and Pentridge Village Pty Ltd (ACN 087 151 068) v G and S Potenza Pty Ltd (ACN 103 195 393)
[2014] VSCA 50
•27 March 2014
SUPREME COURT OF VICTORIA
COURT OF APPEAL
| S APCI 2013 0061 | |
| PENTRIDGE VILLAGE PTY LTD (ACN 087 151 068) | Appellant |
| v | |
| G & S POTENZA PTY LTD | Respondents |
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JUDGES: | NETTLE and NEAVE JJA and SIFRIS AJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 20 February 2014 | |
DATE OF JUDGMENT: | 27 March 2014 | |
MEDIUM NEUTRAL CITATION: | [2014] VSCA 50 | |
JUDGMENT APPEALED FROM: | [2013] VCC 399 (Judge Ginnane) | |
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RESTITUTION – Whether money paid under mistake – Whether relevant conduct caused mistake – Whether evidence established that money paid under a mistake.
MISLEADING OR DECEPTIVE CONDUCT – Whether representations were made – Whether representations were relied upon in making the payment .
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APPEARANCES: | Counsel | Solicitors |
For the Appellant | Mr M F Wheelahan SC with Mr A M Bell | Fairweather Legal |
| For the Respondents | Mr I W Upjohn | RNG Lawyers |
NETTLE JA
NEAVE JA
SIFRIS AJA:
Introduction
G & S Potenza Pty Ltd (‘Potenza’), the first respondent and plaintiff below, claimed that the appellant, Pentridge Village Pty Ltd (‘Pentridge Village’), the defendant below, owed Potenza the sum of $188,607.50.
The claim was based on an alleged agreement concluded in or about early January 2008 between Potenza and Pentridge Village. Potenza claimed that in 2008, pursuant to the alleged agreement, it performed excavation and soil sorting work at the Pentridge Village housing estate in Coburg, a substantial housing project undertaken by Pentridge Village. An alternative quantum meruit claim was also made.
Potenza alleged that the original claim, based on its invoices, was in the sum of $338,607.50 (‘the Debt’) but that Pentridge Village had paid $150,000 on 25 August 2009 following a meeting held on 4 August 2009.
Pentridge Village denied that there was any agreement as alleged, and by counterclaim sought repayment of the sum of $150,000.
After a six day trial in the County Court the trial judge held that there was no agreement between Potenza and Pentridge Village and that there was no basis for the quantum meruit claim. Potenza’s agreement was with a sub-contractor, Mr Mrnjavac. Potenza’s claim was dismissed and it does not appeal the decision.
The trial judge also dismissed the counterclaim. Pentridge Village appeals against that decision. Accordingly the critical issue in this appeal is whether there is any error in the decision of the trial judge to the effect that Pentridge Village failed to establish an entitlement to the repayment of the sum of $150,000 that it paid to Potenza on 25 August 2009.
The trial of the counterclaim
Most of the trial and the evidence was in relation to Potenza’s claim.
In relation to the counterclaim, Pentridge Village contended that the payment was money had and received, alternatively money paid for consideration that wholly failed, or money paid by mistake, or money paid because of misleading or deceptive conduct on the part of Potenza in breach of s 52 of the Trade Practices Act 1974 (Cth) (‘TPA’). Pentridge Village made a separate claim against Gianuario (John) Fortunato (‘Mr Fortunato’), a director of Potenza, for the said sum, pursuant to s 9 of the Fair Trading Act 1999 and, on the basis of his alleged involvement in Potenza’s conduct, under s 75B of the TPA. The claim of ‘involvement’ was later abandoned during the course of final addresses at trial.
Potenza denied that the sum of $150,000 was paid under any mistake, for consideration that failed or on the basis of any misleading or deceptive conduct.
Pentridge Village relied on the evidence of its director, Mr Peter Chiavaroli (‘Mr Chiavaroli’) to the effect that at a meeting on 4 August 2009 Mr Fortunato asserted the existence of the Debt and provided an invoice to Mr Chiavaroli for $338,607.50. Pentridge Village alleged that but for such assertion Mr Chiavaroli would not have directed his son Damian to make payment of the sum of $150,000.
The critical factual basis that underpins the various claims made by Pentridge Village is the exchange between Mr Fortunato and Mr Chiavaroli during the meeting on 4 August 2009. It is this exchange that is said to have caused Pentridge Village (essentially Mr Chiavaroli) to act in the way it did and make the payment.
