Ausbulk Ltd v Evison - [2009] SADC 70

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
AUSBULK LTD v EVISON
[2009] SADC 70
Judgment of His Honour Judge Barrett
24 June 2009
TRADE AND COMMERCE - TRADE AND COMMERCE GENERALLY - STATUTES RELATING TO MISLEADING OR DECEPTIVE CONDUCT IN TRADE
Plaintiff sues for non-performance of contracts for sale and purchase of grain. Defendant counterclaims that the plaintiff rendered it impossible to complete the contracts by failing to increase his credit limit in accordance with his request and the plaintiff's assurance that he would be given the increase. Defendant alleges misleading or deceptive conduct by misrepresentation, pursuant to s 52 of Trade Practices Act.
Held: Plaintiff did breach s 52 of the Trade Practices Act by making a representation that the defendant would be granted increased credit. That induced the defendant to enter the contracts which he was then unable to complete.
Trade Practices Act 1974 s 52, s 51A, S 82,s 87, referred to.
Phoenix Court Pty Ltd v Melbourne Central Pty Ltd (1987) ATPR (Digest) 46-179; Bennett v Minister of Community Services (1992) 176 VLR 408; March v Stramare (1991) 171 CLR 506, considered.

AUSBULK LTD v EVISON
[2009] SADC 70
Introduction

This case concerns two contracts for the sale and purchase of grain. The plaintiff sues the defendant alleging he failed to complete the contracts. The defendant says it was not his fault that the contracts were not completed. He says that the plaintiff made it impossible for him to complete them. He says that the contracts were conditional upon him being granted sufficient credit by the plaintiff to complete them. In the alternative, he asserts that within the meaning of the Trade Practices Act he was induced into the contracts by misrepresentation and altered his position to his disadvantage.
Background summary
The plaintiff is a large scale grain merchant. The defendant is a road transport carrier who also traded in grain. He is from Victoria. He purchased grain for dairy farmer customers in Victoria and transported the grain for them. In early December 2002 he signed two contracts to purchase from the plaintiff two 1,000 metric ton consignments of grain. One was for a grain called triticale and the other was for barley. The grain was to be drawn from the plaintiff’s depots in South Australia over a period of approximately 10 months from early December 2002 to 31 October 2003. The defendant says that he entered the two agreements on the understanding that he would receive credit from the plaintiff to enable him to take delivery of the grain. He would be paid for it by his customers in time to pay the plaintiff for each consignment within 4 to 6 weeks. To do that he would need a credit limit of $100,000. He says that a grain trader working for the plaintiff assured him that, while he would not initially be given $100,000 credit, he would be able to gradually work up to that figure and would thus have the credit he required to complete the contracts.
In about September 2002 the parties had contracted together for the supply and purchase of grain. The defendant had entered into two contracts each for the sale and purchase of 200 metric tons of grain. The defendant had applied for, and been given, credit to the extent of $20,000, which was increased to $30,000. With that credit limit of $30,000 he was able to complete those two earlier contracts. He says that he failed to complete the larger contracts entered into in December 2002 because he was not given the credit that he was assured by the plaintiff he would be given. Instead he sourced grain from other suppliers who did give him the credit he required.
The issues
The plaintiff sues on the two contracts for the loss it suffered when the defendant failed to complete performance of them. After the terms of the contracts had elapsed the defendant said he was unable to take the grain that he had not taken delivery of. The plaintiff was forced to sell that grain at what was, by then, a lower price than it had contracted to sell to the defendant. Accordingly, in what is described as a “wash out”, the plaintiff suffered a loss of $194,180.88 plus interest and costs. The defendant says that he was induced into this contract by the assurance or promise of sufficient credit to enable him to carry out the contract. The assurance was that he would receive credit of $100,000. The issues in the trials are:
1. Did an officer of the plaintiff make a representation to the defendant that he would be able to obtain $100,000 credit and if a representation was made, what exactly was it?
2. Did the defendant rely on that representation to alter his position by entering the contracts?
3. Did there rest on the defendant any obligation to take more constructive steps than he took to obtain the credit he needed? Did his failure to take adequate steps break the chain of causation?
Background
The plaintiff is a large grain merchant based in South Australia. It has depots for the receipt of cereal crops around South Australia. It buys the grain from the growers who deliver it to its depots. It then sells the grain directly to users or to other grain merchants. In the trial the plaintiff called six witnesses, but the essential evidence for the plaintiff came from Mr Wilsdon, the grain trader within the organisation who dealt with the defendant.
