American Express Australia Ltd v Mi-Ok Pty Ltd t/a Topgun Technology
[2006] NSWLC 28
•01/08/2006
Local Court of New South Wales
CITATION: American Express Australia Ltd v Mi-Ok Pty Ltd t/a Topgun Technology [2006] NSWLC 28 JURISDICTION: Civil PARTIES: American Express Australia Ltd
Mi-Ok Pty Ltd t/a Topgun TechnologyFILE NUMBER: 11433/05 PLACE OF HEARING: DowningCentre Local Court DATE OF DECISION:
08/01/2006MAGISTRATE: Magistrate H Dillon CATCHWORDS: Contract - Terms and conditions - Onus onplaintiff to prove terms and conditions - Onus on plaintiff to prove breach of conditions - written terms - Consideration of the difference between signed and unsigned written contracts LEGISLATION CITED: CASES CITED: Baltic Shipping Co ("The Mikhail Lermontov" ) v Dillon (1991) 22 NSWLR 1
L'Estrange v Graucob [1934] 2 KB 394
Sydney City Council v West (1965) 115 CLR 353
Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52REPRESENTATION: Mr Keller - Counsel
Insight Litigation - Solicitors
Mr O'Sullivan - CounselORDERS: Verdict for the Defendant. I propose an order that the costs follow the event in a sum agreed or assessed. Parties may have liberty to apply on the question of costs.
JUDGMENT
1. In this matter the plaintiff, American Express Australia Ltd (“American Express”) claims a sum of $19,632.59 being an amount it paid to the defendant pursuant to a contract between the parties. It asserts an entitlement under the contract to be repaid those moneys. Although it concedes that a contract had been formed by the parties, the defendant, Mi-Ok Pty Ltd, trading as Topgun Technology (“Topgun”) denies an agreement in the terms asserted by the plaintiff.
Background
2. Most of the facts in the matter are not significantly contested. In 2001, Topgun started trading with Mr Phillip Newell and his wife Indira Newell. The Newells ran a business under various entities including “Aussie Coupes”. This business was conducted in the United States and appears to have operated in a niche market (one assumes a small one) trading in Australian “classic” vehicles and their parts. Part of Topguns business was to source and supply vehicles and parts to the Newells.
3. On 14 August 2001, Mr Rob Luck, the sole director and owner of Topgun, completed a form known as a “Merchant Card Acceptance Form”. These forms are used by American Express and traders who seek to become what the plaintiff calls “American Express merchants”. Topgun supplied various pertinent details to American Express in the form and Mr Luck then signed on behalf of Topgun a declaration in the following terms:
Please set up the organization named above as an American Express merchant. We agree to be bound by the American Express terms and conditions for Card Acceptance that will be sent to us with account set up materials. The individual signing on behalf of the organization represents and warrants that s/he has authority to do so. We agree to accept the American Express card unconditionally and not to charge Cardmembers any fee for using the card.
4. No evidence was tendered by the plaintiff directly proving the terms and conditions that obtained in August 2001. Mr Luck denied in his evidence ever having received a copy of the document referred as the “American Express terms and conditions” in the Merchant Card Acceptance Form.
5. Notwithstanding that, however, Topgun thereafter traded with American Express card members, accepting their cards for transactions, among them Mr Newell.
6. In 2003 Mr Newell placed orders with Topgun and provided an American Express number against which he asked Mr Luck to debit the amounts for the goods ordered. In relation to three transactions, Mr Newell provided a faxed debit authorisation. He provided telephone authorisation for a further transaction that year.
7. The following year Mr Newell placed further orders with Topgun. In January he requested Topgun to supply two motor vehicles and parts including engines and engine parts. That month Topgun billed his card for two sums, $90 and $285 being deposit payments for the goods. A few days later Mr Luck, having sourced the goods, arranged for them to be shipped to the United States. He emailed Mr Newell on 17 January 2004 that the cost would be between $20,500 and $23,000. Later the same day Mr Newell replied to Mr Luck asking for the “final cost details” and telling him that he would send Mr Luck “a date to bill my Amex card”.
8. It appears from the bill of lading tendered in evidence that a containing enclosing two cars and parts were shipped on board the vessel PONL Adelaide in Sydney on 26 January 2004 for delivery to Portland, Oregon with an expected date of arrival at that port of 18 March 2004.