The trial judge’s summary of the evidence relating to the meeting held on 4 August 2009 is set out in the reasons for judgment.[1] The summary is accurate and it was not contended otherwise by Pentridge Village.
[1]G & S Potenza Pty Ltd v Pentridge Village Pty Ltd [2013] VCC 399 (‘Judgment’) [108]–[125].
Ms Grgas‑Bego, Mr Fortunato’s daughter, said that she and her father walked into the offices of Pentridge Village and told the receptionist that they had a meeting with Peter Chiavaroli. The receptionist told them to go to the boardroom where they met Mr Chiavaroli who was later joined by his sons, Leigh and Damian. She said that she and her father gave them the invoice and:
They informed us they didn’t have the whole amount and they could only give us $150,000 which we agreed to and they said to us that once they had the money they would pay us. They also requested dockets which a couple of days later I did photocopy them and send them through email.
Mr Fortunato’s account of the meeting was that he submitted the invoice to Mr Chiavaroli, who said in essence that because he and Mr Fortunato had known each other for a long time, it was better that he pay, presumably meaning first pay, small sub-contractors. Mr Fortunato said that he did not need the money at the time and that he trusted Mr Chiavaroli. Mr Chiavaroli said that he would pay him later.
In cross‑examination, Mr Fortunato gave evidence that Mr Chiavaroli said:
... the best we can do for you, he said, we pay $150,000 at the moment, he said later we pay the rest and it never happened.
Mr Fortunato also said that Damian Chiavaroli, at the direction of his father, took the invoice and wrote him a cheque for $150,000, which he received at a later point after 25 August 2009.
Mr Chiavaroli’s evidence was that he was working in the boardroom, which he used as his office, and that Mr Fortunato, on his own, walked into the boardroom waving an invoice and wanting money. Mr Chiavaroli said that:
I listened to his argument and screaming then I called in my son Damian, I told him to take John with him, take an invoice he said he had with him and to pay him $150,000 but it had to be sorted out with Breese Pitt Dixon.[2]
[2]Breese Pitt Dixon was the project manager.
Mr Chiavaroli added that he did not look at the invoice and only saw it after the litigation commenced. Mr Fortunato walked out with Damian Chiavaroli and that was the end of the matter as far as he was concerned.
Mr Chiavaroli also gave the following evidence:
I have known John for a long time, he was desperate for money, he was upset so I called in my son Damian because he wasn’t getting progressive payments from Breese Pitt Dixon or payments from other place and I said okay, you say you owe [sic, are owed] this money, call in Damian. Damian take John with you, take this invoice or whatever he’s got and pay him 150 subject that John goes and sees Breese Pitt Dixon to sort all this out’.
Damian Chiavaroli is and was at all relevant times the accountant and financial controller for West Homes Pty Ltd (‘West Homes’), a company that is and was at all relevant times a builder and contractor for Pentridge Village. West Homes is effectively controlled by Mr Chiavaroli. Damian Chiavaroli gave evidence that, on 4 August 2009, his father called him into the office and told him to go with Mr Fortunato and draw a cheque. He said that Mr Fortunato gave him the invoice in the office. He told Mr Fortunato that he could not give him any funds then and that he first needed approval from Capital Finance to draw a cheque. Capital Finance were the financiers of the Pentridge Village project.
The decision below
The reasons of the trial judge for dismissing the counterclaim[3] are set out below.
[3]Based on mistake and misleading or deceptive conduct. These were the only grounds that were the subject of the appeal.
Mistake
203Pentridge Village bears the onus of proving its entitlement to recover the $150,000. That entitlement does not arise automatically because Potenza’s claim against Pentridge Village has not succeeded. The mistake has to have caused the payment and Pentridge Village bears the onus of proof on that issue.[4]
[4]David Securities Pty Ltd v Commonwealth of Australia (1992) 175 CLR 353, 376–377, 395–6, 402 and Mason and Carter’s Restitution Law in Australia 2nd ed, p 156.
204Pentridge Village has failed to discharge that onus for the following reasons.
205First, there were no explanations of why the payment was made other than that given by Mr Chiavaroli in chief and in cross‑examination, which I have set out above.
206The first explanation that Mr Chiavaroli gave hardly amounted to evidence of being misled by a false representation. Rather it showed Mr Chiavaroli was prepared to arrange payment for a long standing acquaintance, who had been doing work at the Pentridge Village site and not being paid. It is not surprising that, faced with such a complaint from someone that he knew well, that Mr Chiavaroli, without reference to the legal questions of who were the contracting parties, should decide to authorise a substantial payment in respect of the work that he presumably knew, at least in general terms, had been done at the site.
