The New South Wales Court of Appeal recently refused leave to appeal a lower court decision denying Dr Colin Weatherill damages under Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth))(‘the ACL‘) for misleading and deceptive conduct, after he acted on an estimate of value of transporting an aircraft purchased in the USA to Australia (Weatherill v Bartett [2017] NSWCA 175).
In the primary decision on appeal (Bartlett v Weatherill [2017] NSWC 31), the Supreme Court had earlier set aside a Local Court judgment in favour of Mr Weatherill when it found that no actual financial loss resulted from the misleading estimate of transportation costs of an aircraft.
Facts
In 2012, Dr Weatherill, an obstetrician and gynaecologist, as well as a licenced pilot, began making enquiries to upgrade his Cessna 172 to the faster Cessna 400. After conducting his own research in the Australian market, and the market in the USA, Dr Weatherill decided to purchase a Cessna 400 in the USA for significantly less than the A$500,000.00 he had been quoted in Australia.
Before purchasing an aircraft in the USA, Mr Bartlett, a Licensed Aircraft Maintenance Engineer provided an estimate of A$52,395 (ex GST) to Dr Weatherill for the cost of bringing the aircraft to Australia from the USA. Relying on the estimate, Dr Weatherill went about purchasing the aircraft for US$370,000 and bringing it to Australia. Dr Weatherill had been prepared to pay up to $438,000 for acquisition and transport of the aircraft.
By the time the aircraft had reached Australia, Dr Weatherill had spent a total of A$490,000 purchasing and transporting the aircraft. He had spent more than he expected for transportation costs, and issued proceedings in the Local Court for damages he allegedly suffered as a result on relying on Mr Bartlett’s transport estimate.
In the Local Court proceeding, a Magistrate found that Mr Bartlett had engaged in misleading or deceptive conduct in breach of the ACL when he estimated the transport costs. In reaching a damages decision, the Magistrate acknowledged that due to the benefit of the USD/AUD exchange rate leading to Dr Weatherill’s aircraft actually being worth more than its purchase price at the time of the hearing, Dr Weatherill ought to be compensated for the loss of use of money he had not intended to part with between the time of purchase and time of hearing. Damages of $25,000 and costs were awarded to Dr Weatherill.
Decision on appeal to the supreme court
While the aircraft was purchased in reliance on Mr Bartlett’s misleading statement (the estimate), the actual value of the aircraft still exceeded the purchase and transportations cost. The decision was subsequently appealed by Mr Bartlett to the Supreme Court.
Mr Bartlett took issue with the Magistrates’ finding of loss in circumstances where it had been acknowledged the aircraft had actually increased in value.
Dr Weatherill cross-appealed on points which also touched on the methodology of determination of damages and as well as the aircraft being treated as an asset that had increased in value since its purchase.
It was found the Magistrate had failed to apply the authority set out in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 when considering damages for misleading and deceptive conduct under the ACL. Dr Weatherwill was obliged to prove that he had suffered actual loss as a result of his purchase of the aircraft in reliance on Mr Bartlett’s estimate. Dr Weatherill could only have suffered loss if the value of the aircraft acquired was less than the total amount paid for purchasing and transporting it. While Dr Weatherill spent more than he had expected in acquiring the aircraft, the value of the aircraft exceeded the total he had paid for it and he accordingly suffered no actual loss.
As a result of relying on the estimate, he owned an aircraft worth $500,000, on which he had spent $490,000 to purchase and transport. He was therefore $10,000 better off.
New South Wales court of appeal
Dr Weatherill appealed this reversal of the initial decision, as well as the order for him to pay all of Mr Bartlett’s costs.
Dr Weatherill failed in the appeal on multiple grounds. Firstly, Dr Weatherill was unable to establish that he did not require a grant of leave to appeal under the Supreme Court Act (NSW), given the value and nature of the claim in question. Dr Weatherill also failed to satisfy the Court of Appeal that leave should be granted to appeal.
The Court of Appeal agreed with the Supreme Court’s application of the principals in Marks v GIO Australia Holdings Ltd, and that the recoverable loss was any prejudice or disadvantage sustained as a result of altering his position under the inducement of Mr Bartlett’s misleading estimate, dismissing Dr Weatherill’s submission that treated Mr Bartlett’s estimate like a contractual promise arguing that he should be compensated for expectation loss, having paid more than the estimate.
The Court of Appeal also dismissed Dr Weatherill’s submission that the finding the aircraft was worth more at hearing than it was when purchased in 2012 was based on erroneous reasoning concerning changes in the AUD/USD exchange rate as this was not relevant to the finding that the aircraft was worth $500,000 at the time of purchase, and that no loss had been suffered.
Dr Weatherill also submitted there had been an error in proceeding on the basis that he had not been successful on liability, because the contravention of the ACL was admitted by Mr Bartlet for the purposes of the initial appeal. Mr Bartlett’s initial appeal in fact challenged that Dr Weatherill had suffered loss from the deceptive conduct. The Court of Appeal found that as no loss was suffered, Dr Weatherill had not made out of the cause of action under the ACL as pleaded even though there had been a contravention under the ACL.
Dr Weatherill’s appeal was dismissed as incompetent, and he was ordered to pay Mr Bartlett’s costs of the appeal.
The upshot of Dr Weatherill’s tale is that in an action for misleading and deceptive conduct under the ACL, an assessment must be made as to whether actual loss has been suffered as a result of the conduct. While a misleading statement may induce a consumer into a transaction, the value of the obtained from the transaction (in this case, the purchase of an aircraft with an actual value that exceeded the cost of purchase and transportation from the USA) must recognised in making a calculation as to whether any actual loss has flowed from the misleading and deceptive conduct.
This article was written by Matthew Brooks, Partner and Adrian Lee, Solicitor.
| Matthew Brooks
P: +61 2 9334 8740 E: mbrooks@hwle.com.au |