Bass Strait Transport Pty Ltd v Loone
[2014] VCC 1600
•26 September 2014
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL LIST
GENERAL CASES DIVISION
Case No. CI-13-03872
| BASS STRAIT TRANSPORT PTY. LTD. (ACN 085 329 086) | Plaintiff |
| v |
PETER JOHN LOONE First Defendant
&
KEITH MAXWELL IVES Second Defendant
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JUDGE: | HER HONOUR JUDGE MILLANE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 September 2014 | |
DATE OF JUDGMENT: | 26 September 2014 | |
CASE MAY BE CITED AS: | Bass Strait Transport Pty Ltd v Loone | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 1600 | |
REASONS FOR JUDGMENT
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Subject: Commercial Law
Catchwords: Whether plaintiff entitled to damages from the defendant for misleading and deceptive conduct – defendant a director of principal to Exclusive Contractor Agreement – oral and documentary representations made about the continuation of the business and solvency of the principal – plaintiff induced by representations to enter into Exclusive Contractor Agreement and pay first instalment of Sign-on fee
Legislation Cited: Sections 4 and 18 of the Australian Consumer Law (ACL) as applied to individuals pursuant to section 9 of the Fair Trading Act 1999
Judgment: Judgment for the plaintiff.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C.R. Northrop | Pointon Partners |
| For the Defendant | No appearance |
HER HONOUR:
Introduction
1 The plaintiff, Bass Strait Transport Pty Ltd (BST) seeks damages from defendant, Peter John Loone alone. The cause of action is for misleading and deceptive conduct contrary to sections 4 and 18 of the Australian Consumer Law (ACL) as applied to individuals pursuant to section 9 of the Fair Trading Act 1999, arising from events which occurred in February 2011.
2 The proceeding was discontinued against now bankrupt second defendant, Keith Maxwell Ives on 15 May 2014.
3 The defendant, who is no longer represented by solicitors, did not appear at hearing on 24 September 2014. A defence filed on his behalf on 27 September 2013, nevertheless, admitted various factual matters. Generally speaking, however, the defendant denied the falsity of the representations alleged and disputed the characterisation of the conduct as misleading and deceptive.
4 At hearing BST’s Chief Financial Officer, Stanislaw Korkliniewski and solicitor, Davide Mazzeo gave evidence. Documents marked Exhibit P1 to Exhibit P16 inclusive were tendered.
Background matters
5 At the relevant time, BST carried on business as a freight forwarder, transporting goods between Victoria and Tasmania.
6 I was told the company, Total Care Transport Pty Ltd (TCT), operated as a transport, transport logistics and warehousing company. It was a competitor business, which also shipped goods between Victoria and Tasmania. The defendant was appointed a director of TCT on 29 May 2008 (Exhibit P4).
7 On 12 July 2011 the directors of TCT, passed a resolution in accordance with section 436A of the Corporations Act to appoint Paul Cook and Terry O’Connor joint and several administrators of TCT. The company is no longer registered.
8 On 18 February 2011, TCT as principal and BST as contractor entered into an Exclusive Contractor Agreement (the ECA). Subsequently, BST received various documents from the administrators, indicating, among other things, that TCT had been in the process of selling its business and, in the period before the execution of the ECA was probably not solvent.
9 In correspondence to creditors and suppliers dated 13 July 2011(Exhibit P1), to which was attached the administrators’ formal declaration of independence, among other things, creditors were advised:
· TCT’s business had been sold to Deliver Australia Pty Ltd, effective 27 June 2011;
· on 19 March 2010 during a meeting in Devonport attended by the defendant, Mr Ives and TCT’s external accountant, Mr Cook was advised that TCT was in the process of selling the business (“It had two interested parties, it was believed at this stage that a sale would be concluded and all creditors paid. The financial position of the group was discussed. Paul Cook advised that Insolvent Trading provisions only become relevant if the company subsequently goes into Liquidation”);
· on 26 July 2010 a second meeting, attended by the same individuals, took place in Devonport. During this meeting Mr Cook was advised the prospective purchaser had not proceeded, although another had been identified. Mr Cook apparently repeated the comments made at their first meeting and explained how the process of Voluntary Administration worked.
