BMW Australia Finance Pty Ltd v Morehuman Erskineville Pty Ltd and Bayni
[2011] NSWDC 15
•25 March 2011
District Court
New South Wales
Medium Neutral Citation: BMW Australia Finance Pty Ltd v Morehuman Erskineville Pty Ltd & Bayni [2011] NSWDC 15 Hearing dates: 17, 18, 19 August, 26 November 2010 Decision date: 25 March 2011 Jurisdiction: Civil Before: Levy SC DCJ Decision: 1. Verdict and judgment for the defendants on the plaintiff's claim
2. The cross claim is dismissed
3. The plaintiff is to pay the costs of the defendants in respect of the plaintiff's claim and the cross claim on the ordinary basis unless otherwise ordered
4. The exhibits may be returned
5. Liberty to apply for further orders on 7 days notice unless otherwise ordered.
Catchwords: CONTRACT - contract for hire purchase of a motor vehicle - guarantee of that contract - whether enforceable where fraud by a third party - motor vehicle did not exist - whether contract could be performed or was frustrated - consequences for the parties; ESTOPPEL - whether hirer or guarantor estopped from denying existence of a non-existent motor vehicle after providing financier with an acknowledgment that the motor vehicle had been inspected - whether financier could acquire ownership of a non-existent motor vehicle and make it the subject of a hire purchase agreement - extent of application of the principle of nemo dat quod non habet Legislation Cited: Frustrated Contracts Act 1978, ss 13(1), 15, 15(1), 15(1)(b), 15(2)
Trade Practices Act 1974 (Cwth), ss 52, 75B, 82Cases Cited: Air Tahiti Nui Pty Limited v McKenzie [2009] NSWCA 429
Hornsby Building Information Centre v Sydney Building Information Centre (1978) 140 CLR 218
March v Stramare (1992) 175 CLR 514
Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507
Toll (FGCT) Pty Limited v Alphapharm Pty Ltd & Ors [2004] HCA 52; (2004) 219 CLR 165Category: Principal judgment Parties: BMW Australia Finance Pty Ltd (Plaintiff)
Morehuman Erskineville Pty Ltd (First defendant)
Salman Ghassan Bayni (Second defendant)Representation: Counsel:
Mr R Beasley (Plaintiff)
Mr M Gracie with Mr D Neggo (Defendants)
Solicitors:
Bartier Perry (Plaintiff)
Spinks Legal (Defendants)
File Number(s): 777 of 2008 2008/315535
Judgment
Cause of action
These proceedings involve a contractual dispute in which the plaintiff seeks to recover from the defendants monies owing under a motor vehicle hire purchase agreement entered into on 20 March 2006. The proceedings arise as the result of an elaborate fraud perpetrated by a third party to the litigation, with the result that the parties entered into a hire purchase agreement in respect of the hiring of what the parties thought was a used 2006 model Lamborghini Gallard Coupe motor vehicle. Ultimately, the purported vehicle said to be the subject of the hire purchase agreement was revealed to be non-existent. That fact was unknown to the parties to the litigation at the time they entered into the transaction. Before entering into the transaction the second defendant had been shown, and had test driven, a different vehicle to the one similarly described in the hiring agreement.
Relationship of the parties
The plaintiff, BMW Finance Australia Pty Ltd is a motor vehicle finance company. As the financier of the transaction, the plaintiff paid the selling dealer, Galleria Veloce, an entity that is no longer in existence, the outstanding balance of the purchase price of the vehicle, namely $200,000, out of the total asking price of $350,000, after the second defendant signed the transaction documentation that was required by the plaintiff.
Mr Salman Ghassan Bayni is a director of two related property development companies, Morehuman Australia Pty Ltd and Morehuman Erskineville Pty Ltd. In these proceedings, Morehuman Erskineville Pty Ltd is named as the first defendant, and Mr Bayni is named as the second defendant.
Mr Bayni was named as a guarantor under the agreement signed with the plaintiff and with Morehuman Erskineville Pty Ltd.
Neither party to the proceedings had ever taken delivery of the motor vehicle in question, nor a vehicle fitting the vehicle description in the contract. They could not have done so, as the vehicle described in the hire purchase contract, did not exist.
