Advance Business Finance Pty Ltd v Tuff Toys Qld Pty Ltd
[2010] QCAT 525
•21 October 2010
CITATION:Advance Business Finance Pty Ltd v Tuff Toys Qld Pty Ltd & Ors [2010] QCAT 525
| PARTIES: | Applicant: | Advance Business Finance Pty Ltd | ||
| v | ||||
| First respondent: | Tuff Toys Qld Pty Ltd t/a Tuff Toys Qld | |||
| Second respondent: | Mr Wayne Arthur Oldman | |||
| Third respondent: | Michael John Terry | |||
| APPLICATION NUMBER: | PC020-09 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 8 October 2010 |
| HEARD AT: | Brisbane |
| DECISION OF: | Peta Stilgoe |
| DELIVERED ON: | 21 October 2010 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: |
|
| CATCHWORDS : | MOTOR DEALERS – where finance approved on the basis of a false invoice – where dealer received two payments for the purchase of the car – whether unlicensed respondent a relevant person - whether dealer converted money - whether money converted dishonestly - whether false and misleading statement – whether financier suffered loss – whether dealer entitled to defence of duress – whether duress Property Agents and Motor Dealers Act ss 279, 469, 470, 573 & 574 Criminal Code s 31 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | D Williams instructed by McKays, solicitors |
| FIRST RESPONDENT: | Wayne Arthur Oldman |
| SECOND RESPONDENT: | Self |
| THIRD RESPONDENT: | A Kingston, Norman & Kingston |
REASONS FOR DECISION
In 2008, Advance Business Finance Pty Ltd (“Advance”) loaned a third party $250,000 for the purchase of a 2002 Ferrari that was being held by Tuff Toys Qld Pty Ltd (“Tuff Toys”). The Ferrari was, in fact a 1997 model; the purchase and loan were fraudulent. Advance has recovered possession of the Ferrari but it has not recovered any of the initial $250,000. Advance says that its loss was caused by Tuff Toys’ breaches of the Property Agents and Motor Dealers Act (“PAMDA”) and that it is, therefore, entitled to recover its loss from the statutory fund.
The issues
Section 470 of PAMDA provides that a person may make a claim against the fund if the person suffers financial loss because of the happening of any of the following events:
a)The contravention of any of the following provisions by a relevant person:
…
· Section 573
· Section 574
…
e)A stealing, misappropriation or misapplication by a relevant person of property entrusted to the person as agent for someone else in the person’s capacity as a relevant person.
Section 573 applies if a licensee, in the performance of the activities of a licensee, receives an amount belonging to someone else. A licensee who dishonestly converts the amount to the licensee’s own or someone else’s use commits a crime.
Section 574 provides that a licensee or registered employee must not represent in any way to someone else anything that is false or misleading in relation to the letting, exchange or sale of property.
Advance makes no submissions against Mr Terry. The questions to be determined are:
a)Is Mr Oldman/Tuff Toys a relevant person?
b)Did a licensee, in the performance of the activities of a licensee, receive money belonging to someone else?
c)Did he dishonestly convert an amount as contemplated by section 573; and/or
d)Did he represent something that is false or misleading in relation to the sale of the Ferrari within the terms of section 574?
e)Did Advance suffer a loss as a result of Mr Tuff Toys/Oldman’s activities?
f)Do Mr Oldman/Tuff Toys have a defence to the claims by Advance?
The facts
These facts are not in dispute:
a)Advance received a request from a broker to finance the purchase of a 2002 Ferrari Maranello. The material that accompanied the request included a document from Tuff Toys that Advance took to be an invoice (“Invoice 1”).
b)On 2 July 2008, one of Advance’s officers undertook a Red Book search that showed the retail price of a 2002 Ferrari Maranello to be $235,950, excluding GST. He also undertook a REVS search that showed the car was unencumbered.
c)Advance received a signed loan agreement, copies of the purchaser’s bank statements, rates’ notices, tax returns, credit reference history, and trade credit references. It resolved to finance the purchase but asked for a fresh invoice from Tuff Toys that showed all necessary retails for a tax invoice. It received that document from the broker on or about 7 July 2008 (“Invoice 2”)
Advance paid $250,000 into Tuff Toys’ Bank of Queensland bank account on 17 July 2008. Mr Oldman dispersed those funds the next day.