The defendant is a land transport operator who also trades in grain. He supplies feed grain to dairy farmers in Gippsland Victoria near where he lives. He has several trucks and employs drivers but essentially the business is run by him and his partner. He gave evidence for the defence, as did his partner who handled the bookwork of the business. The essential evidence for the defence was given by Mr Evison himself.
Early in 2002 Mr Evison came to know Mr Wilsdon through a freight agreement he entered into with the plaintiff. The defendant says it was a merely oral freight agreement between him and Mr Wilsdon, pursuant to which the defendant transported the grain from a depot or depots in South Australia to Maffra in Victoria. Mr Wilsdon has no recollection of the freight agreement but I accept that it occurred. A little later in the year the parties discussed the sale and purchase of grain. In September 2002 the parties entered into two agreements for the sale and purchase of 200 metric tons of barley and 200 metric tons of triticale. There was a further contract for the sale and purchase of 13 metric tons of grain which really just a top up of a load. In respect of each of these agreements there was a written contract based on the oral agreements between Mr Wilsdon and Mr Evison. As a result of the oral agreements Mr Wilsdon prepared what he described as a “scratch note” which he forwarded to the contracts section of the plaintiff. The contracts section drew up the brief written contract which was sent to the defendant who executed it and returned it to the plaintiff. In respect of these contracts the defendant made it clear that he would only be able to complete them if he was given credit by the plaintiff. He said that his universal practice was to give his dairy farmer customers credit for the orders they placed with him for the purchase of grain. The credit he extended to his customers was for 30 days. The practice in the dairy industry is that dairy farmers are paid on the 15^th of every month. The defendant then expects to be paid for the grain a short time after the 15^th of each month. In turn he sought credit from the plaintiff so that he could carry out these transactions without having to obtain loans from a bank or financial institution. He says that he never worked on an overdraft. Just as he gave credit to his customers, he sought credit from his suppliers. The plaintiff was not his only supplier. He gave evidence and produced documents showing that he purchased sometimes large quantities of grain from other suppliers and he was extended sometimes large amounts of credit sometimes over $100,000. In respect of these other suppliers, he says that he never had a formal credit agreement or limit. This is despite credit limits from referee credit providers being recorded by his partner in their initial application for credit from the plaintiff. His partner explained that although she put down credit limits for various financial referees, these were really the monthly trading figures with each of these suppliers.
Mr Wilsdon did not have authority to grant or extend credit. That function was carried out by the credit or finance section of the plaintiff. It is clear though from his own evidence at the trial that he was the only person with whom Mr Evison communicated. When the defendant told Mr Wilsdon he needed credit Mr Wilsdon filled out a request for credit which he sent to the finance section. The finance section then sent an application for credit form to the defendant. The defendant’s partner, Ms Jennings, filled out the credit application form except for the two questions which related to the credit limit which was sought by the defendant. Mr Evison himself wrote down $30,000. In due course the plaintiff approved the application for a $30,000 credit limit. Thereafter, in September, the defendant entered into the two contracts for the supply of 200 metric tons of grain and proceeded to carry out the terms of the contracts. In doing so he occasionally exceeded the credit limit of $30,000 but Mr Wilsdon said that the defendant was allowed some latitude because he had proved himself to be reliable. He brought his account within the credit limit promptly whenever he exceeded it. In this way the plaintiff allowed him a temporary accommodation of credit during the fairly short terms of the two contracts entered into in September.
In November Mr Wilsdon and the defendant spoke about the possible sale and purchase of larger quantities of grain. On 27 November the plaintiff made a written offer to supply the defendant with 1,000 metric tons of barley. That offer was not accepted by the defendant. He said his customers preferred to purchase triticale. He said that after he failed to accept the offer to purchase 1,000 tons of barley, he had a discussion with Mr Wilsdon in which Mr Wilsdon said that, because the plaintiff had much larger quantities of barley than triticale, and because it was particularly concerned to sell barley, it would only enter into an agreement to sell grain to the defendant if he bought both a consignment of triticale and a consignment of barley. The defendant agreed to purchase 1,000 metric tons of each grain. He says that he made it clear to Mr Wilsdon that he would only agree to these larger quantities of grain if his credit limit was raised to $100,000. He says that he made it clear to Mr Wilsdon that he would need $100,000 credit to be able to trade in this larger quantity of grain. 2,000 metric tons of grain was going to cost him some $600,000, and if the grain was drawn down evenly over the 10 month period of the contract the monthly purchase price of grain would be approximately $60,000. He would need about 50% more than that figure per month to be able to meet the terms of the contract. He says that he asked for $100,000 credit.