9. From this point problems began to develop for Topgun. On 12 March, Mr Luck emailed Mr Newell asking about payment for the shipped goods. The same day Mr Newell replied that he would have funds available in approximately one week’s time and sought details of the cars and the registration papers. By 31 March Topgun had still not received payment and this led to further email correspondence in which Mr Newell gave a number of reasons, which may or may not have been spurious, for not paying Topgun.
10. Finally, on 20 April 2004, Mr Newell sent Mr Luck a written (but unsigned) authorisation to debit his American Express card in the sum of $20,930. The card number provided, however, was missing a digit and Topgun was unable immediately to process the transaction. The following day, after being telephoned by Mr Luck, Mr Newell provided the missing number but asked that the transaction be broken down into sums of less than $5000. He provided no explanation for this other than that “for some reason the card does not seem to accept billings over $5000.” He also asked Mr Luck to withhold billing the last $2500 until 28 April. A number of separate transactions were then charged to Mr Newell’s American Express card number by Topgun.
11. It seems that for goods to be cleared by customs in the United States, the consignee must provide proof of payment for the goods. According to business records tendered by Topgun, the container sent to Mr Newell cleared customs in the USA on 4 April and was released from bond by the customs agents on 5 May 2004. It can readily be inferred that Mr Newell relied upon his American Express records to have obtained the release of the container.
12. About a month afterwards, however, Mr Newell lodged a dispute with American Express concerning the shipment. It requested details and documentary records of the relevant transactions from Topgun. It came to a view that the materials provided by Topgun were insufficient for its purposes as defined in the agreement it now asserts it had with Topgun at that time and upon which it relies to support its claim. I will come to the details of the terms and conditions of that asserted contract shortly.
13. At this point it is sufficient to say that American Express, in the course of the hearing, effectively conceded that Mr Newell had acted fraudulently in ordering goods, authorising Topgun to debit his American Express card, taking possession of the goods and then disputing liability to pay American Express for the charge against his card. As the case developed, it became clear that one of the principal issues between the parties, if not the main issue is where the risk falls if an American Express card member commits a fraud: on the merchant or on the financier, American Express itself. We shall return to that question in due course.
14. Having reached the conclusion that the information sought from Topgun was insufficient to satisfy its requirements pursuant to its asserted contract, American Express then fell back on what it calls its entitlement under the contract to “Full Recourse”. Once again, I will deal with this in somewhat more detail below but, in a nutshell, American Express asserts that, the defendant having failed in its duties under the contract it is entitled to be repaid the moneys it paid to Topgun in respect of the Newell transactions because the contract provides that the risk in relation to fraudulent transactions effectively falls on merchants unless they comply with all the terms and conditions of their merchant agreements with American Express.
15. This leads us directly to a summary of the issues in the case.
What is in dispute?
16. The first critical issue for the court to determine is whether Topgun were ever notified of the terms and conditions of the merchant agreement Mr Luck had undertaken to enter upon receipt of the set-up kit. According to Mr Luck, he and his company never received the document in question. No copy of it has been tendered in evidence by the plaintiff.
17. The second major issue to determine only arises if I make findings of fact (a) that Topgun, on the balance of probabilities, received the relevant document in 2001 and had the relevant terms and conditions brought to its attention and (b) agreed to be bound by them. That is whether the terms and conditions relied upon by American Express in these proceedings were the terms agreed to by Topgun. Tendered in evidence by American Express was a document dating from 2002 which sets out standard terms and conditions of a merchant agreement. The plaintiff contends that these were the terms binding on the defendant at the time of the disputed transaction. The defendant contends that as the terms of the agreement entered in 2001 have not been placed in evidence there is no inference available from which the court can conclude that the 2002 terms were in fact operative in relation to these parties at the relevant time.
18. The third major issue concerns the pleaded breach of contract. Again, this issue only arises if I accept the plaintiff’s case in respect of the relevant terms and conditions of the agreement. The question here becomes whether the plaintiff has made out, on the balance of probabilities, that the defendant breached its agreement by failing to provide sufficient material and information to enable American Express to deal with the disputed transaction in favour of the merchant.
19. The plaintiff also contends that it is entitled, by virtue of its particulars, to rely on any other alleged breaches of the agreement in order to recover. The defendant disputed that approach arguing that the plaintiff’s case was confined to the alleged provision of insufficient documentation and information. As the defendant’s case is, principally, that it did not enter the agreement alleged, I allowed the evidence of multiple breaches because it appeared to me that the defendant would stand or fall on its contention about the agreement (bearing in mind always that the plaintiff bears the onus in proving the original agreement and any variation of it). It appeared to me that, having nailed its colours to the mast, as it were, with the argument that there was no agreement in the terms asserted by the plaintiff, there could be no substantial prejudice to the defendant in allowing proofs of breaches other than the single particularised breach.