Issues
Initially, the parties identified numerous issues. In my view, the essential issues can be distilled into the following 3 principal issues calling for decision:
Issue 1 : Whether the offer made to the plaintiff by the first defendant, in an application for finance, submitted by the plaintiff to Trivet Classic Cars acting as an agent, was accepted by the plaintiff in accordance with the terms of the proposed Prestige Purchase Agreement, so as to form a contract between the parties, including a guarantee of that contract by the second defendant, and if so does an estoppel arise;
Issue 2 : If there was no vehicle matching the description of the vehicle described in the contract document described as the Prestige Purchase Agreement, to what extent, if any, are the defendants estopped from in any way asserting that the vehicle did not exist, and was the contract capable of performance, and if not, with what result;
Issue 3: The quantum of damages in the event the plaintiff is successful in the proceedings.
Within these principal issues that I have identified, the parties identified a number of related sub-issues, to which I will refer in my analysis, where relevant. Unless otherwise stated, my fact findings appear in the paragraphs that follow.
Factual background
A convenient starting point to a consideration of the relevant factual background to these proceedings is to observe the fact that Mr Bayni had previously entered into two separate motor vehicle hire purchase agreements with the plaintiff company.
The first such transaction, which occurred in 2002, involved the hire purchase of a 2002 BMW 330Ci convertible motor vehicle. The second such transaction, which occurred in October 2005, involved the hire purchase of a M3 2005 BMW convertible motor vehicle. Both of those transactions were regular in every respect. The defendants had fulfilled their obligations to make payments under the respective agreements. The required payments under those earlier agreements were paid from a bank account nominated by the defendants.
Apparently unrelated to these events, at some time in early 2006 Mr Bayni and his company had some problematic financial dealings with a Mr George Nahed, a broker in the property development industry. As a consequence of those dealings, Mr Nahed ended up owing a substantial sum of money to either Mr Bayni or to Morehuman Erskineville Pty Ltd. In the context of such dealings, in March 2006, Mr Nahed approached Mr Bayni regarding the possible hire purchase by Mr Bayni, of a yellow Lamborghini sports car. Mr Nahed had offered Mr Bayni the benefit of an advantageous deal on the vehicle. This was by way of part payment or deposit to be paid by Mr Nahed to the vendor in lieu of any actual payment of the monies owing by Mr Nahed to the defendants. Mr Bayni expressed interest in that proposal.
On the evening of 18 March 2006, as a consequence of such discussions, Mr Nahed arrived at Mr Bayni's premises with a yellow Lamborghini sports car. The intention was for Mr Bayni to inspect and test drive the vehicle. Mr Bayni undertook a test drive of the vehicle and determined that he wanted to proceed with the transaction that had been suggested by Mr Nahed. The vehicle that was test driven by Mr Bayni bore the registration plates "IMBRKE." Subsequent events have revealed that those number plates were false, and that there was no such vehicle registered with those number plates.
The result of Mr Bayni's discussions and arrangements with Mr Nahed were that finance for the vehicle in the sum of $200,000 was required for the transaction to proceed. This was because Mr Nahed had apparently made some prior arrangements with the vendor concerning the balance of the purchase price of the vehicle, in the form of a deposit or part-payment of $150,000 against the total asking price of the vehicle in the sum of $350,000.
On the evening in question, under street lighting, Mr Nahed presented Mr Bayni with a 2 page Prestige Purchase Agreement. A number of different copies of that document were tendered in evidence : Exhibit "A', pp 75-58; Annexure "A" to the affidavit sworn by Mr Jay To on 21 June 2010, pp 8-14. Mr Bayni claimed that he understood that he was only signing an application for finance, not a hire purchase agreement. Notwithstanding his evidence to that effect, legal principle requires that he be bound by the hire purchase agreement that he signed : Toll (FGCT) Pty Limited v Alphapharm Pty Ltd & Ors [2004] HCA 52; (2004) 219 CLR 165, at [42] - [45].
The vendor of the Lamborghini turned out to be a car dealership known as Galleria Veloce. I accept that Mr Bayni was unaware of this fact when he made his arrangements with Mr Nahed. Subsequent events have revealed that on 22 March 2006 and after the transaction was processed and the monies were paid by the plaintiff, Galleria Veloce became a defunct entity. It was placed in receivership with a significant shortfall in funds. The vehicle stock of Galleria Veloce remained unaccounted for, as were some millions of dollars.
