Australian Heat Control Industries Pty ltd v J and K Strapping Systems Pty Ltd

[2004] QDC 3

DISTRICT COURT OF QUEENSLAND

CITATION:	Australian Heat Control Industries Pty ltd v J & K Strapping Systems Pty Ltd & Anor [2004] QDC 003
PARTIES:	AUSTRALIAN HEAT CONTROL INDUSTRIES PTY LTD (ACN 089 061 889) Plaintiff v J & K STRAPPING SYSTEMS PTY LTD (ACN 092 879 975) First Defendant And ANTHONY PAUL BRAMWELL Second Defendant
FILE NO:	D377/02
DIVISION:	Civil
PROCEEDING:	Action for Damages for breach of contract and/or misleading or deceptive conduct pursuant to the Trade Practices Act 1974 and/or negligence
ORIGINATING COURT:	District Court Brisbane
DELIVERED ON:	16 January 2004
DELIVERED AT:	Brisbane
HEARING DATE:	17-18 November 2003
JUDGE:	Boulton DCJ
ORDER:	Judgment for the plaintiff in the sum of $131,612.19. The defendants pay the plaintiff’s costs of and incidental to the action to be assessed.  Judgment for first defendant on the counterclaim in the sum of $797.50, and for the second defendant in sum of $1,000.00. No order as to the costs of the counterclaim.
CATCHWORDS:	Commercial Premises - Sub-tenancy – Promise of insurance cover – Loss by fire – Sub-lessor causing fire through negligence
COUNSEL:	Mr P W Hackett for the Plaintiff instructed by Redchip Lawyers Mr R Morton for the First and Second Defendants instructed by Moray and Agnew
SOLICITORS:	Redchip Lawyers for the Plaintiff Moray & Agnew for the First and Second Defendants

1. The matter was heard over two days on 17 and 18 November 2003 at Brisbane. 

1. The principal of the plaintiff company, Mr Terry Houlihan (Houlihan) and the second defendant, Anthony Paul Bramwell (Bramwell) had been business acquaintances for approximately ten years prior to the events referred to in these proceedings.

1. Their relationship had commenced in New Zealand and then had continued in Brisbane.  The first defendant company was operated by Bramwell.  Houlihan operated the plaintiff company which was an importing/exporting/packaging business in Brisbane.

1. Prior to 1 June 2000 the plaintiff company stored its product at Harker Transport at Rocklea but at or about that time the first defendant leased spacious premises at Spine Street, Sumner Park and issued an invitation to the plaintiff to move its operations.  Initially it was to provide storage facility but later the plaintiff took up office space in the building eventually paying rent to half the value of the outgoings on the premises.

1. Part of the conversation alleged by Houlihan was as follows:

“You will also be able to use the office space located above, should you need to”, and at the time he mentioned, “By the way you won’t have to worry about insurance, I’ve got plenty.”, and he made the comment that he’d in actually discussing his set-up costs for his business at the time, felt that the amount of insurance he had to take was excessive for his needs.”

1. It is beyond dispute that Bramwell’s new premises had superfluous space and that Houlihan was invited to use it.  A visit to the premises such as Houlihan describes would seem perfectly logical.  Houlihan says that the same promise of insurance cover was repeated.

1. Houlihan’s account on the offer of insurance cover is attacked on a number of grounds:

(i)         He already had insurance cover with Marsh which included cover of stock in Australia;

(ii)        He renewed that insurance from 1 October 2000 maintaining the Australian cover;

(iii)       He inquired of Bramwell’s insurance broker about a new quotation for insurance cover in the first half of 2001 and obtained a quotation which included cover for stock in Australia.  These documents are Exs 14 and 15.

(iv)       He had not renewed with Marsh or taken up the new offer when the fire occurred on 30 October 2001;

(v)        On the night of the fire he made comments to Bramwell’s office assistant, Michelle, that he was not covered by insurance;

(vi)       Shortly after the fire he responded hopefully to a suggestion from Mrs Bramwell that the landlord of the premises might have insurance cover;

(vii)      According to Mrs Bramwell he said on the night of the fire that ‘he was no better than Christine’.   Christine operated the business next door and was uninsured.

1. I am not satisfied on the balance of probabilities that the statement in (vii) was made. On the view I take it really does not seem to matter. 