The evidence
20. The only evidence tendered for the plaintiff was an affidavit of Ms Jennifer Scully. I digress at this point to say that, initially, objection was taken to the admission of the affidavit, Ms Scully not being present for cross-examination and the plaintiff not having proved that she was “unavailable” as defined by the dictionary of the Evidence Act.
21. The Uniform Civil Procedure Rules, however, provide that a court may order that evidence be given by way of statement or affidavit (see Rules 31.1 and 31.3). Standard directions had been given by this court that the parties exchange statements, the practice in this court being that, ordinarily, evidence-in-chief is given by way of statement (if necessary supplemented by oral evidence). Counsel for the plaintiff sought to rely on these rules to tender the statement of Ms Scully notwithstanding that she was not present.
22. After some discussion between bench and bar, counsel for the defendant agreed to the tender of the document subject to (a) his objections to certain parts of the document and (b) his preserving the right to cross-examine Ms Scully if his objections were not agreed to or upheld by the court. As it happened, after the objections were dealt with he did not seek to cross-examine Ms Scully. That being done, no attempt was thereafter made by the plaintiff to adjourn the matter for the purpose of calling Ms Scully and the matter proceeded.
23. Her evidence consisted chiefly in the production of a number of business records of the plaintiff. The most important of these were the documents entitled “Merchant Card Acceptance Form” (to which reference has been made already) and “Terms and Conditions for American Express Card Acceptance” (the December 2002 edition); a form letter headed “New Terms & Conditions of Card Acceptance” (not addressed to the defendant); a direct debit request form signed by Mr Luck for Topgun; and a small bundle of letters concerning the disputed transaction between the defendant and Mr Newell.
24. She also gave evidence that in April 2004, American Express had processed six charges against Mr Newell’s card number and had paid the defendant the sum of $19,632.59 (being $20,930.00 less a commission retained by American Express of $1297.41.) According to Ms Scully these payments were made by American Express in accordance with s.1(5) of the terms and conditions dated December 2002.
25. That section deals with the payment procedure and payment plans offered by American Express to its member merchants. In summary, American Express offered to pay the merchant the face amount of all charges submitted less a merchant service fee, taxes (including Goods and Services Tax [“GST”]), credits and any amounts owed by the merchant to American Express. Two payment plans were offered but they are irrelevant to the issues in this case.
26. That the payments were made by American Express to Topgun is not in contest. After Mr Newell disputed the transaction, American Express wrote to Topgun on 23 June 2004 requesting that no credit be issued to Mr Newell by Topgun and that it provide a number of documents to American Express to enable it to investigate the dispute. The documents sought by American Express were: “signed support and itemisation”; a copy of the merchant’s return/refund policy; a copy of the merchant’s “cancellation policy”; signed proof of delivery with the delivery address; proof of shipment including shipping address and date of shipping; insurance details, if any; and a copy of “the signed Membership Contact indicating the expiration date and Renewal Policy”. The letter requested that these documents be provided by 23 July 2004 “to avoid a debt being raised to your account in the future”.
27. Ms Scully’s affidavit provides no explanation of the meaning of some of the jargon used in this letter. No evidence was placed before me as to the meaning of “support and itemisation”, “cancellation policy”, “Membership Contact” (which I infer may have been meant to read “Contract” but am not sure) or “Renewal Policy”.
28. Ms Scully did not provide copies of any documents sent by Topgun but attached to her affidavit a letter dated 21 October 2004 which stated that “the supporting document(s) provided is insufficient to allow us to review these matter (sic) further please provide us with tax invoice and itemisations for each transactions billed to the cardmember’s account.” It noted that there was an obligation for the merchant to provide the requested information within 25 days of the date of request. It noted that the request had been made on 23 June but extended the time to 28 October 2004.
29. On 29 October 2004 American Express wrote again to Topgun in response to the receipt of documents (which, once again, were not annexed to Ms Scully’s affidavit) from it. The letter sought further information from Topgun and again extended time for answering the requisition until 5 November, once again warning Topgun that the information provided to that time was “insufficient to allow us to re-debit the cardmember” and that a failure to provide the requested information could result in the debt settling upon Topgun.
30. On 24 December 2004, American Express still being of the view that the information provided by Topgun was insufficient for its purposes, debited Topgun’s account in the sum of $20,245 “less discount and GST”. It requested that the balance be cleared within seven days. That was not done.
