Cash Resources Australia P/L v Reid - [2006] SADC 45

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
CASH RESOURCES AUSTRALIA P/L v REID AND ORS
Judgment of His Honour Judge David Smith
28 April 2006
EQUITY - GENERAL PRINCIPLES - ASSIGNMENTS IN EQUITY
Equitable assignment of legal chose in action – factoring agreement – oral assignment of debt – debt was a fabrication – action by plaintiff assignee against debtor to enforce assignment – whether false pretence of indebtedness made by debtor to plaintiff assignee creates an estoppel preventing debtor from denying existence of debt – whether the principle that the assignee of a chose in action can only take the assignment subject to “equities” applies – held that as debt was a false pretence and doctrine of estoppel had no application the assignor had nothing to assign and action to enforce assignment dismissed.

TORTS
Deceit – action against fourth defendant for falsely representing to the plaintiff factoring company that the third defendant corporation was indebted to the first and second defendants who were purporting to assign that debt to the plaintiff – discussion of ingredients of tort of deceit and the applicable measure of damages – whether the corporate third defendant and its director and agent the fourth defendant were joint tortfeasors and therefore were jointly liable for the deceit – held that fourth defendant was liable in deceit, misrepresentation pursuant to the Misrepresentation Act 1972 and misleading or deceptive conduct pursuant to the Fair Trading Act 1987 subject to proof of loss and damage.
Misrepresentation Act 1972 (SA); Fair Trading Act 1987 ss 84, 56 and 54; Law of Property Act 1936 (SA) s29, s15; Judicature Act 1873 (UK) s25(6); District Court Act 1991 s37, referred to.
Norman v Federal Commissioner of Taxation (1962-63) 109 CLR 9; McIntyre v Gye & Anor (1994) 122 ALR 289; Halsbury’s Laws of England 4th Ed Vol 6 para 69; Assignments of Choses in Action in Australia J.G. Starke QC 1972 Ed at 13; William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454; Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614; Loxton v Moir (1914) 18 CLR 360; McCaughey v Commissioner of Stamp Duties (1945) SR (NSW) 192; Williams v Commissioner of England Revenue [1965] NZLR 395; Federal Commissioner of Taxation v Everett (1979) 143 CLR 440; Equity Doctrines and Remedies 3rd Ed Meagher, Gummow & Lehane; Commonwealth v Verwayen (1990) 170 CLR 394; Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1; Edgington v Fitzmaurice (1885) 29 Ch D 459; Nicholls v Taylor [1939] VLR 119; Gould v Vaggelas (1984) 157 CLR 215; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Toteff v Antonas (1952) 87 CLR 647; Doyle v Olby (Ironmongers) Ltd [1969] 2 KB 158, considered.

CASH RESOURCES AUSTRALIA P/L v REID AND ORS
[2006] SADC 45
Introduction

The plaintiff (“CRA”) is a debtor finance company or factoring company. The first and second defendants (“the Reids”) were opal miners and wholesalers of opal. They traded as Gemstone Exploration at Coober Pedy.
This action concerns a factoring agreement (“the Agreement”) entered into in writing between CRA and the Reids on the 3^rd May 2002, whereby CRA agreed to consider purchasing debts owing to the Reids from time to time on the terms and for the price and fees set out in the Agreement.
The Reids requested that CRA purchase the following three debts which they represented were owed to them for the purchases of opal:
·Graham Dasborough – Excel Opal Exports ($247,233.80);
·John Hall – Gemco Australia ($239,985);
·Ches Pty Ltd – Paul Shields ($191,923.80).
CRA agreed to purchase those debts and paid the Reids $222,932.66 (ie $147,932.66 on the 7^th May 2002 and $75,000.00 on the 17^th May 2002). The Reids have not repaid those advances.
This action is one of several in which CRA seeks to recover its losses arising from the Agreement with the Reids.
The focus of this action is the alleged debt of the third defendant Ches Pty Ltd (“Ches”). CRA claims from Ches the assigned debt and further and in the alternative seeks damages from the fourth defendant, Paul Shields (“Shields”) who is the sole director and shareholder of Ches, for allegedly misrepresenting to CRA that Ches was indebted to Reid.