Tuff Toys did not own the Ferrari. Tuff Toys previously had possession of the car so that it could do the work necessary for it to comply with Australian standards but it did not have possession at the time of these events.
Relevant Person
“Relevant person” is defined in section 469 as:
a)A licensee; or
b)A licensee’s employee or agent, or a person carrying on business with a licensee; or
c)A person having charge or control, or apparent charge or control, of a licensee’s registered office or business.
Mr Terry was a licensed dealer under PAMDA. Mr Oldman was not. For a short period in 2008, Mr Terry was a director of Tuff Toys. He and Mr Oldman intended to apply for a corporate licence but they used Mr Terry’s licence in the interim. I am satisfied that Mr Oldman was a “person carrying on business with” Mr Terry within the terms of section 469.
Did a licensee, in the performance of the activities of a licensee, receive money belonging to someone else?
10. Mr Oldman conceded that the money he received belonged to someone else. The question is whether he was a licensee and whether he received the money in performance of the activities of a licensee.
11. Section 469 defines licensee: “licensee includes…a person who is not licensed but who acts as a licensee”.
12. Although Mr Oldman initially gave evidence that Tuff Toys’ primary business was making fast Japanese cars compliant with Australian standards “working on cars, not selling them”, he eventually admitted that Tuff Toys did have cars on display for sale and did sell a couple of cars under Mr Terry’s licence during the relevant period. He also told the tribunal that Tuff Toys had a web page for about two years prior to June 208 which advertised Japanese imported cars for sale. I am satisfied that Mr Oldman acted as a licensee in that he offered cars for sale from premises operated by him. He was, therefore, a licensee for the purposes of section 573.
13. The next question to consider is whether Mr Oldman was performing the activities of a licensee.
14. According to Mr Oldman, he was not performing the activities of a licensee because he was not offering the Ferrari for sale on consignment. He says:
a)Tuff Toys received the Ferrari in February 2007. Its owner, Ali Metleg (“Metleg”) left the car with Tuff Toys to work on so that it could reach compliance. Metleg visited Tuff Toys every six weeks or so.
b)He could not get the car to compliance because he could not get the necessary test reports from Italy.
c)In or about June 2008, Metleg visited and introduced Mr Oldman to his brother-in-law, Michael Saraya (“Saraya”). Metleg told Mr Oldman that Saraya wanted to buy the car and that he (Saraya) would arrange compliance in Sydney.
d)Metleg forced him to provide an invoice so that Saraya could obtain a loan.
e)He produced an invoice which was so obviously wrong that no respectable lender would rely on it (“Invoice 3”).
15. Mr Oldman received two payments in relation to the Ferrari; one of $230,000 from Westpac on 1 July 2008 and the second from Advance. On both occasions, at Metleg’s direction, Mr Oldman paid the bulk of the funds into the account of a Conrad Black. From the first payment of $230,000, Mr Oldman retained $2,000; from the second payment, he retained $10,000.
16. Advance says that the fact of the invoice, the receipt of the funds and Mr Oldman knowingly dealing with the funds is sufficient to enable the tribunal to find that Mr Oldman was performing the activities of a licensee because the activities were incidental to the sale of a vehicle.
17. I accept that argument. Pursuant to section 279 of PAMDA, a licensee is authorised, in carrying on the business of a licensed dealer, to:
a)sell used vehicles on consignment as an agent for others for reward;
e)to acquire used motor vehicles, whether or not as complete units, to break up for sale as parts;
f) to sell used motor vehicles mentioned in paragraph (e) as parts;
g)to negotiate, under a consultancy arrangement, for a person who is not a motor dealer or auctioneer for the purchase or sale of a used motor vehicle for the person.
