Cadura Investments Ltd v Rototek Pty Ltd

[2004] WASC 224

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   CADURA INVESTMENTS LTD -v- ROTOTEK PTY LTD & ORS [2004] WASC 224

CORAM:   MASTER NEWNES

HEARD:   7 SEPTEMBER 2004

DELIVERED          :   2 NOVEMBER 2004

FILE NO/S:   CIV 2365 of 2003

BETWEEN:   CADURA INVESTMENTS LTD

Plaintiff

AND

ROTOTEK PTY LTD (ACN 097 944 164)
First Defendant

MARK JAMES PALLISTER
Second Defendant

VANESSA JOAN PALLISTER
Third Defendant

Catchwords:

Practice and procedure - Application by plaintiff for summary judgment - Turns on own facts

Legislation:

Fair Trading Act 1987 (WA), s 10

Rules of the Supreme Court 1971 (WA), O 14

Trade Practices Act 1974 (WA), s 52

Result:

Application dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     Mr G D Cobby

First Defendant             :     Mr L A Tsaknis

Second Defendant         :     Mr L A Tsaknis

Third Defendant           :     Mr L A Tsaknis

Solicitors:

Plaintiff:     Christensen Vaughan

First Defendant             :     Holborn Lenhoff Massey

Second Defendant         :     Holborn Lenhoff Massey

Third Defendant           :     Holborn Lenhoff Massey

Case(s) referred to in judgment(s):

Black v S Freedman & Co (1910) 12 CLR 105

Eng Mee Yong v Letchumanan (1980) App Cas 331

Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87

Marsh v Keating [1834] 1 Bing(NC) 198

Norilya Minerals Pty Ltd v Commissioner of State Taxation (1995) 16 WAR 266

Reid v Rigby & Co [1894] 2 QB 40

Wardley Australia Ltd & Anor v The State of Western Australia (1992) 175 CLR 514

Webster v Lampard (1993) 177 CLR 598

White v Johnston (1886) 8 ALT 53

Case(s) also cited:

Cadura Investments Ltd v Rototek Pty Ltd [2004] WASC 150

McIntosh v Shashoua (1931) 46 CLR 494

State Bank of Victoria v Parry [1989] WAR 240

1. MASTER NEWNES: This is an application by the plaintiff for summary judgment under O 14 of the Rules of the Supreme Court1971 (WA) in respect of one of two claims made in the amended statement of claim in the action. The plaintiff has previously obtained judgment on the other claim. The present claim is in respect of an amount of $425,000.

2. The plaintiff is a company incorporated in the British Virgin Islands.  The first defendant ("Rototek") is incorporated under the Corporations Act2001 (Cth) and is controlled by the second and third defendants. The third defendant (Mrs Pallister) is the sole director of the first defendant. The second and third defendants (the "Pallisters"), who are husband and wife, hold the issued shares in the company.

3. The plaintiff alleges that between 4 April 2003 and 5 September 2003 Rototek and Citybright Pty Ltd carried on business in partnership under the name "Concept Boats" (the "partnership").  Citybright is a company incorporated under the Corporations Act2001 and Mr David Morgan is the sole director and shareholder.  It is the trustee of the Citybright Trust, a discretionary trust, the beneficiaries of which are Mr Morgan and Mr David Barany and their respective families.

4. It is alleged in the statement of claim that in May 2003 there were discussions between the second defendant (Mr Pallister) on behalf of Rototek and the Pallisters, and Messrs Barany and Morgan on behalf of the plaintiff, in the course of which it was agreed that the plaintiff would advance the sum of $425,000 to the partnership to enable it to purchase a rotational moulding oven and two kayak moulds from a company in New Zealand.  It is alleged that in the course of the discussions Mr Pallister told Messrs Barany and Morgan that the oven and moulds were available at a price of approximately $425,000 and that if the loan was made by the plaintiff, the funds would be used to purchase the oven and moulds (the "representations").  It is alleged that Mrs Pallister knew of the representations by Mr Pallister or subsequently ratified them.

5. The plaintiff pleads that in reliance upon the representations it agreed to lend the sum of $425,000 to the partnership and, on about 22 May 2003, it advanced that sum to the partnership. 

6. The plaintiff says that on 28 May 2003 Mr Pallister withdrew the funds from the partnership bank account and deposited them in the bank account of Rototek.  It is alleged that on 28 May 2003 Mr Pallister or Mrs Pallister withdrew an amount of $373,000 from those funds in Rototek's bank account and deposited it to Mrs Pallister's bank account.

7. It is pleaded that at the time he made the representations Mr Pallister did not intend that the funds of $425,000 would be used to purchase the oven and moulds, but intended to purchase the equipment for far less than that sum.  The plaintiff says that Mr Pallister knew that the oven and moulds could be acquired for not more than $80,000 and in fact, unbeknown to Citybright or the plaintiff, he purchased the oven for approximately $21,350 and the moulds for approximately $58,000. 