10 The Administrators’ Report to Creditors on 4 August 2011, among other things, informed creditors that, having conducted a preliminary investigation, the administrators believed the company had been insolvent for at least 12 months (Exhibit P2).
Representations made
11 Mr Korkliniewski told the Court that, in December 2010, as a preliminary to contracting with TCT to supply shipping and transport services on an exclusive basis, BST’s Managing Director, Geoffrey Taylor, forwarded the defendant a signed Deed of Confidentiality, Non-Disclosure and Secrecy (Exhibit P5).
12 At the request of BST, TCT supplied customer lists (Exhibit P6). This was to assist BST in assessing the likely ongoing commitment of TCT’s customers in the event BST entered an agreement with TCT.
13 The defendant admitted that, in February 2011, representatives of BST and TCT conducted negotiations for TCT to engage BST to provide trans Bass Strait shipping services for TCT’s customers for a fixed period.
14 Mr Korkliniewski gave evidence as to the exchange of emails and draft ECA documents during February 2011 (Exhibit P7 to Exhibit P10). Mr Mazzeo explained the sequence of amendments to the drafts.
15 Both witnesses told the Court that on 17 February and again on 18 February 2011 representatives of BST and TCT met to discuss finalisation of the ECA. Those meetings were attended by Mr Korkliniewski, Mr Taylor and Mr Mazzeo on behalf of BST and by the defendant and TCT’s solicitor, Mr Lindsay Kotzman.
16 The defendant admitted that, in the course of these negotiations, he had agreed to inclusion of clauses in the ECA, the effect of which was that the period of the ECA was fixed for five years (clause 2.1) and TCT warranted that it was not insolvent or unable to pay its debts as and when due (clause 19 (f)).
17 Both Mr Korkliniewski and Mr Mazzeo gave evidence that, during the first meeting TCT’s ability to make payments was central to their discussions. BST had been concerned to ensure that, after BST paid the first instalment of the Sign-on Fee for the right to provide exclusive services (a total fee of $600,000 by three instalments over three years), TCT had the ability to pay for these services as and when payment to BST fell due.
18 Both witnesses recalled that, instructed by BST, Mr Mazzeo sought personal guarantees from the directors of TCT. They further recalled Mr Kotzman, on behalf of TCT, strongly resisted the inclusion of personal guarantees under the ECA and, on a number of occasions, insisted that TCT was solvent and able to pay debts to BST as they arose. Eventually, this impasse was resolved by the inclusion of the warranty clause through which both contracting parties expressly warranted their solvency.
19 Mr Korkliniewski told the Court, BST would not have executed the ECA on 18 February 2011 or paid the first instalment of the Sign-on Fee of $440,000 inclusive of GST, had it known that TCT was trying to sell its business and was insolvent or likely insolvent.
20 I was told that, having paid the first instalment of the Sign-on Fee, pursuant to the ECA, BST provided services for which payments ceased after the first month. Demands for payment made by email on 3 May and by letter on 10 May 2011 were never met (Exhibit P13 and Exhibit P14). The claim for payment lodged by BST at a meeting of creditors on 15 August 2011 was for $1,026,936.47, $440,000 of which was for the Sign-on Fee instalment payment (Exhibit P3).
Findings
21 Based on the oral and documentary evidence, I was satisfied that:
· representations were made on behalf of TCT in trade or commerce to the effect that, firstly, TCT would continue in business for a period of at least five years and, secondly, TCT was not insolvent;
· the representations were made as to both existing and future facts;
· the meaning conveyed was misleading or deceptive or likely to be so. The defendant had not advanced reasonable grounds for making the representations in respect to future matters pursuant to section 4(1) of the ACL;
· BST was induced to enter into the ECA and paid the first instalment of the Sign-on Fee in the sum of $440,000 inclusive of GST in reliance on the misleading conduct;
· as claimed BST suffered loss. This loss was constituted by the payment of the Sign-on Fee less GST in the sum of $400,000.
22 In these circumstances, it has not been necessary to separately determine whether the defendant’s failure to disclose that in 2010 TCT was seeking to sell its business and was insolvent or potentially insolvent, also constituted misleading or deceptive conduct.
23 I will order judgment for the plaintiff in the sum of $400,000 against the defendant, Peter John Loone and hear from the plaintiff as to the appropriate form of order.
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