The contract documents signed by Mr Bayni had been forwarded to Trivett Classic Cars as some kind of agent for the purpose of arranging finance with the plaintiff, BMW Finance Australia Pty Limited, which was the same financier with which the defendants had prior successful dealings in similar transactions. Trivett has no relevant role in these proceedings. Galleria Veloce had no prior financial arrangements or dealings with the plaintiff company, which appears to be the explanation for the approach to Trivett.
The contract documentation for the vehicle stated that the engine number of the vehicle which was to be the subject of the agreement was 07L00988, and that the chassis number was ZHWGE11S05LA02099, and the registration plates were IMBRKE. These details ultimately proved to be fictitious, as searches of the records of the Roads and Traffic Authority, and of other records, revealed that there was no such vehicle that bore these numbers or registration. The fictitious nature of these details had not become apparent until some time later, after the plaintiff had paid over the sum of $200,000 for the vehicle.
Prior to making that payment, no-one on behalf of the plaintiff took steps to inspect or ascertain the correctness of the representation that the described vehicle in fact existed. Prior to paying out the sum of $200,000, the plaintiff had not taken any form of physical possession of any vehicle matching the description of the vehicle described in the contract documents. It appears from the evidence that the plaintiff company relied only on the representations made to it in the application for finance concerning the existence and whereabouts of the vehicle which turned out to be fictitious: clause 13 of the Agreement.
Neither the plaintiff nor the defendants ever took possession or delivery of the described vehicle, nor did they take delivery of any vehicle resembling the described vehicle. In these events Mr Nahed has not been located and the moneys paid over by the plaintiff were not recovered.
On 21 March 2006, pursuant to the hiring agreement, the first defendant made a first instalment payment of an amount of $2584.08 to the plaintiff. This payment was made through a direct debit facility, which deducted the amount from the first defendant's bank account.
On 20 April, 19 May and 30 June 2006, second, third, fourth and fifth payments of individual amounts of $2584.08 were made to the plaintiff, two such payments having been made on 30 June 2006.
On 6 July 2006 the plaintiff refunded to the defendants an amount of $2584.08, which was made as a fifth duplicated instalment payment on 30 June 2006. On 20 July and 18 August 2006, fifth and sixth instalment payments of $2584.08 were made to the plaintiff. No further instalment payments were made by the plaintiff under the agreement.
Mr Bayni has stated, and I accept, that notwithstanding that he had never taken possession of any vehicle referred to in the agreement, or any vehicle resembling that description, the above instalment payments to the plaintiff were nevertheless permitted to be deducted from the first defendant's bank account because he was concerned that any non-payment of these amounts would have had the deleterious commercial consequence of adversely affecting the credit rating of the first defendant company, which was involved in property development activities that required a good credit rating. He said, and I accept, that he was anxious to avoid such adverse effects on the credit rating of the company, pending the sorting out of the circumstances that had arisen. However, eventually, Mr Bayni determined that the payments should cease, as he had not taken delivery of the vehicle for which he had bargained. No further payments were made by the defendants.
On 27 February 2007, the plaintiff issued the defendants with a notice of intention to repossess the vehicle. There is no dispute that there was no Lamborghini vehicle fitting the description of the vehicle described in Item 1 to the Schedule to the Prestige Purchase Agreement. Accordingly, the vehicle was never located by, or repossessed by the plaintiff.
Issue 1 - Existence of a contract for hire of a vehicle and resulting estoppel
The first question to be determined is whether Mr Bayni signed the relevant contract documentation knowing that it was a contract for the hire purchase of the described vehicle, rather than it being an application for finance, as claimed by him.
Morehuman Erskineville Pty Ltd is a company that is involved in high value property development projects and the financial transactions that go hand in hand with such projects. As a director and officer of that company, Mr Bayni was not a nave businessman. In fact he was an astute businessman who had, on at least two previous occasions, completed the terms of hire purchase agreements for motor vehicles in circumstances where the plaintiff company had provided the necessary finance pursuant to a request from him.