Mr Wilsdon denied that Mr Evison made a clear request for credit. He said that, while the defendant might have made a “flippant remark” about needing a credit limit of about $100,000, he did not make a clear request for that credit, and, in any event, he, Mr Wilsdon, was not in a position to grant that request. He conceded that he may have had some discussions with Mr Evison about credit but they would not have been long discussions because he would have made it clear to Mr Evison that he himself did not have authority to grant credit or extend credit limits. He says he said that those matters would have to be taken up with the finance or credit section of the company. Accordingly he would have referred Mr Evison to people within that section.
For his part Mr Evison concedes that Mr Wilsdon did not undertake to arrange for him to be given credit up to $100,000. Instead Mr Wilsdon told him that while he would not get $100,000 straightaway but he would be able to “work up” to that figure. He would have to apply for increases of credit gradually but he would ultimately get the credit he needed to complete the contract. These discussions, he said, took place in December 2000. Mr Evison says that he made clear right at the beginning of the discussions about the larger quantities of grain that he would require an increase in credit. As soon as they were talking about sales of 2,000 metric tons of grain, he made it clear that he wanted $100,000 credit. He only entered the agreements when assured that he would ultimately get that credit limit which he required.
There is some evidence supporting, in part at least, Mr Evison’s contention that Mr Wilsdon told him he should apply for gradual increases in his credit limit. Immediately after the discussion they clearly had on 12 December 2002 (there is an entry in Mr Wilsdon’s diary of him discussing credit limit with the defendant on 12 December), there is a request filled out by Mr Wilsdon and sent to the finance department for a credit limit at $40,000 for the defendant. That, unfortunately, is the only documentation on that topic. There is no evidence from the plaintiff that a formal application form for the increased limit was sent to the defendant for completion and return. It has to be said that there was no evidence of the actual sending of the original application for finance in September. However, in that case the application itself was returned by the defendant and remained in the plaintiff’s records. There is no record of the application form being filled out for the $40,000 credit limit. Both Mr Mr Evison and Ms Jennings have no recollection of every receiving that application form.
Mr Evison points to one further aspect of the evidence to suggest he was not willing to sign the new contracts in December until the increase in credit question was resolved. He says that he had a telephone conversation with Mr Wilsdon on 23 December 2002. He says he was in his truck at a town called Tomingley. He says that the conversation concerned two topics. The first topic was a request to be able to draw down 168 metric tons of the grain he was proposing to take delivery of, but instead of taking it from one of the nominated depots, he wanted to take it from Loxton. Loxton was close to Mildura where one of his trucks was to make a delivery of some other commodity. Mr Wilsdon has a different recollection of that part of the conversation. He made brief notes of the conversation and the notes he made suggest something else was said. He made no note of any request to take grain from Loxton but instead his note referred to the plaintiff’s depot at Wallaroo. The price for the grain was mentioned. It was not the price that was contemplated by the proposed agreement. For these reasons, Mr Wilsdon says that he has no recollection of the conversation deposed to by the defendant. Further, he thinks that it is not possible that that was the conversation. His notes suggest it was quite different. I am unable to resolve that discrepancy between the witnesses.
The second topic discussed on that occasion, according to the defendant, was the topic of credit. Mr Evison says that, during that telephone call he sought further assurance from Mr Wilsdon that his credit limit would be raised to $100,000 so that he could confidently proceed with the contracts. In fact he had not signed the contracts by 23 December. He says that the contracts had arrived at this house but he had left on a grain delivery trip without signing them. He says that during the telephone call with Mr Wilsdon, Mr Wilsdon assured him of the credit limit of $100,000. Mr Evison says that when he received that assurance over the telephone he rang Ms Jennings and told her to post to the plaintiff the contracts which he had signed but not sent. In other words, although he had signed the contracts before leaving on his trip, he was not willing to have them returned to the plaintiff until he had received a further assurance from Mr Wilsdon about the increased credit limit. Mr Wilsdon denies giving any such assurance on that occasion, or at any time. He says it was not within his power to give that assurance and did not give it. Any conversation about credit or extension of credit would have been brief and he would have made it clear that he had no power over questions of credit.
Thereafter the defendant did take quantities of the grain contracted for in December but the credit limit of $30,000 was never exceeded. The defendant says that he was unable to take grain from the plaintiff’s depots because he was up to his credit limit and was not permitted to take any more. He does not say that he made any attempt to obtain grain which was refused but he says he knew from experience that he would not be able to obtain grain if he was to exceed his credit limit for anything but a short time. Accordingly he sourced the grain he needed for his customers from other suppliers. Those suppliers gave him the credit he needed. He supplied records to show that that is true. He was accessing relatively large quantities of grain from other suppliers and being given quite substantial credit, sometimes exceeding, and $100,000. He said that occasionally he and Mr Wilsdon would speak over the telephone and he would always complain that the credit limit had not been raised.
