand, GBP2405 (NZD4,665.24) for repairs done in the United Kingdom, and GBP5000 (NZD10,637.97) for fuel.
[78] Motorsport did not challenge the claim for $12,343.24, but challenged the claim for work done in the United Kingdom, on the basis that it was an unnecessary repetition of the work done in New Zealand. Motorsport also challenged the claim for fuel, but gave no reasons for doing so.
[79] I reject Mr Hamilton’s submissions. Mr Jennett, the mechanic who worked on Mr Thornton’s car in New Zealand, gave evidence for the plaintiffs.8
Mr Jennett’s evidence, when cross-examined concerning the work done on Mr Thornton’s car, was that the work was “a minor repair”, a “patch up”, to allow the car to be used for racing. The engine was not stripped down and rebuilt to the standard of a race engine. It was “basic correction work”. The work done in the United Kingdom was, by contrast, a full rebuild. Mr Thornton contrasted the work done in New Zealand with that in the United Kingdom as being a “temporary band aid”, as against a “fix”. I am satisfied that there was no unnecessary repetition.
[80] Mr Thornton’s claim succeeds in its entirety. Motorsport is liable to pay him
$27,646.45.
Result
[81] The plaintiffs’ claims against Motorsport succeed as set out above. Costs should follow the event, on a 2B basis, together with disbursements as fixed by the
Registrar.
Andrews J
8 Mr Jennett was also called by Gull as an expert automotive mechanic and machinist.
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