1. There are really two distinct issues arising from the above.  The first concerns whether the representation by Bramwell as to insurance cover was actually made.  The second concerns inducement.  Did Houlihan rely upon it and thereby suffer loss?

1. The case was fought on the basis that the offer was never made with the abovementioned factors being advanced to suggest that there was no such offer. 

1. However, Houlihan offers persuasive evidence to the effect that it was.  In particular he pointed out:

(i)         He and Bramwell were friends of long standing;

(ii)        On the night of the fire he told Bramwell that they needed to talk;

(iii)       When they met on 2 November 2001 he reminded Bramwell of the offer and Bramwell produced his insurance papers revealing that there was only $20,000 cover for “property in his legal or physical control”.  Bramwell offered to pursue this on his behalf.  This is supported by a diary note ( Ex 6);

(iv)       On 5 November 2001 Houlihan provided Bramwell with a typed acknowledgement (Ex 7) requesting signature.  Bramwell refused to sign but not on the basis that the statement was false.  He wanted to consult his solicitor.  The document appears to have had a dual purpose, firstly to acknowledge the promise and secondly to support the insurance claim.  The opening paragraph reads:

“I, Tony Bramwell, confirm I undertook to provide insurance cover on the stock of Australian Heat Control Industries Pty Ltd under my physical control, in my warehouse at Unit 2, 20 Spine Street, Sumner Park.”

1. Bramwell’s refusal is reflected in another diary note (Ex 8).  Thereafter relationships deteriorated as is reflected in Exs 9, 10, 11 and 12.

1. The sequence of events strongly supports Houlihan’s basic account.  I accept that the representation was made.  Houlihan’s account is further spelt out in cogent detail in the letter (Ex 11).  Bramwell’s response in Ex 12 is anything but compelling.

1. This brings me to Bramwell’s evidence which was in significant respects vague and contradictory.  He was asked for instance in cross-examination:

“Do you recall arranging the insurance for your business?--  Yes.

Did you do that or did your wife do it?--  Yes, I did it.

What did your cover include?--  Couldn’t tell you right at the moment.  Not at all.

You’ve got no idea whatsoever?--  No.  I know I’m covered for 20 grand at the present time in business.

What about for public liability?--  Could not tell you what it says.”

1. Asked about a meeting with Houlihan the following was his response:

“When do you say you met with Mr Houlihan in the premises to discuss him moving in?--  Mate, I don’t recall meeting with Terry at the premises.”

Ever?--  No.  Terry – Terry came over as a friend all the time, and, you know, meeting him at the premises to talk about moving in, no.

You don’t have a recollection of that happening or it didn’t happen?--  no, it didn’t happen in the first month or so.”

1. On being shown Mr Houlihan’s diary entry for 1 June 2000:

“So, if – if a meeting did take place on that date, it’s within days of you arranging the insurance on your new business?--  More than likely, yes.

Do you agree that it’s possible that you could have discussed the insurance you have arranged on your new business at those premises with him?--  No.

Why not?--  Because I don’t even remember doing my insurance myself.”

1. Despite having stock to the value of $120,000 on the premises his insurance cover for property in his physical and legal control was limited to $20,000.  After the fire the police asked him for his insurance papers:

“Did he discuss the contents of them with you?--  He turned around and said, “You’re a little bit under insured.”  I said, “Oh”, and that was the end of the conversation.

HIS HONOUR:  Do I understand that that was your first appreciation that you were under insured?--  Yes.”

1. It is hard to reconcile this with what he said a minute later:

“Did you discuss the extent of cover with your broker?--  Yes, I did.

MR HACKETT:  Just adopting some of that, are you able to tell his Honour how much you asked your broker for stock cover?

Minimal, as far as I remember.  I asked for minimal cover.  I did ask her for the glass out the front because we’re on the main drag of Spine Street and anyone can throw a rock through glass windows.”

1. The result is that one could have little confidence in anything Mr Bramwell said.  The letter of his solicitors, (Ex 12) is an indication of how he was prepared to say just about anything.

1. Resolving this issue in favour of Houlihan does not dispose of the case because there is the much more troubling issue of inducement.  Do the abovementioned facts indicate that Houlihan has failed to discharge his onus of proof of this essential issue?