In April 2003 there is a request filled out by Mr Wilsdon for an increase of credit for the defendant. It is a request to increase the credit to $50,000. There is no documentation about anything being done about that request. As with the earlier request for a credit limit of $40,000 there is no evidence that an application form was sent to the defendant for completion and return. The defendant does not recollect ever receiving an application form. There is certainly no written approval of the $50,000 limit. Mr Wilsdon is unable to explain what happened to that request. It remains a mystery what happened to the two requests for an increased credit limit.
It is clear that there was a failure of communication between the defendant and Mr Wilsdon. I am sure that despite his experience with the smaller September contracts Mr Evison never grasped what it was that he had to do to increase his credit limit. I am sure that, for example, he never said to Mr Wilsdon “What exactly is it I have to do to increase my credit limit to $100,000?” I am sure that if he had asked such a direct question Mr Wilsdon would have told him exactly what he had to do and would possibly have assisted him. Perhaps he would have checked with the finance department to see what had happened to the request to increase the credit limit to $40,000. It would have been in his interests, and the interests of his employer to do so. It is, I suppose, conceivable that he would have dismissed so clear a request but I think it unlikely. Equally I do not think that Mr Wilsdon was plain with the defendant. While I am sure that from time to time the defendant complained that his credit limit had not been raised, I am equally sure that Mr Wilsdon never said to him plainly, “To get your limit increased you will have to fill out an application form and it will not be a decision I can make. It will be a decision of the finance department. You must make sure that you get an application form, you must fill it out and you must send it to the finance department the documents they need to assess your application”. I am sure that if Mr Wilsdon had spoken so plainly to the defendant, he or his partner would have done what was necessary to enable them to complete the contract. It was in their interests to do so. They were keen to make the grain deliveries to their customers.

For reasons that are not clear to me, the defendant’s credit limit was never increased. Instead of pursuing the matter effectively with the plaintiff, the defendant let things drift. He bought his grain from other suppliers and failed to appreciate the consequences that might befall him. He was legally obliged to take delivery of a large quantity of grain from the plaintiff. Mr Wilsdon also let things drift. He did not check to see what was happening about the defendant’s credit increase even when Mr Evison complained to him that his credit limit had not been raised.
In about September 2003, Mr Wilsdon started making enquiries of the defendant about when he was going to complete the contract. Time was running out. In fact, at the time that he made the enquiries, it was effectively impossible for the defendant to carry out the contract. Apparently the practice when this situation arises is for a “wash out” to be conducted. When there is a clear indication by someone in the position of the defendant that he cannot complete the contract, the parties discuss what will be done with the grain that has not been purchased. The defendant might take possession of some of it and sell it for as much as he could get for it. The plaintiff would sell the rest for as much as it could get for it and seek to recover the balance from the defendant. The problem for both parties was that by September 2003 the price of grain had dropped below the price contracted for. If the defendant took grain from the plaintiff pursuant to the contract he would have made a loss on the resale. If the plaintiff had to sell it all on the market he would make a loss. That is what happened. The plaintiff made a wash out proposal to the defendant and proceeded to sell the grain for as much as it could get for it. In doing so it lost $194,180. It seeks to recover that sum from the defendant.
Defences
Initially the defendant pleaded that it had been denied access to the plaintiff’s depots. That claim was without foundation and was abandoned during the trial. The defendant also pleaded that there was a collateral contract pursuant to which there was an agreement between the parties for the provision of $100,000 credit by the plaintiff. In my view there is no evidence to support such an agreement. Mr Riggall, for the defendant, while not abandoning the claim, could not point to any evidence to support such an agreement. I reject that claim. The issue remains the third matter pleaded by the defendant, namely that the plaintiff made a misrepresentation to the defendant that he would be given $100,000. That misrepresentation induced the defendant to enter the agreement. He would not have entered into the agreement without that assurance from the plaintiff. This claim is made pursuant to the Trade Practices Act.
The factual issues
I must determine whether the assurance alleged by Mr Evison was made by Mr Wilsdon and I must decide whether that assurance was relied on by the defendant, so that he only entered into the contracts in reliance on the representation. I must decide whether the defendant altered its position to its detriment, by entering the contracts.
Finally, having found that the defendant did not take constructive steps to obtain the credit he needed, did that failure break the chain of causation?
Was there a representation by the plaintiff?