The Reids are named in this action because CRA claims that there has been an equitable assignment to it, of the debt owed to the Reids by Ches, and it is usual for the equitable assignors, namely the Reids, to be named in such an action (see Norman v Federal Commissioner of Taxation[1], McIntyre v Gye & Anor[2]; Halsbury’s Laws of England[3]; Assignments of Choses in Action in Australia[4]).
[1] (1962-63) 109 CLR 9 per Windeyer J at 27
[2] (1994) 122 ALR 289 at 295
[3] 4^th Ed Vol 6 para 69
[4] J.G. Starke QC 1972 Ed at 13
Summary of Claims in this action
As just indicated, CRA contends, against Ches, that there was an equitable assignment to it, by the Reids, of the legal chose in action, namely the debt of $191,923.80, and that it is entitled to recover that sum from Ches. In particular, CRA argues that, even if it emerges that Ches was not so indebted to the Reids, Ches is estopped from denying it by reason of representations allegedly made to CRA by Ches’s servant and agent, Shields, to the effect that Ches was so indebted.
CRA also claims “further and in the alternative” damages from Shields for misrepresenting that Ches was indebted to the Reids as alleged. The causes of action relied upon for these damages claims are:
·the tort of deceit;
·misrepresentation pursuant to the Misrepresentation Act 1972 (SA); and
·misleading or deceptive conduct pursuant to ss 84, 56 and 54 of the Fair Trading Act 1987 (SA).
The third and fourth defendants, namely Ches and Shields, contend, inter alia, as follows:
·that, well known to CRA, there was no debt capable of assignment, as Shields had made it clear to CRA’s manager that the opals were being sold by Ches on consignment from the Reids;
·that if Shields represented that Ches was indebted to the Reids in the sum of $191,923.80 when there was no such debt, then CRA obtained nothing by way of assignment because there was nothing to assign; and further estoppel could not operate to create a debt or prevent the denial of indebtedness where none existed;
·that CRA was itself in breach of the factoring Agreement in not paying to the Reids 77 percent the face value of the debt in accordance with the Agreement and so could not claim to have purchased the Ches debt if there was a debt;
·that given a debt, the assignment of it was an equitable assignment which was not evidenced in writing as required by s29 of the Law of Property Act 1936 (SA) and was thereby invalid and unenforceable;
·that there were no representations of indebtedness made by Shields and so there could be no basis for a damages claim against him personally; and
·that if there were any misrepresentations as alleged made by Shields he did so within authority for his disclosed corporate principal and so, could not as a matter of law attract personal liability.
The defendants did contend that the plaintiff could not proceed in the action because it had not paid the correct Stamp Duty on a document central to the action, namely the Agreement. That is now abandoned (647, 661). The parties are content that the correct Stamp Duty has been paid. I accept that.
There is a counterclaim by Ches in which it claims that it has retained title in certain café plant and equipment which it installed in Reids’ café in 2001 and for which it has not been paid. Some of this plant and equipment has been seized and sold by CRA in another action pursuant a Bill of Sale granted by the Reids.
Evidence - Findings
There was considerable documentary evidence tendered by consent. Further, I heard oral testimony from:
·David Thomas Ciccolella, State Manager of CRA
·John Charles Taylor of Messrs Randle Taylor, Solicitors for CRA
·Paul Shields, director of Ches; and
·Maxwell John Reid.
I turn now to the evidence. My findings are the following narrative. I will identify and resolve the areas of conflict as I traverse what is essentially a chronology of events.
Relationship between the Reids, Ches & Shields – March 2001 – April 2002
Ches designs, supplies and installs commercial catering equipment for the hospitality industry. In about March 2001 the Reids engaged Ches to refit their café in Coober Pedy (481). The Reids and the Shields soon became friends (307-309).
The refitting work was completed by about February 2002 (488). The total cost was $87,586.40 (485; see also Exhibit D9 at 35). The contract provided that until payment Ches would retain title in the equipment (482; see Exhibit D9 at 35-44 “Romalpa” clause). The Reids have never paid for the supply and installation of the equipment. In proceedings against the Reids under the Bill of Sale, (see District Court Action No. 1192 of 2002; see also Exhibit P2), CRA seized and sold some of this equipment – hence the counterclaim in this action by Ches.