Mr Bayni was an astute and sophisticated businessman accustomed to dealing with financial and contractual matters. I find that when he signed the documents, he must have known, and should be taken to have known, that it was a contract for the hire purchase of a motor vehicle. I find that at the time, his understanding was that this was for the vehicle that Mr Nahed had shown to him, and which he had inspected, and taken for a test drive.
In my view there was no mistake on Mr Bayni's part as to the characterisation of this transaction. He had decided that he wanted a hire purchase arrangement for the vehicle that Mr Nahed had shown to him. He wanted to have it financed. He signed the necessary documentation to ensure that finance was applied for, approved and paid in order to enable him to take possession of the vehicle.
In my view it is plain from these events that a formal state of contract existed between the plaintiff and the first defendant, including with the second defendant as guarantor of the contract.
The essential terms of the contract were that in consideration of the plaintiff purchasing the vehicle, the defendants would hire the vehicle from the plaintiff in return for 60 equal monthly payment instalments of $2584.08, followed by a termination payment of $140,000 to be made at the conclusion of the hiring in order at that time, to effect the transfer of the vehicle from the plaintiff to the defendants. The contract also made provision in the event of there being any default in these arrangements. It is that default which the plaintiff now proceeds upon in order to seek to recover the amount it claims to be owed under the hire purchase agreement.
I find that in these events, Mr Bayni knowingly signed documentation that acknowledged having inspected the vehicle in question, described as a 2006 yellow Lamborghini Gallard Coupe, being a 2 door vehicle bearing the registration IMBRKE, with the engine number 07L00988, and chassis number ZHWGE11S05LA02099
In my view, it necessarily follows from that finding, that the principle of estoppel in pais, or estoppel by representation, applies to these events. Accordingly, for the purposes of the hire purchase contract, I find that Mr Bayni is estopped from denying the existence of the motor vehicle.
Issue 2 - Effect of estoppel
On a superficial examination of these events, the estoppel finding may seem to be a harsh consequence, where the described vehicle upon which the entire transaction depended, did not in fact exist. Notwithstanding any such perception, in such circumstances, the operation of an estoppel has the effect of changing the facts, even if that conclusion involves a fiction : Air Tahiti Nui Pty Limited v McKenzie [2009] NSWCA 429, per Allsop P, at [65].
The object of estoppel by representation is to prevent a party from unjustly departing from an assumption made by another party where the party acting on that assumption has acted detrimentally to their own interests : Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507, at p 547 per Dixon J.
The effect of this estoppel must necessarily be limited to the purposes of the contract. This means that for the purposes of the contract, the defendants cannot deny the existence of the vehicle that was represented as having been inspected by Mr Bayni. However, in my view, the analysis of the circumstances does not end at that point, as other well settled principles of mercantile law also apply to the circumstances.
Although as I have already stated, for the purposes of the contract, the defendants are by their conduct estopped from denying the existence of the vehicle in question, this does not, and cannot mean, that they are estopped from making such a denial for all, or any other purposes.
The next question that arises in connection with this issue is whether the hire purchase contract to which the estoppel applies, is capable of performance, and whether the plaintiff could acquire title to a non-existent vehicle. In this regard, it is relevant to examine the mechanical steps of the transaction that had been agreed to by the parties.
In legal terms, for the transaction to proceed, the plaintiff had to acquire title to the described vehicle in order to hire it to the defendants. In examining the sequential steps that were integral to the transaction, clearly, it was not possible for the plaintiff to obtain good title and possession of a vehicle that did not exist.
In my view, this is a pivotal point in the analysis, in view of the legal principle that one cannot sell something that one does not own : nemo dat quod non habet . In my view, this principle, which has been long known and enforced as the nemo dat rule, also applies to a hire purchase contract which includes an agreement for the sale of a vehicle at the end of the term of the hiring of goods, including the hiring of a motor vehicle. In my view, the result of an application of that rule is that one cannot hire to another what one does not and cannot own. Yet this is what the plaintiff purports to have done in this case.
This was done in circumstances where, before parting with a significant amount of money to acquire a motor vehicle, namely $200,000, the plaintiff, by its employees, took no active steps to satisfy itself that the vehicle in question actually existed or was locatable. In my view this was a risk-laden commercial enterprise undertaken by the plaintiff. The risk taken by the plaintiff was that it could be exposed to possible loss by fraud in a transaction of this kind. As there was no plea of contributory negligence raised by the defendants, it is not necessary to further consider that risk exposure in this context, although it may take on some other relevance.