The plaintiff submits that Mr Wilsdon made no representations to Mr Evison that he would be able to obtain credit of $100,000. Mr Wilsdon denies that he ever made such a representation. He denies that he ever represented to the defendant that the defendant would have to “work up to” a credit limit of $100,000 by applying in stages. In support of that contention the plaintiff relies on the following:
1.Mr Wilsdon had no authority to grant credit. That was the function of the Finance section. He would not have exceeded his authority and did not do so.
2.Mr Wilsdon always made it clear to Mr Evison that to obtain grain he would have to have sufficient approved credit to take deliveries of grain or he would have to “prepay” for it. Not only did Mr Wilsdon make that clear to Mr Evison, but Mr Evison knew that from his experience of the earlier contracts in September.
3.No credit limit above $30,000 was ever approved.
The defendant says that he was told by Mr Wilsdon that he would obtain credit of $100,000. He was told that he would have to achieve that by making incremental applications for increased credit. In support of that he says:
1.He would not have entered the contracts in December unless assured that he would be able to get that level of credit. Otherwise he could not trade.
2.He had only ever traded on credit commensurate with the grain that he was purchasing.
3.After he agreed to purchase the larger amounts of grain in December, Mr Wilsdon forwarded to the Finance Department two requests for increased credit. These are demonstrably incremental steps in the working up to the ultimate limit of $100,000.
These are the general propositions of each of the parties. I turn to examine and evaluate the evidence given by the principal participants, Mr Wilsdon and Mr Evison. The onus is on the defendant to prove the representation and to prove that he was induced thereby to enter the contracts.
Mr Wilsdon maintains that he never had any lengthy discussions with Mr Evison about credit. It was not his area of responsibility. Credit was the province of the Finance Department. He would refer the defendant to that department. (T49) On the other hand there is an entry in his diary for 12 December 2007, just days after the verbal agreement to enter the contracts, reminding Mr Wilson that he had a telephone conversation with the defendant about credit. (T48) One phone call that day with the defendant lasted five minutes. Mr Wilsdon denied that it could have been a conversation of that length at all, beyond a reference to the defendant’s credit limit. (T48, T117-8 and T158-160). Mr Wilsdon nevertheless accepts that on about 13 December he must have, himself, passed on Mr Evison’s request for a credit increase from $30,000 to $40,000. That request was passed onto Ms Prosilis. (T163-4)
Mr Wilsdon was the only person in the plaintiff’s office to whom Mr Evison ever spoke. Such discussions as Mr Evison ever had with anyone from the plaintiff’s company about credit were with Mr Wilsdon. There is no evidence whatever of him discussing credit with anyone else.
Mr Wilsdon denied Mr Evison ever asked him for credit of $100,000. (T78) Mr Evison asserted that he did. (T463-5)
Mr Wilsdon said that the only context in which Mr Evison might have mentioned an increase to his credit limit was a flippant one. (T116) Mr Riggall for the defendant submits that this evidence of Mr Wilsdon adversely affects his credit. It is unlikely to be true. While I would not be able to discount the possibility that the men may have occasionally engaged in flippant conversations as they got to know each other, I do not think that Mr Evison would have been flippant at all about wanting more credit before entering the larger contracts in December. I accept that Mr Wilsdon’s remark is adverse to his credit and is an attempt to explain away a serious conversation that took place between them on the topic of increased credit for the defendant. While as a matter of fact Mr Wilsdon had no authority to grant credit or an extension of credit, it is I think, clear from the evidence that Mr Wilsdon was the defendant’s only point of contact with the plaintiff. The Finance Section dealt with the formalities. Mr Wilsdon did not personally attend to the paperwork. Mr Wilsdon undertook important discussions with customers. I accept Mr Wilsdon’s evidence, however, that the ultimate decision about credit would have been made by the Finance Department. Mr Wilsdon might recommend credit for a customer, but if the customer’s financial circumstances did not meet the Finance Department’s requirement then credit would not be granted.
Mr Wilsdon said that Mr Evison always understood that if he had reached his credit limit with the plaintiff he would thereafter have to “prepay” for any purchases of grain. The plaintiff asserts that that proposition is borne out by Mr Evison’s history of purchases of grain. Mr Evison says he never agreed to “prepay” for grain. In fact, he never did so, not with the plaintiff or with any other suppliers.