1. What concerns me about this in the present case is that Houlihan seems to have acted independently on the issue of insurance.  It is clear that he had insurance at the time that took space in the premises at Spine Street.  He then renewed his insurance with Marsh for a 12 month period from 1 October 2000 at a premium of NZ$5950.09.  The letter of 5 December 2000, Ex 13 makes it clear that the insurance was renewed and that property of the business in Australia was covered.

1. Houlihan’s failure to renew this insurance from 1 October 2001 is explicable perhaps by several considerations.  He may well have been simply dilatory in renewing the insurance with Marsh.  I note that in the previous year he paid the premium on that insurance in the December despite the fact that it was due from 1 October 2000.

1. Another aspect of the matter which deserves mention is that Houlihan inquired of Bramwell in early 2001 concerning his insurance brokers.  Houlihan says that the purpose of this inquiry was merely to obtain a quote as he was giving consideration to moving his operations away from the Spine Street premises.  This may have been a possibility but I note that the inquiry to Austsure Insurance Brokers Pty Ltd in June 2001 specifically referred to the Spine Street premises even though no period of insurance was specified.  There is no evidence that Houlihan canvassed any alternative locations.  It seems more likely to me that he knew that he had a renewal of the insurance with Marsh due on 1 October 2001 and was exploring a possible restructuring of his insurance arrangements.

1. Counsel for the defendants points to certain gloomy comments made by Houlihan following the fire to Mrs Bramwell and Michelle, Bramwell’s assistant.

1. It is submitted on the basis of the abovementioned factors that the promise alleged to have been made by Bramwell simply was never made.  I have already made the finding that it was and that Bramwell’s responses to Houlihan’s claims following the fire support that view.  However, it seems to me to be a crucial issue in the case as to whether that promise was a material factor in Houlihan’s failure to renew his existing insurance or take out fresh insurance.

1. It is Houlihan’s evidence that he did rely on Bramwell’s promise to the effect that his Brisbane stock was covered.  He gave evidence that his importing of product was seasonal and that his marine transit insurance was less important having regard to the fact that his stock had been replenished.

1. I find some support for this view in the quotation from the insurance brokers in June 2001 which made mention of the possibility of monthly premium payments.  These were of the order of a little over $500 per month, an expense which then could be avoided for the time being.

1. It also seems reasonable, having regard to the longstanding friendship between Houlihan and Bramwell that Houlihan would want to meet with Bramwell following the fire before making comments concerning their arrangement to third parties.  It seems that when those meetings did occur that Houlihan made claims accordingly.  It also seems consistent with this view that on finding that Bramwell’s insurance was grossly inadequate he would attempt to salvage the best deal available by attempting to gain access to the $20,000 cover for property in Bramwell’s legal control.

1. The question of inducement following misrepresentation was dealt with in the High Court of Australia in Gould & Anor v Vaggelas & Ors [1985] 157 CLR 215. At p 236 Wilson J made reference to the judgment of Connolly J at first instance concerning the fact of inducement:

“His Honour correctly elucidated the law in this regard.  He referred, inter alia, to Smith v Chadwick (1884) 9 App cases 187 at p 196, Arnison v Smith (1889) 41 Chancery Div 348 at p 369, Holmes v Jones (1907) 4 CLR 1692 at p 1710 and Cheshire and Trifoot on the Law of Contract, 4^th Aust Ed paras 1028, 1029 and from them drew the applicable principles, which can be re-stated as follows:

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.”

1. In the circumstances the representation concerning insurance cover was of a kind that would influence Houlihan to delay in renewing his insurance or taking up fresh insurance.  His evidence further supports this view.

1. The action then in so far as is based on the representation in para 5A of the amended Statement of Claim succeeds on the issue of inducement.  I find that the representation was made and was a material factor in causing the loss.

1. The issue of the cause of the fire is another question.  I am satisfied that in paying rental for a defined area of the premises the plaintiff company was entitled to an implied term of quiet enjoyment of the sublet premises.  Houlihan had previously expressed concern to Bramwell of the danger of fire from cigarettes.  Bramwell agrees that he knew of the danger which was of course reasonably foreseeable. 

1. It is highly unlikely that the offending cigarette came from Bramwell’s secretary who was also a smoker but who worked 9.00 am to 2.00 pm several days per week.  Mr Graham, the fire investigator, placed the entry of the cigarette into the pallet between 30 minutes and three hours prior to the fire which was notified at 6.45 pm.  Bramwell had been the last to leave the premises at about 6.10 pm.