8. The plaintiff says that by reason of the representations, the plaintiff was entitled to, and has, rescinded the loan agreement and it is entitled to recover the sum of $425,000 from the defendants.

9. The defendants say that the plaintiff has no claim against the defendants for the money.  They deny there was any agreement that the oven and moulds would be purchased on behalf of the partnership or that the sum of $425,000 would be advanced by the plaintiff to the partnership to enable it to purchase the oven and moulds.  According to the defendants, Rototek agreed to acquire the oven and moulds from the New Zealand owner and to sell them to Messrs Barany and Morgan, in their personal capacities, for the sum of $425,000.  Any claim alleged in respect of the sum of $425,000 could therefore lie only with Messrs Barany and Morgan and the plaintiff could have no cause of action. 

10. Alternatively, the defendants say that even if it were shown that the oven and moulds were acquired on behalf of the partnership, it was still the case that the plaintiff has no claim against the defendants for the moneys it says it advanced.

11. An extensive affidavit of Mr David Morgan sworn 11 November 2003 was relied on by the plaintiff.  In it Mr Morgan says he is the Australian representative of the plaintiff and that the plaintiff has appointed him as its agent to assist in this litigation.  It has done so because he has knowledge of the circumstances giving rise to the plaintiff's claim and he is resident within the jurisdiction.  Mr Morgan has no interest in the plaintiff.  The sole director of the plaintiff is a Dr Hohenbuehel, a resident of Austria.  According to Mr Morgan, he has collaborated with Dr Hohenbuehel and Mr Barany on a number of projects both in Australia and overseas, but generally the projects do not involve the plaintiff.  He says that generally he and Mr Barany seek out business opportunities and Dr Hohenbuehel acts in the administration of the entities involved in the projects. 

12. Mr Morgan says that on 4 April 2003 Citybright, as trustee of the Citybright Trust, purchased from Rototek a 50 per cent interest in the business of Concept Boats for $350,000.  Rototek and Citybright entered into a written agreement to carry on business in partnership as Concept Boats.  A partnership bank account was opened, the signatories to which were the Pallisters and Mr Morgan.  In April 2003, Citybright deposited the sum of $100,000 to the credit of the account by way of its contribution to the working capital of the partnership.  Mr Morgan says Citybright obtained the funds from the plaintiff.  Rototek's contribution to the capital of the partnership was to be made by way of a contribution of 30 tonnes of polyethylene powder it had recently purchased and it was accordingly credited an amount of $79,800 in the partnership accounts.

13. According to Mr Morgan, in early May 2003 Mr Pallister discussed with him the possibility of Concept Boats diversifying its business to include the manufacture of kayaks.  Mr Pallister said he knew of a company in New Zealand from which it might be possible to purchase kayak moulds and ovens.  Shortly afterwards, Mr Pallister informed Mr Morgan that Concept Boats would be able to purchase a rotational moulding oven and two kayak moulds from New Zealand for the sum of approximately $425,000.  Mr Morgan said he discussed the matter with Mr Barany and, on behalf of Citybright, decided that Concept Boats should proceed to purchase the oven and kayak moulds. 

14. Mr Morgan says that in the discussions he had with Mr Barany and Mr Pallister regarding the purchase of the oven and moulds it had always been understood that the funds would be borrowed from overseas.  Mr Barany had told Mr Morgan that he (Mr Barany) would "source the funds" from the plaintiff.  Mr Morgan says he informed Mr Pallister of this and Mr Pallister agreed that Concept Boats should borrow the money for the purchase.  Mr Barany says he also informed Mr Pallister that a loan could be made by the plaintiff to Concept Boats to enable it to purchase the oven and moulds.  Subsequently, Mr Barany confirmed that he would arrange for funds for the purchase to be lent to Concept Boats by the plaintiff.  Mr Morgan conveyed this to Mr Pallister and Mr Pallister said he would proceed with the purchase. 

15. Subsequently, Mr Barany arranged for $425,000 to be remitted by the plaintiff to the trust account of a firm of accountants who acted for Citybright and Mr Morgan in their dealings in relation to Concept Boats.  The funds were remitted on 21 May 2003.  Upon their receipt the accountants credited the money to Citybright.  Mr Morgan says in his affidavit that that was an error.  Citybright was not borrowing the $425,000 on its own account. 

16. Mr Morgan says he arranged for the accountants to remit the money to the partnership bank account and that occurred on 22 May 2003.  Mr Morgan says he telephoned Mr Pallister and informed him that the money had been received from overseas and transferred into the partnership bank account.  A copy of the partnership bank statement has been produced in evidence and discloses the deposit to the partnership bank account, showing the depositor as Citybright. 