Returning to the transaction itself, I consider it to be an unreasonable purposive construction of the contract between the parties, in circumstances where the plaintiff could not and did not satisfy itself that it had acquired the vehicle that was proposed to be hired to the defendants, and in the course of those events, parted with significant funds to a third party, that the plaintiff should be permitted to legitimately claim from the defendants, the value of the payments owing under the contract of hire. This is so simply because the described vehicle did not exist.
Whilst estoppel operates to prevent the defendants from denying the existence of the vehicle for the purpose of the contract, the fact remains that the contract still required performance, and this is a separate issue requiring consideration beyond the estoppel question. The performance of the contract is an entirely separate matter and it is a matter that both parties were obliged to fulfil.
The plaintiff did not, and could not, produce evidence to show that it acquired title in the vehicle so as to entitle it to hire the vehicle to the defendant. In my view, in the absence of such evidence, it was impossible for the terms of the contract to be performed or fulfilled.
Giving full force and acknowledgment to the estoppel that prevents the defendants from asserting there was no vehicle for the purposes of the hiring contract with the plaintiff, because estoppel changes the facts so as to require the assumption that the vehicle in fact existed, when it did not, however, for the purpose of the performance of the contract, the position is not the same.
Estoppel does not change the facts so far as to bind the defendants to an assumption that the vehicle was in fact hired to them when it was not. In my view, the estoppel which I have found to have arisen, cannot change the facts to the extent that precludes the defendants from denying the performance of the contract by the plaintiff. Performance of the contract necessarily required that the plaintiff hire the vehicle to the defendants. That was something the defendant was never in a position to be able to do in the case of a non-existent vehicle.
In my view, it therefore follows that the contract of hire became frustrated at the outset, when the defendants were required to make the first payment under the hiring contract, and the plaintiff was required to make the hired vehicle available to Mr Bayni, so he could take possession of it in accordance with the agreement in order to give efficacy to the agreement.
It must follow from these circumstances, that the estoppel that prevents the defendants denying the existence of the vehicle for the purpose of the contract, does not extend to prevent the defendants from taking the position that the vehicle was not hired. It follows that the defendants are not estopped from asserting that the contract was not performed by the plaintiff, and was thus frustrated. The performance of the contract was frustrated by the inability of the plaintiff to hire the vehicle to the defendants because the vehicle did not exist. In my view, that excused the defendants from the obligation to make payments under the contract because the estoppel only related to the existence of the vehicle for the purpose of the contract, and did not extend to the performance of the contract.
Having concluded that the contract was frustrated, it becomes necessary to determine the consequences of that frustration. The answer to that question is to be found in the provisions of the Frustrated Contracts Act 1978, [" FC Act "].
The provisions of the FC Act were canvassed in submissions. As the frustration point arose late in the proceedings, it required amendment to the pleadings. In the absence of demonstrated prejudice and in order to achieve justice between the parties, I gave the parties leave to file additional documents and submissions on this issue, to reflect the arguments ultimately relied upon. Those additional documents were as follows:
(a) A further amended statement of claim;
(b) The third further amended defence which dealt with the frustrated contracts issue;
(c) The first cross claim and defence to further amended cross claim, in which the frustrated contract issue is denied, but in the alternative, claims for entitlement to payment made pursuant to ss 13(1), 15(1)(b) and 15(2) of the FC Act .
Ordinarily, and subject to any statutory provisions to the contrary, in the event of a contract becoming frustrated, the payment of monies under that contract would have to be refunded. The defendants seek a refund of the instalment monies that had been paid to the plaintiff under the frustrated contract.
Under the FC Act , there is a range of potential remedies available. The plaintiff has primarily argued that in the event of frustration being found, any order other than that the defendants should nevertheless pay the plaintiff the sum of $200,000, would result in manifest injustice: s 15(1)(b) of the FC Act . The plaintiff's alternative submission was that the defendants should be ordered to pay half of the amount claimed: s 13(1) of the FC Act .
