Patrick G. Flynn (plaintiff) v. Dermot Kelly Ltd and New Holland Finance (Ireland) Ltd (defendants)
Contract - Sale of goods - Collateral contract - Implied term - Whether implied conditions as to quality and fitness applied - Whether collateral contract existed - Whether fundamental breach of implied condition as to quality - Consumer Credit Act 1995 (No. 24), ss. 2 & 76 - Sale of Goods and Supply of Services Act 1980 (No. 16), s.13.
The High Court (Mr Justice O'Neill); judgment delivered on March 16th, 2007
The agreement between the plaintiff and the second named defendant was not a "consumer hire agreement" and the plaintiff was not entitled to the benefit of the implied undertaking as to quality and fitness for purpose contained in the Consumer Credit Act 1995. Nor was the contract between the plaintiff and the second named defendant a contract for the sale of goods and hence the Sale of Goods and Supply of Services Act 1980 did not apply either. The commercial reality of the transaction dictated that there existed a collateral contract between the plaintiff and the first named defendant and there was implied into that contract a condition that the vehicle was of merchantable quality and free from defects which would render it dangerous or unfit for its intended purpose.
The High Court so held in finding that the first named defendant was liable to the plaintiff in damages.
Liam Reidy SC and Frank Duggan BL for the plaintiff; Patrick Keane SC and Martin Collins BL for the defendants
Mr Justice O'Neill commenced his judgment with an account of the relevant facts. The plaintiff was a farmer from Co Meath. The first defendant was a farm equipment seller and the second defendant was a finance and leasing company. In April 1998, the plaintiff sought to acquire from the first defendant a tractor model New Holland. The first defendant was the party from whom the plaintiff sought to make this acquisition. The method of completion of the transaction was by way of a leasing agreement made between the plaintiff and the second defendant and then leased by them to the plaintiff. The lease was for a period of six months at the monthly rent of IR£3,504.13. On June 8th, 1998, the plaintiff was assisting a friend of his, Mr Dixon, to cut silage on the farm of Mr Hiney. They were using three tractors, the plaintiff's New Holland and two Fiat tractors owned by Mr Dixon. The two Fiats were older tractors. When the work was finished late in the evening, the three tractors were parked beside each other with their trailers attached in a field. The plaintiff and Mr Dixon left to go home. Early next morning the plaintiff was contacted and told that his tractor and those of Mr Dixon had been totally destroyed by fire.
Mr Justice O'Neill stated that at trial the core issue was the cause of the fire. The plaintiff through his witnesses and in particular his engineer, Mr Stack, contended that the cause of the fire was an electrical fault in the area of a control panel to the right of the driver's seat resulting in the commencement of a "resistive" type of combustion which ignited into a fire within the closed cab of the plaintiff's tractor and from there spread to the fuel tanks, to engulf and consume the entire tractor. A moderate wind blowing diagonally across the three tractors from the plaintiff's tractor ensured the spread of the fire to the two Fiats causing their total destruction as well. Arising from that evidence the plaintiff contended that the cause of the fire as so proved meant that the New Holland tractor contained an inherent defect in its electrical system which rendered the tractor dangerously defective and unfit for its intended purpose and not of merchantable quality.
Dr Woods, an engineer, gave evidence for the defendants to the effect that the remains of the three tractors did not furnish any evidence which indicated any specific cause of the fire. In particular he differed from Mr Slack's opinion that the fire was caused by an electrical fault at or near the control panel on the right side of the driver seat. Specifically he said that the presence of globules at the end of copper wires in that area and evidence of high temperature damage to two connectors did not indicate "resistive" heating in these cables leading to combustion but was, rather the result of the fire itself, rather than its cause. Dr Woods was of the opinion that the other Fiat tractors were a much more likely source of the fire having regard to the age and probable worn and brittle condition of the wiring. Dr Woods did not advance any opinion to the effect that the fire was started maliciously although that explanation was pursued vigorously by counsel for the defendants. A specific theory advanced by counsel for the defendants was that the fire was started maliciously by the placement of a rag doused with accelerant placed behind a wheel near the control panel referred to by Mr Stack. A second theory was that a miscreant, finding that the doors of the two fiats were not locked started the fire by igniting materials in the cab of one or other of them. Both Dr Woods and Mr Stack acknowledged that this was a possibility. Another theory advanced by the defendants was that even if the fire had started in the cab of the New Holland tractor, that because the cab was locked the fire would have self extinguished due to oxygen starvation. Evidence relating to the question of whether the fire was malicious was given by Detective Garda Farrelly. He attended the scene on the morning of the fire and took samples which he sent for analysis. The results of the tests caused Garda Farrelly to be satisfied that the fire was not started maliciously.