I do not think the evidence of Mr Evison’s trading with the plaintiff bears out Mr Wilsdon’s assertion. There is no evidence that Mr Evison ever paid cash for any consignment of grain before taking delivery of it. There is, however, evidence that whenever Mr Evison went over his credit limit he made payments sufficient to bring the account back under the limit before taking a further delivery. The payment might be sufficient to permit Mr Evison to take delivery of his next consignment without exceeding, or without greatly exceeding, his credit limit. Mr Wilsdon conceded that the records showed that Mr Evison was struggling to stay within his credit limit. This difficulty occurred during the performance of the earlier contracts in August. Far from evidencing the defendant prepaying for grain, the evidence tended to show that he was “post-paying”. That is, he was always purchasing grain on credit and was doing his best to stay within his credit limit. That evidence demonstrates that Mr Evison was well aware he would not be able generally to exceed his credit limit. It may even demonstrate that he was aware that if he was unable to stay within his credit limit he would have to “prepay”. What the evidence does not demonstrate is that he did ever prepay. Mr Wilsdon’s continual insistence that Mr Evison prepaid for grain and, specifically, agreed to prepay, is not borne out by the evidence. On the contrary, the evidence supports Mr Evison’s evidence that he never contemplated prepaying for grain when he entered the December contracts. He always expected to purchase grain on credit. That state of mind tends to support his further evidence that he would not have entered the larger contracts in December unless he believed he would be able to obtain the credit he required to complete them. I do not necessarily conclude that Mr Wilsdon was giving misleading evidence when he continued to maintain that Mr Evison specifically agreed to prepay for grain. He may not have appreciated what might be seen as the subtle difference between prepaying and post-paying as it was operating in the working relationship between the plaintiff and the defendant.
The third basis for the plaintiff’s claim - that the defendant never sought $100,000 credit to perform his December contracts - is a factual one. No formal application for that much credit was ever made, much less granted. Mr Evison says that he only entered into the contracts because Mr Wilsdon, as he saw it acting on behalf of the plaintiff, told him that he would eventually be able to get $100,000 credit but he would have to work up to it. Mr Wilsdon denies ever saying anything of the sort. In the absence of a formal application by Mr Evison for credit of $100,000, or anything approaching it, how can it be said that he was ever given such an assurance? Mr Evison points to other facts. There is the note dated 13 December 2002 by Ms Prosilis to Mr Newman that Mr Evison was seeking an increase in credit from $30,000 to $40,000 (page 31 MFI D3, also in plaintiff’s documents). Mr Wilsdon acknowledges that he passed that request from Mr Evison to Ms Prosilis. (T164) There is also the application dated 15 April 2003 for a credit limit of $50,000 (page 37 MFI D3, also in plaintiff’s documents). It is true that there is no evidence of any formal application for a credit increase. It remains completely unclear why that is so. Nevertheless, it is clear that Mr Evison was seeking increased credit. There is no evidence to suggest that $100,000 credit was an unreasonable expectation on Mr Evison’s part. He obtained that level of credit from other suppliers. His payment performance on earlier contract with the plaintiff was regarded by the plaintiff as satisfactory.
There is one further topic to be considered when evaluating Mr Evison’s reliability. The plaintiff submits that Mr Evison’s credit is damaged by his failure to assert the representation of $100,000 credit during a taped telephone call Mr Wilsdon had with him in September or October of 2003. By then the plaintiff was proposing a wash out and it was clear to both Mr Wilsdon and Mr Evison that each stood to lose money because the purchase of grain had dropped since the December contracts were entered into. Unknown to Mr Evison Mr Wilsdon taped the telephone call. Mr Evison did not clearly assert that Mr Wilsdon has assured him he would get $100,000 credit. Nor did he assert that he had ever been induced to enter into the contracts by that assertion. What he did say however was that he had been unable to take delivery of grain from the plaintiff because the plaintiff had not increased his credit limit. This is the relevant exchange that took place during the phone call: (AE is Mr Evison, AW is Mr Wilsdon)
AE:No, well I had to go and get, I mean … the grain at the time was at, I was surprised right I got, I do agreed, I was. I couldn’t keep, um picking up because every time I’d pick up it’d go up, it was ten thousand dollars, I pick two loads up there’s twenty thousand dollars, and that’s, that’s only in one week.
AW:right ….
AE:The next week and the week after I couldn’t pick the grain up because I had this um, this twenty thousand dollar load limit on me.
AW:yes,
AE:and that was, that was what was stoppin’ me pick’n it up. I can’t pick anything up …
AW:Because you need to prepay, as per your contract, that, that’s what we’d …
AE:You, you said you were gonna get that lifted, but you, you’ve either got to lift it on me.
AW:I don’t believe I was going to get it lifted, I certainly said “If you need to apply for credit, an increase certainly do it. And I don’t think we ever had a credit application from you, have we?”
(4 MINUTES)
AE:Yes, you did; and they come back and said ‘well, we’ll give you thirty thousand dollars.’
AW:Yes.
AE:So it went from twenty to thirty … she’s only, you know, it was, it was, and that sort of buggered me, err well it did, it buggered me right off, I just couldn’t pick it up.
