Gwam Investments Pty Ltd v Outback Health Screenings Pty Ltd
 SASC 37
A recent decision of the Full Court of South Australia has
highlighted the extensive damages awards that can follow the supply
of equipment that is not fit for the purpose contemplated by the
Outback Health Screenings Pty Ltd (OHS) operated a health
service business for remote mining communities. In July 2006 the
directors of OHS approached Gwam Special Vehicles (Gwam) and asked
if Gwam could construct a mobile drug testing unit able to be
fitted to the rear of a four wheel drive vehicle. Gwam professed
expertise in designing and constructing similar custom made units
The parties entered into a contract pursuant to which Gwam was
to construct a mobile unit for approximately $82,000. There was no
formal contract – Gwam simply prepared concept drawings
and a quotation, which was accepted by OHS. After some discussions
with Gwam, OHS purchased an Isuzu four wheel drive for
approximately $67,000 with the intention of fixing the mobile unit
to the chassis.
When the unit was fitted to the Isuzu, the combined weight of
the vehicle and the unit exceeded the maximum loaded mass for the
Isuzu of 6 tonnes. As such, the vehicle could not travel on public
fter it became apparent that the mobile unit could not legally
be operated on the back of the Isuzu, OHS traded the Isuzu for
$40,000 and purchased a Hino truck for $96,000.
The Full Court upheld the trial judge's findings that OHS
was entitled to recover damages for breach of:
an implied term of the contract that the vehicle and its custom
made unit would be fit for the purpose contemplated –
namely to drive on public roads; and
Gwam's duty of care.
Given that OHS had little or no control over the weight of the
testing unit and no means of assessing the likely total mass of the
unit, it was in a vulnerable position. Thus Gwam owed a duty of
care to take steps to ensure that OHS purchased an appropriate
vehicle to transport the unit or to ensure that the unit would be
suitable for transport on the vehicle selected by OHS.
The Full Court increased the damages awarded by the trial judge
by approximately $29,000 and gave judgment for approximately
$84,000 made up of:
the loss of $27,500 suffered when the Isuzu was traded in for
much less than its original purchase price;
$9,500 being the cost of transferring the unit from the Isuzu
to the Hino truck;
$18,000 being interest paid by OHS pursuant to its financing
arrangements for the Isuzu; and
a further $29,000 (over an above the original damages awarded
by the trial judge) being the difference between the cost of the
Isuzu and the cost of the alternative Hino truck.
Gwam argued that OHS should not be entitled to recover the
difference between the price of the Isuzu and the Hino truck as
clearly, given the weight of the unit, OHS was always going to need
a heavier and more expensive vehicle. In essence OHS eventually
bought what it should have purchased initially and thus there was
Alternatively, Gwam argued that OHS ended up owning a much more
valuable vehicle and that any award of damages for the difference
in price between the Hino vehicle and the Isuzu vehicle would
amount to unjustified betterment.
The Full Court rejected both contentions and indicated that any
claim "ought not be weighed in nice scales at the instance of
the party whose breach of contract has occasioned the
The case demonstrates a generous attitude by the Full Court to
the awarding of damages for breach of contract. It also illustrates
the importance of written contractual terms clearly setting out the
obligations of buyer and seller in such situations.
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