The plaintiff's argument was that since it paid out the sum of $200,00 because of representations made by the defendants through the representation made in clause 13 of the Agreement, the payment was reasonably made by the plaintiff, and had resulted in the plaintiff suffering a relevant detriment, which was that it had no vehicle, and it had parted with $200,000, without the prospect of repayment, unless the court made an order for payment pursuant to ss 13 or 15 of the FC Act . Accordingly, the plaintiff claims an entitlement to fair compensation, in the alternative amounts of either $200,000, or $100,000, plus interest.
Any monetary adjustments to the entitlement of the plaintiff pursuant to s 15 of the FC Act requires a consideration of what would be proper, or just, in the circumstances, in order to avoid manifest injustice.
Clause 13 of the Agreement, which appears at page 55 of the agreed tender bundle that comprised Exhibit "A" was in the following terms:
"13.WARRANTIES
The Hirer warrants that:- (a) the Hirer has thoroughly examined the Goods before signing this Agreement and is satisfied as to the condition, quality and suitability of the Goods for its purpose and that the Goods are, or will when delivered be, in accordance with the description contained in item 1 of the Schedule and are of a design, size, type, capacity and manufacture as selected by the Hirer; (b) the Hirer has relied solely on the Hirer's own skill and judgement in selecting the Goods as suitable for the Hirer's purposes and if the Hirer either expressly or by implication has made known to the Owner or to the Dealer any particular purpose for which the Goods are required the Hirer has not relied on nor would it have been reasonable for the Hirer to have relied on the skill or judgement of the Owner when deciding whether the Goods were reasonably fit for that purpose; (c) the Hirer represents and warrants that all credit and financial information concerning the Hirer supplied to the Owner or to the Dealer is true and correct in all respects; and (d) subject to clause 10, the Hirer's obligation to pay the Rent Instalments and otherwise to comply with the terms and conditions of this Agreement shall continue notwithstanding the occurrence of any defect in or total or partial breakdown of the Goods or any damage thereto."
That clause provides proof that the plaintiff was reliant on the representations made by Mr Bayni, including that the vehicle existed. However, the plaintiff took no steps to satisfy itself, other than by such representations that it could take ownership of the vehicle for the purpose of hiring it to Mr Bayni.
There is a limit on the extent to which the plaintiff can rely upon clause 13 for estoppel purposes, which in turn affects the remedies available to the plaintiff. For example, as was submitted by the defendants, the plaintiff is unable to show that the defendants had represented to the plaintiff that the plaintiff had hired the Lamborghini to the defendants. Nor can the plaintiff show that it relied upon such a representation because the plaintiff was never in a position to know it had hired the Lamborghini to the defendants. This is because it had no such vehicle. In this sense, there was no relevant change of position to one of relevant detriment based on a representation that came from the defendants concerning the hiring of a Lamborghini.
In the circumstances, I consider that it would be manifestly unjust for the defendants to be required to pay for the balance of the hiring costs of a vehicle that did not exist in circumstances where the plaintiff had not beforehand satisfied itself as to the existence of the vehicle, and as to its title to the vehicle, before entering into a hiring agreement in respect of that vehicle : s 15(1) of the FC Act . I consider those events should properly and justly operate to preclude the plaintiff from an entitlement to the payment of the full amount of its payment, or even half that amount under s 13(1) of the FC Act .
On the opposing side of the issue, an analysis of the position of the defendants is that the defendants proceeded to make a number of hiring instalment payments to the plaintiff without any protest as to the non-existence of the vehicle, before they eventually ceased making those payments, at which time they made their final position with respect to the non-existent vehicle known to the plaintiff.
In those circumstances, I consider that the appropriate adjustment between the parties, as contemplated by s 15(1) of the FC Act , should be that the plaintiff should not be required to refund to the defendants, any of the instalment monies they paid to the defendants under the agreement for hire. In my view that is the proper and just consequence of the silence of the defendants as to the non-existence of the vehicle.
Finally, the plaintiff argued that even in the event of a finding that the contract was frustrated, that position is no answer to the claim brought by the plaintiff under s 52 of the Trade Practices Act 1974 [" TP Act "]. That argument was advanced on the basis of alleged misleading and deceptive conduct on the part of the defendants, which were claimed to amount to misleading or deceptive representations. The plaintiff argued that this position did not depend upon the contract itself, including whether or not it was frustrated.