AW:Well, I, I’d, I disagree what limit you had.
AE:Yeah, but youse can just go and get it changed though, and get it lifted it up for us so we could, you know, get it out.
AW:Not true, I, I disagree with …
In my view, given the lack of preparedness on the part of Mr Evison for the telephone call, his failure to assert the representation by Mr Wilsdon does not damage his credibility. His responses on the telephone were not particularly articulate but he was essentially complaining that Mr Wilsdon had told him he would get his credit limit lifted and he had failed to do so.
Mr Turon submitted that if Mr Wilsdon had, in fact, told Mr Evison he would be able to work his way up to a $100,000 credit limit he would have been exceeding his authority. He said it would be inherently unlikely that Mr Wilsdon would have done so. In fact, he said it would have been stupid for him to have done so. I do not agree. Mr Wilsdon was a grain salesman. It must have been very plain to him that he was the only person from the plaintiff’s company to whom Mr Evison was speaking directly. It must have been plain that Mr Evison traded on credit. While the Finance Department did the paperwork and made the final decisions about customers’ credit, credit must have been part of Mr Wilsdon’s daily conversations with customers such as Mr Evison. I find it quite unremarkable that they might discuss credit limits and the prospects of obtaining credit. Mr Wilsdon was familiar with the workings of the Finance Department. He was familiar with how customers’ credit performance was going. He was party to regular in-house discussions between, among others, the sales people such as himself and the finance people. I think it would, in fact, be likely that Mr Wilsdon would say to someone in Mr Evison’s position seeking $100,000 credit to perform a contract to purchase 2,000 tons of grain, that he would be able to get $100,000 credit but he would not be able to get it straight away. He would have to work up to it. Mr Evison says he said that. I accept Mr Evison’s evidence. I reject Mr Wilsdon’s denials.
Mr Turon correctly points out that the defendant has only pleaded that he was offered $100,000 credit, not what he described as the “rolling figures” of $30,000, $40,000 and $50,000 leading to $100,000. I do not think that the pleadings reflect any changed story on the part of the defendant. Rather they reflect what it was that ultimately the defendant was promised.
Having found that Mr Wilsdon made the representation that Mr Evison would be able to get credit of $100,000 there are further matters which the defendant must prove before he can succeed.
First, he must prove that what was said amounted to a representation and was not merely an opinion. It must be capable of being described as misleading and deceptive so as to bring the representation within the reach of Section 52 of the Trade Practices Act.
Second, the defendant must prove that he was induced to enter the contracts by the representation. He must demonstrate that he changed his position to his disadvantage by reason of the representation.
Third, there must be no break in the chain of causation between the representation and the disadvantage suffered.
Representation or opinion
I deal with the first of these. Was there a misrepresentation? What the defendant is really claiming is that the plaintiff, through its employee Mr Wilsdon, represented that the defendant would in the future be given credit of $100,000, ie that $100,000 would be the limit and the plaintiff would attend to granting it. The defendant could take delivery of the grain in the time specified because he would be given the credit necessary to do so.
Section 52 of the Trade Practices Act proscribes misleading or deceptive conduct in these terms:
(1)A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 51A is an evidentiary provision applicable to future events. It reads as follows:
(1)For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2)For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making this representation.
Mr Turon submitted that if Mr Wilsdon had, contrary to his denial, told Mr Evison that he would obtain $100,000 credit, then that could, at best for the defendant, be seen as an opinion. I do not accept that submission. While the words uttered by Mr Wilsdon might linguistically be so construed, they amounted to more than that in the context of the relationship between the plaintiff and the defendant. Mr Wilsdon was, so far as Mr Evison was concerned, the spokesman for the plaintiff. The representation from Mr Wilsdon as to a likely credit limit made in negotiations leading up to the signing of a contract for the purchase of grain where the defendant was going to be relying on credit is, in my view, a representation.