207Mr Chiavaroli’s second explanation in cross-examination was vague and lacking in detail. It was not put to Mr Fortunato in cross-examination. It really amounted to evidence that Mr Chiavaroli authorised the payment to Potenza on Mr Fortunato’s description of the work. The work so described was quite different to the work described in the Invoice and was work that no other witness in the trial had mentioned.
208I find on the balance of probabilities that Mr Fortunato did not make the representations that Mr Chiavaroli alleged. In those circumstances Pentridge Village has not proved a mistake made by Mr Chiavaroli.
209Secondly, the description of accord and satisfaction that Pentridge Village gave to the payment of $150,000 in its amended defence is significant.
210Thirdly, there was no evidence of what occurred in the three weeks between 4 August and 25 August 2009. The evidence suggested that Mr Chiavaroli gave no further consideration to the matter and did not read the Invoice. The counterclaim alleges that he was misled by the Invoice, but the evidence does not support that conclusion. The evidence suggests that a number of persons were involved in processing the claim, including staff of Pentridge Village, the quantity surveyor, Breese Pitt Dixon and Capital Finance. Apart from Mr Paini and Mr Damian Chiavaroli, no one else from Pentridge Village’s side gave evidence that they read the Invoice.
211Fourthly, Pentridge Village only commenced an attempt to have the $150,000 returned as a counterclaim in this proceeding on 22 August 2012 more than three years after the payment was made.
212Taking all these matters into account, I do not consider that Pentridge Village has proved that it made a mistake of fact or of law in paying the $150,000 to Potenza.
213Potenza relied on the principle that generally a payment made to compromise an honest claim is irrecoverable on the grounds of mistake.[5] But I do not consider that that principle is applicable in this case – there must be questions of whether the claim fits within that principle.
…
Misleading or deceptive conduct
219As I have previously stated, I find that Pentridge Village has not proved that the representation that Mr Chiavaroli says caused it to authorise the payment of $150,000, did in fact do so.
220If on the other hand, the conduct considered is Mr Fortunato’s delivery of the Invoice, then Pentridge Village has not proved that it acted in reliance on it in deciding to make the payment. Nor has it proved that it was misled or deceived by it.
221Pentridge Village must prove that it suffered loss by or because of the misleading or deceptive conduct of Potenza e.g. s 82 of the Trade Practices Act 1974 and s159 of the Fair Trading Act 1999. That statutory formula incorporates ordinary principles of causation.[6] [7]
[5]See Hookway v Racing Victoria Ltd (2005) 13 VR 444 [48]–[69].
[6]Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, 525.
[7]Judgment [203]–[213], [219]–[221].
The grounds of appeal
The grounds of appeal are set out below.[8]
[8]Leave was granted to amend the grounds of appeal. However, the amendments relate to the form of order sought by Pentridge Village in the event that the appeal was allowed. In view of our decision the amendments are not relevant.
Mistake
1.The trial judge erred, when, in relation to assessing whether the mistake (namely, that there was an obligation on the Appellant’s behalf to make a payment to the G & S Potenza Pty Ltd (Potenza)) caused the payment by Pentridge Village of $150,000 to Potenza (see [203]), held that there was no ‘evidence of being misled by a false representation’: at [206] and see also [210].
2.The trial judge erred, when, in relation to assessing whether the mistake caused the payment by Pentridge Village of $150,000 to Potenza, held that the description of ‘accord and satisfaction that Pentridge Village gave to the payment of $150,000 in its amended defence is significant’: at [210].
3.The trial judge erred, when, in relation to assessing whether the mistake caused the payment by Pentridge Village of $150,000 to Potenza, held that there was no evidence of ‘what occurred in the three weeks between 4 August [the demand for payment by Potenza] and 25 August 2009 [the making of payment to Potenza]’: at [210].
4.The trial judge erred, when, in relation to assessing whether the mistake caused the payment by Pentridge Village of $150,000 to Potenza (see [203]), held that Pentridge Village delayed by ‘more than three years’ in commencing proceedings to have the sum of $150,000 returned: at [211].
5.In so holding the matters in 1 – 4 above, the trial judge impermissibly had regard to matters irrelevant to the question of causation in relation to the mistaken payment.
6.Further, the trial judge placed undue weight upon those matters in relation to the question of causation.