31. The plaintiff’s case turns on the terms and conditions of the merchant agreement. Section 1(7) of the December 2002 form of the agreement is headed “Full Recourse” and provides:
We may recover payment from you for the full amount of each Chare which is subject to Full Recourse as set out in this agreement. We may deduct or set off such amount from any sum payable to you under this Agreement or any other agreement you have with us or otherwise invoice you for such amount. If we invoice you, you agree to pay the full invoiced amount within seven (7) days. We will have Full Recourse for a Charge if you do not comply with this Agreement, even if we were aware of your non-compliance when we made payment and even if you obtained Authorisation for the Charge in question.
32. The copy of the December 2002 terms and conditions was not signed by a representative of Topgun. American Express did not tender a copy of the terms and conditions that applied in August 2001 when Mr Luck signed the merchant agreement on behalf of Topgun and no evidence was presented to prove that Topgun had received a copy following Mr Luck signing the original merchant agreement acceptance form.
33. The direct debit request form was signed by Mr Luck on 14 August 2001. It acknowledged that he had read the form and “agree[d] to be bound by the terms of that agreement in addition to the terms and conditions for Card Acceptance”.
34. Mr Luck was the only witness called for Topgun. His evidence in respect of the transactions with Mr Newell was uncontroversial and has been outlined above. In relation to the question of the terms and conditions of the merchant agreement with American Express, his testimony was to the effect that he had not received a copy of the terms and conditions that applied in 2001 after he had signed the acceptance form. He acknowledged signing the merchant agreement acceptance form and the direct debit request form but his evidence was to the effect that he had received no further contractual documents from American Express after signing those forms on 14 August 2001.
35. He also gave evidence in relation to the question of the documents he had provided to American Express. They included, most importantly, his correspondence with Mr Newell and various shipping and other documents all of which went to the question of whether the goods had been ordered, shipped to the USA, received there, undergone customs examination and been accepted by Mr Newell.
Consideration and conclusions
36. The plaintiff alleges that it is entitled to repayment of the sum of $19,632.59 pursuant to its contract with the defendant and that in breach of that agreement the defendant failed to repay the moneys. It bears the onus, on the balance of probabilities, of proving both those elements of its case. The second element, of course, is dependent on the first: the plaintiff must prove the relevant term alleged to have been breached.
37. Although no direct evidence was given of this by Ms Scully in her affidavit, or by any other witness from American Express, there may be an inference to be drawn from the business records tendered that by December 2002 (if not before) American Express had a practice of unilaterally varying the terms and conditions of its agreements with merchants by sending them form letters and new editions of the terms and conditions. It is upon this inference that American Express relies to prove the terms and conditions upon which it relies.
38. No evidence was tendered by American Express, however, of the terms and conditions that applied in August 2001 when Mr Luck signed the Merchant Agreement Acceptance Form. Nor was any evidence tendered by American Express of the receipt by Topgun of the “set-up kit” referred to in that document. Neither was any evidence tendered by American Express showing that Topgun had been sent a copy of the 2002 terms and conditions or that Topgun had received that document or that, if it did receive the document, the terms contained within it had been brought to the attention of Mr Luck or anyone else involved in the management of Topgun.
39. The defendant submits that no inference can properly be drawn from the documents tendered by the plaintiff that in August 2001 Topgun and American Express had agreed that American Express might from time to time alter the terms of the agreement, thereby binding Topgun to December 2002 terms and conditions. It was contended that it may have been the case that the parties had originally agreed that terms and conditions could only be varied with the express consent of the defendant. It was also possible that the terms may have been able to be varied unilaterally by American Express. It was put that the court could not speculate and, absent evidence of system, custom and practice from American Express (and there was none here), there was no inferential evidence upon which the court could rely to settle the question.
40. American Express argued that an inference that Mr Luck had read and agreed to be bound by the terms and conditions now relied upon by it could be drawn from the fact that Topgun had, in the Direct Debit agreement, acknowledged that it had agreed to the terms and conditions for Card Acceptance. The defendant suggests otherwise, arguing that the direct debit agreement does not constitute such an admission on Mr Luck’s part.
41. For my part I cannot see that the document can be read in the way contended for by counsel for the plaintiff. The acknowledgment is that Topgun will be bound by the terms of the direct debit agreement and other terms and conditions agreed by the parties. That is the very point of the defendant’s case: he agrees Topgun was bound by those conditions which he acknowledged in writing but not those which he did not have drawn to his attention.