Mr Justice O'Neill stated that he was satisfied that the evidence did not support the conclusion that the fire was malicious. The theories advanced by the defendants were not supported by evidence and were unconvincing. Mr Slack gave evidence of finding debris on the floor of the cab of the plaintiff's tractor and of examining the layers of that debris. He said that in the debris he found plastics at the bottom and glass on top, and this, he said indicated that plastics in the cab burned first before the windows of the cab broke causing glass to fall on the floor of the cab. That meant that the fire occurred within the cab rather than coming from outside. If the fire had come back from outside, the glass would have broken first resulting in the glass being found at the bottom of the debris rather than at the top as was the case. Mr Justice O'Neill accepted the evidence of Mr Slack in this regard. The consequence of this finding was decisive for the resolution of the issue of how the fire started. The undisputed evidence was that the cab of the plaintiff's tractor was locked. Thus, Mr Justice O'Neill concluded that the fire was not started maliciously inside the cab of the New Holland tractor. It was highly probable the fire was started by an electrical fault in the cab. The expert witnesses were in agreement that the two connectors showed evidence of exposure to higher temperatures than effected other connectors. Mr Justice O'Neill held that it was probable that the fire did start in the manner described by Mr Stack. Mr Justice O'Neill was satisfied that the fire spread from the plaintiff's tractor to the other two by winds blowing diagonally in the direction of the two Fiats. The scorching of the grass tended to support the view that the fire was moved in that direction by the wind. The theory that the fire should have self extinguished could not be valid. Sufficient air must have been available for the fire to develop, be it from leaks from the underside of the tractor or from the vents in the roof.
Therefore Mr Justice O'Neill was satisfied that the fire was caused by an electrical fault in the cab of the New Holland tractor.
Mr Justice O'Neill said that it remained to be decided whether the defendants had a liability for the damage so caused. It was conceded that the plaintiff was not a "consumer" as defined in s.2 of the 1995 Act, because the plaintiff purchased the tractor in the course of his business as a farmer. It was submitted by counsel for the defendants that because the plaintiff was not a "consumer" he could not then be a "hirer" as defined in s.2 of the 1995 Act, and if he was not a "hirer" then the agreement entered into by the plaintiff with the second defendant was not a "consumer hire agreement" and hence the plaintiff was not entitled to the benefit of the implied undertakings as to quality or fitness as contained in s.76 of the 1995 Act. It was further submitted that as there was no contract for the sale of goods as between the plaintiff and either of the defendants, because the only contract entered into was between the plaintiff and the second defendant and that was simply a leasing agreement, the implied conditions and warranties as to quality and fitness contained in the Sale of Goods and Supply of Services Act 1980 did not apply.
It was further submitted that the plaintiff had not given any evidence as to express warranties given to him by the first defendant when he was acquiring the tractor, and therefore, even if the court found that the fire had been caused by an electrical fault in the tractor, there was no breach of contract on the part of the first defendant and as the agreement between the plaintiff and the second defendant was a leasing agreement to which the 1995 Act did not apply, and as the agreement entered into between the plaintiff and the second defendant for the lease of the tractor contained a clause which excluded any liability on the part of the second defendant in respect of any liability in contract or tort, in respect of any defect in the tractor, be it latent or apparent defect, no liability could attach to the second defendant either. Hence it was submitted that the plaintiff had failed to prove any breach of contract against either defendant.
For the plaintiff it was submitted that apart from the agreement between the plaintiff and the second defendant there was a collateral agreement between the plaintiff and the first defendant, whereby in consideration of the plaintiff entering into the leasing agreement with the second defendant, the first defendant agreed to sell the tractor to the second defendant which was then leased to the plaintiff. It was submitted that as the agreement was for the supply of a new tractor it was necessarily to be implied that that agreement contained a condition that the tractor was of merchantable quality and fit for its intended purpose, and did not have dangerous defects.