7.The trial judge should have inferred from his Honour’s factual findings (at [123]-[124]) that the demand of $338,607.50 made by Potenza on 4 August 2009 was causative of the direction given by Mr Chiavaroli (of Pentridge Village) for payment of the sum of $150,000 to Potenza and, therefore, Pentridge Village was entitled to restitution of the money paid it by mistake and/or money had and received by Potenza for the use of Pentridge Village.
Misleading and deceptive conduct
8.Further, the trial judge erred, when, in relation to assessing whether Potenza’s representation on 4 August 2009 (namely, that Pentridge Village owed $338,607.50 to Potenza), his Honour held that the representation did not cause Pentridge Village to make the payment of $150,000 to Potenza: at [219].
9.Further, the trial judge erred, when, in relation to assessing whether Potenza’s delivery of an invoice on 4 August 2009 (namely, that Pentridge Village owed $338,607.50 to Potenza), his Honour held that conduct did not mislead or deceive Pentridge Village and, therefore, did not cause Pentridge Village to make the payment of $150,000 to Potenza: at [220].
10.In so holding the matters in 8 and 9 above, the trial judge failed to make proper inferences of fact regarding the causative link between the demand made by Potenza and Pentridge Village’s response to the demand, namely a decision to make payment of $150,000 to Potenza.
11.The trial judge should have inferred from his Honour’s factual findings (at [123]-[124]) that:
a.but for the demand of $338,607.50 made by Potenza on 4 August 2009, the direction given by Mr Chiavaroli (of Pentridge Village) for payment of the sum of $150,000 would not have been made; and/or
b.the demand of $338,607.50 made by Potenza on 4 August 2009 was a factor that caused the direction given by Mr Chiavaroli (of Pentridge Village) for payment of the sum of $150,000.
12.As a result of the above errors, the trial judge erred in finding that Pentridge Village did not suffer loss or damage by reason of its payment of $150,000 to Potenza.
Grounds 1–7 Mistake
The critical issue is whether Pentridge Village made the payment of $150,000 on 25 August 2009 because it believed it was under a legal obligation to do so. If Pentridge Village believed that it was contractually bound to make the payment when in fact it was not, it will prima facie be entitled to recover the sum.[9]
[9]David Securities Pty Ltd & Ors v Commonwealth of Australia (1992) 175 CLR 353.
The evidence does not establish that it is more likely than not that the payment of $150,000 was made because of any mistake on the part of Pentridge Village. The onus was on Pentridge Village. It failed to discharge the onus. There is no error in the reasoning of the trial judge.
As to the first explanation of Mr Chiavaroli as to why he made the payment, the evidence of Mr Chiavaroli (and Mr Fortunato) was far too general to establish a mistake. It lacked the specificity and directness required to conclude that the offered payment was mistakenly made because of an asserted legal obligation on the part of Pentridge Village to G & S Potenza. Mr Fortunato did not refer to any such specific obligation and the invoice so much relied upon by the appellant was not addressed to any party. It simply recorded the work done. Further, Mr Chiavaroli did not say that it was why he agreed to the payment. He accepted that he did not read or rely on the invoice. A fair reading of the evidence suggests that Mr Fortunato was upset that he had not been paid for work done and Mr Chiavaroli was concerned to see that some money was paid to his old and trusted friend, Mr Fortunato. But there is no evidence that Mr Chiavaroli considered that Pentridge Village was under a legal obligation to make the payment. Indeed, there is no evidence that Mr Chiavaroli even directed his mind to the issue. Moreover, why would Mr Chiavaroli have assumed that Pentridge Village was under a legal obligation to make the payment? The notion of such an obligation was not based on anything said by Mr Fortunato or the invoice and it is unlikely that he would have believed it was. Mr Chiavaroli knew the way in which the project operated. West Homes, and not Pentridge Village, was generally responsible for such payments to contractors. He would not have assumed that Pentridge Village had the liability given the way in which the project operated. The opposite is more likely the case. Mr Chiavaroli made continuous reference to the need to sort the matter out with Breese Pitt Dixon, the project manager.
Subject to the matters referred to hereunder at paragraphs [27]-[30], there was no other evidence as to why the payment was made. For the reasons given by the trial judge, the second explanation given by Mr Chiavaroli for making payment does not assist Pentridge Village.
Senior Counsel for Pentridge Village contended that the scope of his Honour’s enquiry and analysis was too narrow and should have extended beyond consideration of whether there was ‘a false representation’.[10] We were urged to have regard to other evidence and available inferences which, it was said, the trial judge had failed to take into account. They include:[11]
•The provision of various dockets by Ms Grgas-Bego as requested by Pentridge Village.