18. Mr Oldman knew that Invoice 3 was being relied upon to enable a sale of the car. He knew that he had received two substantial sums of money into his account directly because of the “sale” of the Ferrari. He told the tribunal that he was otherwise in the business of acquiring cars for parts and selling other used cars. He had possession of the Ferrari, albeit not at the time of this transaction. To all intents and purposes, he was performing the activities of a licensee.
Did Mr Oldman dishonestly convert an amount as contemplated by section 573?
19. The tort of conversion is committed by a person who deals with chattels not belonging to him in a manner which is inconsistent with the rights of the person entitled to them.
20. Mr Oldman thought that the money paid to him by Advance was a refinance of the first loan by Westpac. If that proposition had been correct, then the party entitled to the money was Westpac but Mr Oldman did not remit the money to the bank.
21. He says that Metleg told him that Westpac had been “paid out”. If that proposition had been correct, then the person entitled to the money was the purchaser. It could not have been Conrad Black. A vendor does not get paid twice for the same product.
22. None of the parties who may have been entitled to the money authorised Mr Oldman to deduct and retain any money to himself. I am satisfied that Mr Oldman dealt with the money in a manner that was inconsistent with the rights of the party who was entitled to payment.
23. I am also satisfied that Mr Oldman converted that money dishonestly. On both occasions when money was paid into the Tuff Toys account, Metleg appeared on Mr Oldman’s doorstep the next day, accompanied Mr Oldman to his bank and directed the disbursement of funds. Metleg appeared to “collect” the Advance money before Mr Oldman knew that it had been deposited to the account. That fact alone must have made Mr Oldman suspicious. Mr Oldman told the tribunal that he had concerns about the ownership of the Ferrari, he knew that Metleg had roped him into something rotten, Metleg had threatened him and he described the people involved in this transaction as “rogues”. Considering his situation objectively, and adopting the standards of ordinary, decent people,[1] Mr Oldman should have known that Conrad Black was not entitled to receive payment for the car twice. He must have known, or reasonably suspected, that his dealings with the money were dishonest.
Did Mr Oldman represent something that is false or misleading in relation to the sale of the Ferrari within the terms of section 574?
[1] R v Allard [1988] 2 Qd R 269 at 276
24. Advance says that, by creating and publishing an invoice, Tuff Toys made a false and misleading representation in relation to the sale of the Ferrari. The false representation, according to Advance, is that Tuff Toys had a red Ferrari Maranello for sale.
25. Mr Oldman says that the only invoice Tuff Toys produced was Invoice 3. The tribunal called Mrs Oldman to give evidence. She confirmed that Invoice 3 was the only invoice that Tuff Toys produced. Mr Oldman gave the invoice to Metleg. Metleg rang the next day, saying that he had lost the invoice. Mrs Oldman emailed him a Word version of the invoice.
26. Invoice 3 was not sent to Advance. It is reasonably apparent that Metleg took the emailed version, altered it and passed the altered versions of the invoice onto the broker who, in turn, passed them on to Advance.
27. Mr Oldman says, and I accept, that he deliberately drafted Invoice 3 so that no reasonable lender would rely on it. Certainly, Mr Crutchley, a director of Advance who gave evidence at the hearing, would not have lent on the strength of Invoice 3. He told the tribunal that he was satisfied with the proposed loan only because the Red Book search demonstrated that there was sufficient equity in the Ferrari to cover the proposed loan. A loan of $350,000, based on a purchase price of $400,000, could not have been sustained on the Red Book valuation.
28. I accept the argument from Advance that Invoice 3 was a representation that Tuff Toys had a red Ferrari Maranello of a particular VIN and engine number for sale. I am satisfied that Mr Oldman/Tuff Toys made a false and misleading statement about those matters. I am also satisfied, because he conceded as much in cross examination, that Mr Oldman knew the invoice would be given to a finance company for the purpose of obtaining finance.
Did Advance suffer a loss as a result of Mr Oldman’s activities?