42. This case is somewhat unusual in that there is a signed written agreement that does not, however, contain or attach the relevant terms and conditions. Had American Express annexed a copy of its terms and conditions to the form signed by Mr Luck, it is clear that, whether or not he read them, Topgun would have very probably been bound by them (see Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; L’Estrange v Graucob [1934] 2 KB 394) there being no suggestion from Mr Luck of fraud or misrepresentation on the part of the American Express representative with whom he was dealing on 14 August 2001.
43. On the other hand, by taking the unusual course of delaying the presentation of the proposed terms and conditions until it had provided a “set-up kit”, case becomes one analogous in some respects to a “ticket” case. In such cases, the service provider who relies on written terms such as indemnity or exemption clauses is required to take reasonable steps to bring the terms to the attention of the other contracting party. (See, for example, Sydney City Council v West (1965) 115 CLR 353; Baltic Shipping Co (“The Mikhail Lermontov”) v Dillon (1991) 22 NSWLR 1.) Here, it seems, the intention of American Express was to provide the terms and conditions it proposed with a kit at some time after 14 August 2001. No evidence of the provision of the written terms, let alone any effort on the part of American Express to draw them to Mr Luck’s attention, has been tendered by the plaintiff.
44. The ticket cases turn on the construction of the contracts and, in particular, whether there was a meeting of minds by the parties to the alleged agreement. Somewhat surprisingly the plaintiff has produced no records of the terms said to have been agreed and there is no evidence from the American Express representative with whom Mr Luck negotiated the agreement. American Express is therefore in an even more invidious position, it seems to me, than an operator of a service who is at least able to produce a copy of the ticket bearing the relevant terms upon which it relies.
45. It needs to be observed that the agreement, in whatever terms it was originally formed, was entered about five years ago and in the meantime Mr Luck has been gravely ill, being treated for cancer. He appeared to struggle to remember certain matters, particularly when there was no documentary record available to him to refresh his memory. The possibility that his evidence concerning the alleged failure of American Express to bring the terms and conditions of the merchant agreement it alleges was formed to his attention being entirely self-serving is manifest. It is therefore difficult to determine how reliable that evidence really is. He, however, does not bear the onus of proof.
46. That settles the matter from a contractual point of view in favour of the defendant.
47. If, however, I am mistaken in that view, it is difficult to see that the plaintiff can succeed in proving the original breach upon which it relied, namely that of providing insufficient material or information for it to resolve the dispute with Mr Newell in favour of the merchant. It was very fairly and candidly conceded by counsel for American Express that this was a case in which Topgun appeared to have been the victim of a fraud by Mr Newell and the only real question was where the cost of that fraud should fall.
48. I took that to be an admission by American Express that the supposed dispute had, at least by the time the matter came on for hearing before me, clearly been understood by American Express to be disingenuous and designed by Mr Newell to avoid having to pay for goods he had obtained from Topgun. What was obvious to counsel for the plaintiff when he examined the evidence ought, in my opinion, to have been obvious to American Express at the time it formed a view that Topgun had breached its contract by providing insufficient material to determine the so-called “dispute”. It was self-evident, even if American Express had not received every last jot and tittle of the information it sought from Topgun, what had happened. Its remedy ought to have been against the dishonest cardmember, not the trader.
49. Before concluding, I should also deal with another issue. Over objection, evidence of other breaches by Topgun was led by the plaintiff. The principal argument advanced was that American Express was entitled to Full Recourse if a merchant did not fulfil its obligations under the contract thereby enabling American Express to take adequate steps to protect itself from fraud. Although it makes no difference to the ultimate result, with the benefit of hindsight I think that it was a mistake on my part to admit that evidence. I was conscious of the fact that Mr Luck is very ill and was keen to have the case conclude that afternoon. In retrospect, the decision was, I think, somewhat hasty and therefore ill-considered.
50. On reflection, it seems clear that the plaintiff’s real case was commenced with a view to seeking Full Recourse on the basis of the breach alleged – the provision by Topgun of what it claimed was inadequate information. To have expanded its case I now take the view that the plaintiff ought to have sought leave to amend its Statement of Claim or particulars, or that I should have asked that it seek leave and then considered the issue after hearing both parties. If the matter were to be remitted for some reason, I consider that question ought also be revisited.
51. That said, a verdict will be entered for the defendant.
Orders
52. Verdict for the defendant.
53. I propose an order that costs follow the event in a sum agreed or assessed.
54. Parties may have liberty to apply on the question of costs.
Hugh Dillon
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