•The admission by Potenza in paragraph 30 of its defence to Pentridge Village’s counterclaim to the effect that the invoice did contain an implied representation that Pentridge Village owed the Debt.
•The backdating of a quotation, failure of the claim and the credit of Mr Fortunato.
[10]See Judgment [206].
[11]It should be noted that none of these matters were specifically put to the trial judge.
In our opinion none of these matters, whether individually or collectively, has sufficient bearing to lead to a different conclusion on the ultimate question of whether Pentridge Village made the identified mistake. Providing the dockets as requested goes nowhere. To regard it as probative evidence of an asserted contractual relationship between Potenza and Pentridge Village is unwarranted. Providing Mr Chiavaroli with documents in circumstances where he was involved in a substantial project with many entities controlled by him was understandable and does not warrant any further inference or unjustified corollary.
The admission was obviously part of Potenza’s case. It is a pleading many years later, it is limited and a response to the assertions made by Pentridge Village and, in any event, it goes nowhere. All possible evidence was led, examined and analysed with the obvious and available conclusion on the evidence reached. The particulars of the representation pleaded by Pentridge Village in paragraph 30 of its counterclaim refer to the invoice and its handing over and the meeting held on 4 August 2009. The representation was not made out on the evidence and, more particularly, was not relied on.
The failure of the claim and the credit issues associated with Mr Fortunato do not affect or detract from the relevant findings in relation to mistake which were based on other evidence and in particular and specifically Mr Chiavaroli’s evidence.
There is no error in the judge’s third reason for rejecting the claim.[12] The position of Pentridge Village is that the mistake arose as a result of the meeting on 4 August 2009. The cheque and payment were made on 25 August 2009, some three weeks later. If there were a mistake, was Pentridge Village under the same mistake at 25 August 2009 when the payment was actually made? There is no evidence of the mistake continuing until the date of payment. During the course of processing the cheque there must have been documentation or discussions about the payment. There is no evidence that whatever mistake Mr Chiavaroli may have been under continued throughout the process and until payment was made.
[12]Judgment [210].
With reference to specific grounds of appeal, there was in our view no evidence of Pentridge Village being misled by any conduct on the part of Mr Fortunato and accordingly Ground 1 must fail.
Having found no evidence of any mistake, it is unnecessary to deal with the matters the subject of Grounds 2 and 4, and we do not propose to do so.[13]
[13]Although not affecting the result, the withdrawn defence of accord and satisfaction, presumably pleaded on instruction, undermines the defence based on mistake. To the extent that it is predicated on the presumed considered position that a liability was being satisfied, it is, in the absence of a satisfactory explanation, inconsistent with the existence of a mistake.
So far as Ground 3 is concerned we consider that the trial judge was correct in finding that there was no evidence that the mistake continued until 25 August 2009, the actual date of payment.
In relation to Ground 6 we do not consider that the trial judge placed undue weight on the matters referred to. His Honour’s first reason was sufficient to dispose of the counterclaim.
As to Ground 7, as we have said, the critical issue in this case is causation. Did the invoice or demand made at the meeting on 4 August 2009, cause Mr Chiavaroli to believe he was under a legal obligation to make the payment? For the reasons given, we do not consider that to be the case. There is nothing in the invoice or in the discussion on 4 August 2009 that communicated to Mr Chiavaroli that Pentridge Village was under a legal obligation to make payment to Potenza. For this reason Ground 7 is not made out.
Grounds 8–12 Misleading or deceptive conduct
Having found on a balance of probabilities that Mr Fortunato did not make the representation alleged by Mr Chiavaroli, and that as a consequence it did not cause the payment to be made, the trial judge dismissed the misleading or deceptive conduct claim. The trial judge was correct to find on the evidence that Pentridge Village had failed to establish that there was any representation of the kind alleged or that it was misled or deceived by any representation. In fact Mr Chiavaroli agreed that he was not so misled.
The decision of Gould & Anor v Veggelas[14] referred to by Senior Counsel for Pentridge Village does not assist its case. We were referred to the following passage in the judgment of Wilson J:
1.Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case.
2.If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.
3.The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation.
4.The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract.[15]
[14][1983] 157 CLR 215.
[15]Ibid 236.
There was no material representation as alleged and in any event any inference that he was misled by the alleged representation was rebutted, indeed out of the very mouth of Mr Chiavaroli. He did not rely on any such representation.
The grounds of appeal are not made out.
Disposition
The appeal will be dismissed.
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