29. The question that causes me concern is whether Invoice 1 caused Advance’s loss. Advance called for a fresh invoice because that invoice was clearly deficient. As I have already observed, it did not have Tuff Toys’ ABN or dealer’s licence number, nor was it identified as a tax invoice. There was no reference to, or provision for, GST. Instead of calling Tuff Toys, Advance contacted the broker.
30. Invoice 2 is materially different from Invoice 1. Apart from supplying the missing ABN and dealer’s licence number:
a)The description of the car was more detailed;
b)The registration (build?) date had changed from 7/2002 to 6/2002;
c)The mileage had increased by 10,000 km in the space of two months;
d)The VIN was different;
e)The engine number was different;
f)A registration number was provided.
31. Because of the size of this loan, Mr Crutchley was responsible for the final sign off. He did not check Invoice 2 against Invoice 1 as he assumed that his officers would have undertaken that task. The file relating to the loan was produced to the tribunal in response to a question from me. There is no evidence that the officer:
a)contacted any of the finance referees or the borrower’s accountant;
b)checked Invoice 2 against Invoice 1,
c)conducted a REVS search with the new VIN,
d)conducted a registration search.
32. Perhaps with the benefit of hindsight, this is a file where alarm bells should have been ringing. The officer who completed the loan documentation was unable to contact any of the nominated trade references, all of whom had mobile telephone numbers but that item is ticked off on Advance’s pro forma check list. Even a cursory comparison of Saraya’s signature on the passport and driver’s licence with the signature on the application form should have raised some concerns.
33. I accept Advance’s argument that the misleading conduct does not need to be the only factor in an applicant’s decision. I also accept the evidence of Mr Crutchley that the important point, so far as he was concerned, was that the invoice was issued by a licensed motor dealer and provided enough information for Advance to verify that the car existed and its value could be verified. I do find, however, that the failure to notice the changes in Invoice 2, and to act upon them, was sufficient to break the chain of causation. I find that Advance did not suffer any loss because of the false representation.
34. However, for the reasons previously discussed, I find that Advance did suffer loss because of Mr Oldman’s improper dealing with the money deposited into his account.
35. Advance has calculated its loss from this transaction as follows:
Funds advanced $250,000.00 Less first payment made 6910.63 243,089.37 Less value of the Ferrari 110,000.00 133,089.37 Plus conversion, repairs registration and roadworthy expenses 73,099.29 206,188.66 Brokerage fee 19,250.00 Total $225,438.66
36. The car has not been sold. The tribunal accepts the evidence from Mr Whelan that the current value of the Ferrari is $110,000 plus GST and the difficulties of selling a prestige car in the current economic conditions.
37. Mr Whelan also told the tribunal, and I accept, that the unregistered and non-compliant car would have been worth much less than $110,000. It is therefore reasonable that Advance would spend money to make the car more saleable. On a reconciliation prepared by Advance there are notes, but no supporting evidence, to this effect:
a)Offers before conversion and registration were $20,000 to $30,000.
b)Offers after conversion and before registration were $80,000 to $90,000.
38. Advance provided the tribunal with copies of invoices totalling $65,401.78, excluding GST. I have formed the view that some of the expenditure cannot properly be described as a loss because of Mr Oldman’s conduct. There is excessive towing, “preparations for sale” has been charged twice as have at least two expensive services even though the car had travelled no distance under its own power. I am therefore deducting:
Preparation for sale 12.01.10 $339.20 Towing 12.01.10 143.00 Towing 01.02.10 165.00 Towing 10.02.10 154.00 Service, petrol and detail to car 18.03.10 5027.25 Total $5828.45
although, given that the maximum recoverable from the statutory fund is $200,000, the recalculation is of little significance.
The defences
39. Mr Oldman did not make any submissions in relation to defences that might be available to him under Part 5 of the Criminal Code. I am indebted to Counsel for Advance in addressing this issue. The decision of Judge McGill in To v Department of Tourism, Fair Trading and Wine Industry Development[2] is authority for the proposition that where the contravention of a statutory provision may result in an offence being committed, a respondent gets the benefit of all of the defences in Chapter 5 of the Criminal Code of Queensland. A breach of sections 573 or 574 may give rise to an offence. It is therefore necessary to consider what defences may be available.