In addition it was submitted that the implied condition contained in s.13 of the 1980 Act applied and that the fire was caused by a defect in the tractor namely an electrical fault which rendered the tractor both dangerous and not of a merchantable quality. It was further submitted that the occurrence of this defect in the tractor, having regard to the very young age of the tractor and the danger which it posed to the user of the tractor was a fundamental breach of the agreement between the plaintiff and the defendants.
Mr Justice O' Neill said that the following statutory provisions were relevant to the issues to be decided. S.2 of the Consumer Credit Act, 1995, provides as follows:
"consumer" means a natural person acting outside his trade, business or profession;
"consumer-hire agreement" means an agreement of more than three months duration for the bailment of goods to a hirer under which the property in the goods remains with the owner . . .
"hirer" means a consumer who takes, intends to take or has taken goods from an owner under a hire-purchase agreement or a consumer-hire agreement in return for periodical payments;"
S.13 of the Sale of Goods and Supply of Services Act, 1980, provides as follows:
"(1) In this section "motor vehicle" means a vehicle intended or adapted for propulsion by mechanical means, including
"(a) a bicycle or tricycle with an attachment for propelling it by mechanical power, and
"(b) a vehicle the means of propulsion of which is electrical or partly electrical and partly mechanical.
"(2) Without prejudice to any other condition or warranty, in every contract for the sale of a motor vehicle (except a contract in which the buyer is a person whose business it is to deal in motor vehicles) there is an implied condition that at the time of delivery of the vehicle under the contract it is free from any defect which would render it a danger to the public, including persons travelling in the vehicle . . ."
Mr Justice O'Neill stated that he was satisfied that counsel for the defendants was correct in his submission that the agreement entered into between the plaintiff and the second defendant for the leasing of the tractor was not a "consumer hire agreement" as defined in the 1995 Act because the plaintiff was not a "consumer" and therefore he could be a "hirer" as defined in s.2 of that Act. That being so, the plaintiff was not entitled to the benefit of the implied undertaking as to quality and fitness contained in s.76 of that Act. The contract between the plaintiff and the second defendant was for the lease of this tractor and hence in the view of Mr Justice O'Neill it was not a contract for the sale of goods and hence the implied conditions as to quality and fitness contained in s.13 of the Sale of Goods and Supply of Services Act 1980 did not apply either. There was no evidence of any warranties or representations on the part of the second defendant as to the quality or fitness of the tractor and therefore the plaintiff had failed to make out a case for breach of contract against the second defendant. That being so, it was not necessary to consider whether or not the exclusion clause in s.8 of the agreement was effective to exclude any such liability.
Mr Justice O'Neill stated that the position of the first defendant was somewhat different. The entire basis of the transaction was that the plaintiff went to the first defendant to acquire a new tractor. Having selected one he wished to acquire he then, for the purposes of the acquisition, entered into the leasing arrangement with the second defendant. Mr Justice O'Neill held that a necessary and unavoidable part of the transaction was the agreement of the first defendant to sell the tractor to the second defendant. This would not have happened or could have happened without the agreement of the plaintiff to enter into the leasing agreement with the second defendant. Mr Justice O'Neill stated that he was satisfied that the commercial reality of the transaction dictated the existence of a collateral contract between the plaintiff and the first defendant whereby the first defendant agreed to sell the tractor to the second defendant in consideration of the plaintiff entering into the leasing agreement with the second defendant.
As this was a contract for the supply of a new tractor, necessarily, there was implied into that contract between the plaintiff and the first defendant a condition that the contract was of merchantable quality and free from defects which would render it dangerous or unfit for its intended purpose. The existence of the defect in the electrical system of the tractor was, having regard to the age of the tractor, a fundamental breach of that implied condition as to quality. That being so, Mr Justice O'Neill concluded that the first defendant was in breach of his collateral contract with the plaintiff, and was liable to the plaintiff in damages. There would be judgment in the sum of €42,387.34 in favour of the plaintiff against the first defendant for that sum.
Solicitors: Francis X. Burke & Co. (Dublin) (for the plaintiff); Carvill & Co. (Dublin) (for the defendants)
Kieran O'Callaghan, barrister