Section 52 of the TP Act prohibits a corporation from engaging in conduct that is misleading or deceptive in trade or commerce. The plaintiff sought to invoke s 75B of the TP Act to establish a liability of Mr Bayni for allegedly aiding, abetting, counselling or procuring a contravention of s 52 of the TP Act .
It was argued that, according to s 82 of the TP Act , the plaintiff could maintain an action for damages against Mr Bayni in respect of the chain of events that have led to the plaintiff sustaining the loss of $200,000 because of his conduct in contravention of s 52. In this regard, the plaintiff argued that it has suffered losses caused by that conduct, where intent is not the test of causation of the loss : Hornsby Building Information Centre v Sydney Building Information Centre (1978) 140 CLR 218, per Stephen J at p 223: March v Stramare (1992) 175 CLR 514 per Mason CJ at p 525.
In support of the s 52 claim, it was argued that the plaintiff would not have paid out $200,000, and would not have then lost it, but for the representation that was made by defendants in clause 13 of the Agreement as cited above.
It was argued that Mr Bayni's representations concerning the vehicle, and therefore the representations of the first defendant company, were clearly misleading and deceptive, and were therefore false, because he had not inspected the vehicle as he had warranted. He could not have done so as it did not exist, and for that matter, the plaintiff could not have done so either. The plaintiff's position was that it simply paid on receipt of an invoice in reliance on those representations.
There is a question as to whether the representations were relied upon and made in the course of trade or commerce. The plaintiff, a corporate entity, provides credit or finance, and therefore engages in trade or commerce.
There is a question as to whether the credit was provided to another corporate entity, such that the conduct had the commercial and trading character sufficient to come within the concept conveyed by the words within s 52 concerning " trade or commerce ". This question arises because the credit was supplied to the corporate entity Morehuman Erskineville Pty Limited, and guaranteed by Mr Bayni. The hirer was described as being Mr Bayni, not the company : Exhibit "A", pp 49 - 51.
In my view, Mr Bayni did not make representations in trade or commerce for the purposes of the TP Act , which is concerned with the behaviour of corporations. Rather, the representations were made in connection with the hire of a vehicle. Neither Mr Bayni nor Morehuman Erskineville Pty Ltd were engaged in trade or commerce concerning the commercial trade or hire of motor vehicles. This was a one-off transaction for the hire of a vehicle. I do not consider Mr Bayni, and therefore the first defendant, to have acted unreasonably in not inspecting the engine or chassis numbers on the vehicle, having observed, at night, the correlation between the registration IMBRKE affixed to the vehicle, and the description on the document that he signed, and which formed part of the representations made to the plaintiff.
Accordingly, in my view, the plaintiff has no remedy pursuant to s 52, as claimed.
Issue 3 - Quantum of damages
To allow for the possibility that on an appeal from this decision, my findings on the preceding issues may be found to involve error, in accordance with convention, it is appropriate that I outline the approach that would otherwise have been taken to assess damages, notwithstanding my findings to the effect that no damages arise for assessment.
There is no dispute that if there were to have been a verdict and judgment for the plaintiff in the proceedings, the amount of any such damages, including pre-judgment interest up to the date of the commencement of the trial, would be in the submitted total amount of $271,486.68. Had the plaintiff been successful in the proceedings, there would have been a verdict and judgment in its favour in that amount.
Disposition
The defendants have succeeded on the primary issue that determines the result of the proceedings. Accordingly, the cross claim brought by the defendants does not arise for consideration. The defendants are therefore entitled to an order that the plaintiff pay their costs in defending these proceedings. As the cross claim was mounted to allow for the event that the plaintiff's claim may have succeeded, and since that claim has failed, I consider the defendants should also have their costs of the cross claim paid by the plaintiff. Those costs are to be assessed on the ordinary basis, unless an entitlement can be shown for an order for costs on some other basis.
Orders
I make the following orders:-
(1) Verdict and judgment for the defendants on the plaintiff's claim;
(2) The cross claim is dismissed;
(3) The plaintiff to pay the costs of the defendants in relation to the plaintiff's claim and the cross claim, on the ordinary basis, unless otherwise ordered;
(4) The exhibits may be returned;
(5) Liberty to apply on 7 days notice if further orders are required.
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Decision last updated: 25 March 2011
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