[2] [2006] QDC 381
40. Mr Oldman gave evidence that:
a)He had been threatened by associates of Metleg who carried “guns”;
b)Metleg pressured him to provide the invoice;
c)Metleg accompanied him to the bank to direct the disbursement of the money each time it appeared in Tuff Toys’ bank account;
d)Metleg had threatened to “torch his yard” when Mr Oldman had difficulty getting the Ferrari compliant;
e)Metleg forced Mr Oldman to pay $2,000 per month while the Ferrari was in Tuff Toys’ possession. In a letter to the Office of Fair Trading dated 17 August 2009, Mr Oldman quotes Metleg: “If you don’t make the payments, you won’t live.”
41. In a letter to the Office of Fair Trading dated 16 July 2009, Mr Oldman describes Metleg as “an armed standover person who threatened me and my family with physical violence.”
42. Section 31 of the Criminal Code of Queensland provides that a person is not criminally responsible for an act when:
a)the act is reasonably necessary in order to resist actual and unlawful violence threatened to the person, or to another person in the person’s presence; or
b)the person does or omits to do the act in order to save himself or herself or another person, or his or her property or the property of another person, from serious harm or detriment threatened to be inflicted by some person in a position to carry out the threat; and
c)the person doing the act or making the omission reasonably believes he or she or the other person is unable otherwise to escape the carrying out of the threat; and
d)doing the act or making the omission is reasonably proportionate to the harm or detriment threatened.
43. Advance argues that Mr Oldman did not transfer the funds because of a threat within the meaning of the Criminal Code of Queensland but because, as he stated in evidence, he was exhausted and wanted Metleg out of his life. Advance says that Mr Oldman could have surrendered possession of the car at an earlier date; Mr Oldman seems to dispute the proposition.
44. To paraphrase Justice Keane (as he then was)[3], if Mr Oldman dealt with the money as instructed by Metleg because he reasonably believed that there was no other means of avoiding that threat than complying with an unlawful demand then the reasonableness of that belief must be considered in the light of the other alternatives available. That necessarily means that Mr Oldman must have a reasonable basis for believing that the law and its enforcement agencies cannot give him protection from the threat.
[3] R v Taiapa [2008] QCA 204 at paragraph 36
45. Mr Oldman cooperated with the police once Advance made a complaint in the New South Wales police in September 2008. He does not say why he did not approach the police for assistance at an earlier date. Therefore, I cannot be satisfied that Mr Oldman had no alternative but to comply with Metleg’s demands. He may have felt pressured to do so but that it not the same thing as a compulsion within the meaning of section 31 of the Criminal Code of Queensland.
Conclusion
46. Mr Oldman was a relevant person within the meaning of section 469 of PAMDA;
47. In the course of performing activities of a licensee, Mr Oldman/Tuff Toys did receive money belonging to someone else. They received money from Advance that belonged to either Westpac or the purchaser.
48. Mr Oldman/Tuff Toys did dishonestly convert that money as contemplated by section 573 of PAMDA. They did not send the money to Westpac or the purchaser; they retained some of the money for Tuff Toys’ own use. Mr Oldman did not contact Advance to inform it that he had already been paid for the sale of the Ferrari.
49. Tuff Toys did make a representation that was false and misleading in relation to the sale of the Ferrari. It represented that it held a red Ferrari Maranello, with a specific VIN and engine number, for sale.
50. Advance suffered a loss of $199,573.33 because of Tuff Toys/Mr Oldman’s dishonest conversion.
51. The defence of payment under duress is not available to Mr Oldman.
52. I order that Advance be paid $200,000 from the statutory fund.
53. I find that Mr Oldman and Tuff Toys are jointly and severally liable for the loss suffered by Advance and order them to reimburse the fund in the sum of $200,000 under section 490 of PAMDA.
2