It is a representation that the defendant will get credit of $100,000. That is the credit he said he would need to perform the contracts. The misrepresentation was misleading in the sense that the plaintiff never took the steps necessary to make good the representations. There is no record of the plaintiff sending to the defendant the paperwork that was the first necessary step in the obtaining of the higher credit limit. Neither Mr Evison nor his partner ever recollects receiving any paperwork. There is no evidence of any follow up by the plaintiff of the two memorandums seeking an increase in credit, the first to $40,000 and the second to $50,000. Mr Wilsdon’s representation was about a future matter, the future grant of $100,000 credit. Section 51A of the Trade Practices Act operates to cast an evidentiary burden on the plaintiff to avoid a rebuttable presumption that it had no reasonable grounds for making the representation. (See Phoenix Court Pty Ltd v Melbourne Central Pty Ltd (1987) ATPR (Digest) 46-179. The plaintiff has not adduced evidence to rebut that presumption. While the plaintiff has not adduced evidence on that topic, I would not be willing to infer that the plaintiff did not have reasonable grounds for predicting that the defendant would, in due course, be able to obtain $100,000 credit. What I do infer is that Mr Wilsdon did not have reasonable grounds to believe that the defendant would obtain the credit unless he himself took active steps to see that the applications were properly made and processed. Mr Wilsdon relied on his claim to the limits of his powers and duties regarding credit. Once questions of credit arose, he said they were not his territory. They were solely the territory of the Finance Department. That does not amount in my view to evidence that Mr Wilsdon had reasonable grounds for making the representation that he made to the defendant. The plaintiff is therefore deemed not to have reasonable grounds for making the representation.
Inducement
The test of whether the defendant was induced by the plaintiff’s representation to enter the contracts is an objective one. For the reasons I have already referred to, I am satisfied that the defendant would not have agreed to purchase 2,000 metric tons of grain unless he was first assured that he would get the credit he required to take the consignments. He had calculated that in order to take delivery of the grain during the term of the contracts he would need $100,000 credit. He made that clear to Mr Wilsdon and only authorised his partner to send the already signed contracts to the plaintiff once he was assured that he would be able to have the required credit. He bound himself to take delivery of grain which he could not pay for unless he got the credit. When he did not get the credit, he did not take the grain. When he did not take the grain, it was sold at a loss by the plaintiff. The plaintiff seeks to recover that loss from the defendant. In this way the defendant has changed his position to his disadvantage by reason of the representation.
Causation
Does the defendant’s failure to take more active and effective steps to obtain the increased credit absolve the plaintiff from liability? Does the fact that he let things drift mean that he cannot avoid liability to recompense the plaintiff for its loss?
Mr Riggall referred to two cases which deal with causation. However, as McHugh J said in Bennett v Minister of Community Services (1992) 176 VLR 408 at 428, “Causation is a question of fact.” What that case and the other case cited by Mr Riggall (March v Stramare (1991) 171 CLR 506) demonstrate, is that once a liability is attributed to a party, the intervening act absolving that party from liability will have to be considerable. In the former case the High Court found that erroneous legal advice which led the plaintiff to become statute-barred from claiming damages for physical injury did not absolve the defendant, who was otherwise liable to pay damages.
In the latter case a truck driver’s liability for negligently parking his illuminated truck straddling the centre line of a six lane road at night, was not diminished by the negligence of an intoxicated driver who was speeding when he collided with that truck.
In the present case I have already observed that in relation to obtaining increased credit, the defendant allowed things to drift. He had been granted credit when he entered the first contracts in August. To obtain that credit he first told Mr Wilsdon the credit he would need. Mr Wilsdon passed the request to the Finance Section who sent the defendant an application form. The defendant filled it out and returned it. In due course he was granted credit.
In relation to the increased credit he sought from Mr Wilsdon in November or December, he told Mr Wilsdon what were his increased credit requirements. There is no evidence that the plaintiff thereafter sent him any documents to complete. Mr Evison continued to speak with Mr Wilsdon, but instead of clearly ascertaining precisely what was happening to his request and what, if anything, he needed to do to obtain the increased credit, he simply complained that the limit had not been increased. Equally, Mr Wilsdon let things drift. He did nothing effective about Mr Evison’s complaints.
In my view, the failure of the defendant to take effective steps to secure his higher credit limit does not absolve the plaintiff from liability for Mr Wilsdon’s representations. Mr Evison was not particularly articulate. So much is plain from the manner in which he gave his evidence and in the taped telephone call to which I have referred. That should have been obvious to Mr Wilsdon. He asked for the credit, he was told that ultimately he would get that credit and he complained when he did not get it. In those circumstances I do not consider that the chain of causation is broken.
Conclusion
I am satisfied that the plaintiff has breached s52 of the Trade Practices Act. I will make an order that has the effect of relieving the defendant of any obligation to make any further payment to the plaintiff pursuant to the two contracts entered into in December 2004 for the purchase of 1,000 metric tons of barley and 1,000 metric tons of triticale. The plaintiff seeks enforcement of the contracts. Pursuant to s87 of the Trade Practices Act I refuse to enforce any provision of contracts 52318 and 52319 which require the defendant to pay any further monies to the plaintiff.
Orders
1. The plaintiff’s claim is dismissed.
2. The plaintiff pay the defendant’s costs to be taxed or agreed.