17. The sum of $425,000 was withdrawn from the partnership bank account on 27 May 2003 by Mr Pallister and deposited to the account of Rototek.

18. The defendants did not deny that the moulds and oven were purchased for far less than $425,000, although they contended that the equipment had cost $200,000 rather than the $80,000 alleged by the plaintiff.  The defendants argued that the cost was immaterial.  The transaction, it was said, involved an agreement by Rototek to acquire the moulds and oven and to sell them to Messrs Barany and Morgan for the sum of $425,000, so how much Rototek paid for the equipment, and therefore the amount of profit Rototek made on the transaction, was irrelevant.  The defendants, by Mr Pallister, also denied that there was ever any agreement or discussion that the plaintiff would lend the sum of $425,000 to Concept Boats to purchase the equipment. 

19. In support of their contention that the equipment was purchased by Messrs Barany and Morgan, the defendants pointed to the fact that the money was transferred to the Concept Boats' partnership account by Citybright, not by the plaintiff.  The plaintiff says, as I have mentioned, that that was the result of an error by the accountants for Citybright and Mr Morgan, to whom the plaintiff sent the funds.

20. Counsel for the defendants submitted that, even if the defendants' contention as to the agreement for the sale of the ovens and mould to Messrs Morgan and Barany was not accepted, the onus still lay on the plaintiff to establish that it had advanced the sum of $425,000 to the partnership and that it was entitled to recover that sum from the defendants.  It was submitted that the evidence fell well short of that.

21. At the hearing, counsel for the plaintiff went in detail through the contemporaneous documents to establish that, in the light of those documents, the defendants' contention that there was a sale agreement between Messrs Barany and Morgan and Rototek in respect of the oven and moulds was plainly untenable and that at all times the defendants knew that the equipment was being purchased on behalf of the partnership. 

22. I do not think it is necessary to canvass that evidence in detail.  Suffice it to say that it clearly emerges from the various e‑mails sent by Mr Pallister to Messrs Barany and Morgan in relation to the acquisition and transport of the equipment to Western Australia, and other relevant documents of the time, that Mr Pallister clearly understood the equipment was being acquired by Concept Boats and not by Messrs Barany and Morgan in their personal capacity.  On the evidence before me, I do not consider there is any real doubt that Mr Pallister was acting on behalf of the partnership in relation to the acquisition.

23. The question then is whether the plaintiff has a cause of action to which the defendants have no arguable defence.  Whether, if the facts relied upon by the plaintiff are proved, any other person would have a cause of action against the defendants, or any of them, is, of course, beside the point.

24. It is clear that the power to order summary judgment must be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried:  Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87. The need for exceptional caution is nowhere more important than where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact: Webster v Lampard (1993) 177 CLR 598. It was never intended that when the facts are in dispute, actions should be disposed of summarily: White v Johnston (1886) 8 ALT 53, but the Court is not bound to accept uncritically as raising a dispute of fact calling for further investigation, every statement in an affidavit, however equivocal, lacking in precision or inconsistent with contemporary documents or other statements by the deponent: Eng Mee Yong v Letchumanan (1980) App Cas 331.

25. The plaintiff's claim is framed in a number of ways, in the alternative.  It is alleged first, that the loan agreement has been rescinded and that Rototek holds the $425,000 as constructive trustee for the plaintiff; secondly, that Rototek is liable to account to the plaintiff for the $425,000; and, thirdly, that the defendants are liable to the plaintiff in the sum of $425,000 as moneys had and received. 

26. Alternatively, it is contended that by making the representations allegedly made by Mr Pallister, the defendants engaged in misleading or deceptive conduct, contrary to s 52 of the Trade Practices Act 1974 (WA) and s 10 of the Fair Trading Act 1987 (WA). The plaintiff says that if the representations had not been made, it would not have advanced the funds to the partnership. It alleges that, as a result of the defendants' misleading or deceptive conduct, the plaintiff has lost the sum of $425,000, and the use of that money since it was advanced, and it claims damages.

27. It seems to me that a fundamental difficulty for the plaintiff on this application is that it is not clear on the affidavit evidence that the representations were in fact made to the plaintiff or that it had been informed of them at the time it advanced the money.  That is, it is arguable that the alleged representations were made to Mr Morgan (and, if they were made to Mr Barany, to Mr Barany) as a representative of Citybright, as a partner in Concept Boats, not in any capacity Mr Barany or Mr Morgan may then have had as a representative of the plaintiff.  I should add that the evidence as to what (if any) role or authority they respectively had at that time in relation to the plaintiff is by no means clear. 

28. As Mr Morgan's evidence stands, it seems that the representations were made to him in the course of obtaining Citybright's agreement to the purchase of the oven and moulds for the partnership.  Once the decision to purchase the equipment had been made by the partnership, Mr Barany arranged to "source" the necessary funds from the plaintiff.  How he went about doing so, and on what basis he obtained the funds, does not appear in the evidence.