1. The possibility that the cigarette had been flicked into the premises by a passing truck was “floated”, by Bramwell but is no more than the merest speculation.  The warehouse fronted on an access road which met a dead end.  There would have been little passing traffic.  The particular pallet which contained the fire source was located halfway along the south wall raised to the second pallet level.  A strong inference can be drawn that the fire was caused by a discarded cigarette and that Bramwell was the culprit.  I accept Houlihan that the pallet did not contain materials which had been packaged earlier that day ready for dispatch.

Damages

1. The plaintiff claims loss in the sum of $136,112.19.  The loss is particularised in Ex 5.  It is supported by a number of invoices which are annexed to the exhibit, and an Items List (Summary).  The two significant items of office equipment, the laptop computer and the printer are supported in a Harvey Norman invoice from earlier the same year.

1. Houlihan was severely embarrassed in cross-examination in respect of the document headed “Items List (Summary)” which is part of Ex 5.  Initially he said that the document which bears date 28 November 2001 listed the items salvaged from the fire but it was pointed out to him that many items on the list were identical to items on the list headed “Particulars of the value of goods destroyed by fire”.  The explanation gradually became clear but not before Counsel for the defendants had observed that it was astonishing that the amount apparently had on hand as saleable was identical in many respects to the amount which was said to have been lost. 

1. The explanation appeared to me to lie in the hard drive of the computer damaged in the fire.  Houlihan eventually identified the mistake pointing out that he had been confused by the date on the document, 28 November 2001 which was of course following the fire:

“And now that I’ve pointed out to you that what you said before just must utterly be wrong – sorry, that your claim must utterly be wrong, do you want to change what this is now, do you?--  I believe looking at it, trying to remember back to the 28^th of the 11^th and remember after having left the premises, transported our goods to a new facility, trying to set up the business and trying to recover the data, this document must be a print-out of what was on the inventory management system, on the company’s business software at the time of the fire.”

1. There were two large items on the list of damaged stock which were subjected to attack.  One concerned 140 cases of Lemon Lime concentrate two litre for which there was an invoice dated 25 October 2001, a mere five days prior to the fire.  Houlihan was unable to be satisfied under cross-examination that this shipment had arrived.  His evidence at p 50 of the transcript was that the shipping time from New Zealand was seven days.  However, the Items List supports the claim with the entry SQ 0028 Safety Direct Ltd 2 litre Lemon Lime 182 $9044.76, $49.68/case $89.00.

1. The other entry concerns the large item in the first entry of the particulars, invoice 30521 and an amount of $90,000.  That invoice was dated 26 October 1999 almost exactly two years prior to the fire.  However the claim is supported by the photographs, Ex 3 and the value is supported by invoice 30521 which is expressed in US dollars.  The evidence of Houlihan was that the particular product had moved slowly despite the date of the invoice being in October 1999.  While this may have seemed unlikely at first blush the fact is that the loss is supported in the photographs.

1. I am satisfied with the quantum of the claim.  I give judgment on the claim against both defendants in the sum of $131,612.19 with interest on that amount from 1 November 2001 at 8 per cent per annum to today’s date.

1. I formally find that in making the representation referred to in para 5A of the statement of claim the first defendant’s conduct was in trade and commerce and was misleading and deceptive in contravention of s 52 of the Trade Practices Ac, the second defendant being knowingly concerned in the breach.  The first defendant also owed an implied duty which was breached in the circumstances by the second defendant acting as the agent of the first defendant.

1. There is a small counterclaim which makes mention of three items.  The first relates to a sum of $450 being said to be half of the cost of cleaning up debris following the fire.  The evidence is that this sum was paid by the insurer.  In any event it should be disallowed having regard to my findings above.

1. The second sum is an amount of $797.50 for unpaid rent.  This sum is admitted in the amended reply and answer and should be allowed and set off against the judgment sum against the first defendant.  The third issue concerns an amount of $1,000 for work done by the second defendant, Mr Bramwell where a sum of $1,000 was agreed.  This amount has not been paid.  It is admitted in para 19 of the amended reply and answer and should be set off in the judgment against the second defendant, Mr Bramwell.

1. I order that the defendants pay the plaintiff’s costs of and incidental to the action to be assessed.  I make no order as to the costs of  counterclaim.