29. In my view, therefore, it is not clear on the evidence that the representations were made to the plaintiff, whether by Messrs Barany and Morgan in any capacity they may have held as representatives of the plaintiff or otherwise.  There is no evidence that the plaintiff was otherwise informed of any of the representations.  If it is the case that the plaintiff was not aware of the representations, it could not have loaned the funds in reliance upon them. 

30. The claim that the money is held on constructive trust was not developed in the oral submissions of counsel for the plaintiff, but in his supplementary written outline of submissions it was put in the following way.  Where money has been stolen it is trust money in the hands of the thief, and the thief cannot divest it of that character.  If he pays it over to another, it may be followed into that person's hands:  Black v S Freedman & Co (1910) 12 CLR 105 at 110. That principle applies to moneys obtained by fraud: Norilya Minerals Pty Ltd v Commissioner of State Taxation (1995) 16 WAR 266. Accordingly, Rototek is liable to account to the plaintiff for the sum of $425,000 and Mrs Pallister holds the sum of $373,000 as constructive trustee for the plaintiff.

31. Apart from any other issue, I do not consider it is clearly established that the funds were obtained by a fraud perpetrated on the plaintiff.  For the reasons I have given, I do not consider that it is clear on the affidavit evidence that the plaintiff ever became aware of or acted upon the representations alleged to constitute the fraud. 

32. The alleged duty to account was not explained in the plaintiff's submissions and its basis is not apparent.  On the evidence, it is not clear on what basis it is alleged that there arises a duty on the part of the defendants to account to the plaintiff for funds lent to the partnership. 

33. The claim for moneys had and received also does not seem to me, on the affidavit evidence, to be clearly made out.  The basis for this claim was not articulated in either the written or oral submissions on behalf of the plaintiff.  However, it appears to be the case, for instance, that where B obtains money from A under a fraudulent transaction, and B pays it over to C, an action for money had and received will be available against C provided A is still entitled to and does rescind the transaction:  Marsh v Keating [1834] 1 Bing (NC) 198; Reid v Rigby & Co [1894] 2 QB 40.

34. If put on that or any like basis, apart from any other issue it is not clear, as I have said, that the representations attributed to Mr Pallister were made or communicated to the plaintiff, from whom the funds for the purchase were obtained, as opposed being made to representatives of Citybright in the course of gaining approval for the purchase of the equipment on behalf of the partnership. 

35. The claim for damages for misleading or deceptive conduct is based on the contention that by inducing the plaintiff to make the loan on the basis that the funds were to be used to purchase an oven and moulds valued at $425,000, the defendants engaged in misleading and deceptive conduct.  It is, of course, clear that damage must be suffered by the plaintiff in order to give rise to such a cause of action under the Trade Practices Act 1974:  Wardley Australia Ltd & Anor v The State of Western Australia (1992) 175 CLR 514 at 526.

36. I do not consider it is clear that by making the loan the plaintiff has suffered damage.  There is no evidence that the borrower, the partnership, cannot repay the money.  In addition, there remains, in my view, an arguable issue as to whether the representations alleged to constitute the misleading and deceptive conduct were in fact made to, and acted upon by, the plaintiff.

37. Finally, the plaintiff submits in its written outline of submissions that Rototek is liable under the loan agreement.  It is said that the plaintiff is entitled to bring proceedings to recover the sum advanced from either of the partners without bringing action against the other. 

1. In the first place, it must be said that this claim is not pleaded in the statement of claim.  In any event, it is not clear, in my view, that the plaintiff would be entitled to judgment on such a claim, if pleaded.  The basis of the claim is that the plaintiff was entitled to, and did, rescind the loan agreement by reason of the representations made by Mr Pallister and that, the loan agreement having been rescinded, the plaintiff was entitled to recover the loan funds.  For the reasons I have given, it is, however, arguable that the representations were not made to the plaintiff at all.  No other basis has been pleaded upon which the money is said to be now due and payable to the plaintiff by the partnership.  Indeed, the statement of claim merely pleads the fact of the loan agreement; the terms of the loan agreement have not been pleaded.

2. The defendants also contended there was an issue, in effect, as to whether the sum of $425,000 was advanced by the plaintiff to the partnership or borrowed by Citybright from the plaintiff and lent by Citybright to the partnership.  In view of the conclusion I have reached it is unnecessary to deal with that contention, although I should say that on the basis of the affidavit evidence, including the e‑mail correspondence annexed to Mr Morgan's affidavit, I would not have regarded that issue as plain beyond argument.

3. I do not consider it can be said that the defendants have no arguable defence to the claim of the plaintiff.  The summary judgment application must therefore be dismissed.