I accept the above evidence. It is uncontroversial.
Shields began working for Reid in November 2001 (488, 310). He began promoting the sale of, inter alia, river sand and clay from the Reids mining interests in Western Australia (489, 310). As at March 2002 the Reids’ businesses were sustaining losses and were unable to pay not only the Ches account for the refitting of the café, but also Shields salary (487, 310, 311). Shields resigned in June 2002 (311). Nonetheless Shields agreed to help Reid to sell opals overseas (318, 319). By April 2002, according to Shields, Reid told him there was some positive interest from Malaysia (319, 320). According to Shields’ evidence, any sale to Malaysia was subject to the buyer approving samples (320). Shields said Reid agreed to put any sale through Ches because it would assist Reids’ effort to raise finance (323, 324).
I am not prepared to accept the detail of this evidence wholly dependent as it is on the questionable credibility and reliability of Reid and Shields. I accept only that from about November 2001 Shields joined the Reids in some failing business ventures including the sale of opals.
Contact between Reids and CRA – February 2002 to 3^rd May 2002
In February 2002 Max Reid telephoned Ciccolella and enquired about raising debtor finance from CRA for his business Gemstone Explorations. There were several telephone conversations which at that time did not lead to anything (104, 105; see also Exhibit P1 at 1).
On the 22^nd April 2002 a finance broker named Bill Johns contacted Ciccolella on the telephone and sought debtor finance on behalf of the Reids. Johns gave Ciccolella some particulars of the application. Ciccolella faxed an application form to the Reids as a result of this telephone contact. It was duly completed and returned on the following day, namely the 23^rd April 2002 (107; Exhibit P1 at 2; see also Exhibit P9).
On the 24^th April Reid faxed to CRA three invoices for the three claimed debts he was agreeable to assigning which included the invoice for $191,923.80 said to be owing by Ches for a parcel of opals (122, 123; see also Exhibit P1 at 143, 145 and 147).
Then later on the 24^th April 2002 Ciccolella obtained a business history from Reid over the telephone and informed Reid that he would submit the application for a factoring facility to the head office of CRA in Melbourne for approval (109, 111, 112; see also Exhibit P1 at 3, 4).
During the last days of April 2002, at CRA’s request, Reid responded to a series of requisitions about such matters as ownership of assets and outstanding creditors. It is notable that a list of creditors provided by Reid as at the 29^th April omitted any reference to Ches being owned $87,586.40 (see Exhibit P13; 340, 341).
On the 1^st May 2002 the Reids were notified by fax that CRA had approved “a factoring facility for your business with an approved limit of $250,000 ...”, and that the facility was subject to the completion of formal documentation which was to be prepared by CRA’s solicitors (120, 121; see also Exhibit P1 at 138).
On the same day, namely the 1^st May 2002, CRA, through Ciccolella, supplied to the Reids a list of requirements to ensure “a speedy draw down of the factoring facility”. In particular, the email included the following:
I remind you that all Factoring of your Debts is to be conducted on Full Notification Factoring, which will include the following process in each instance:
·    Factored Debtor is to be notified of CRA’s involvement and that the Debt has been assigned to CRA and payment of that debt is to be made direct to CRA.
·    Verification of the Debt is to (sic) obtained in writing direct from the respective Factored Debtor on each occasion
·    A credit check on the Factored Debtor’s Credit worth and ability to make good the debt, is to be undertaken
I trust this clarifies the situation and will enable a prompt settlement of your Factoring Facility?
(121; see also Exhibit P1 at 139)
Messrs Randle and Taylor prepared the factoring Agreement and collateral security documents, which were required by its terms, namely:
·a mortgage of two parcels of land at Coober Pedy;
·a Bill of Sale over a tin allegedly containing opal and held by Chubb Securities;
·a Guarantee Indemnity and Charge from Gemstone Mining Pty Ltd;
·a Company Charge over the assets of Gemstone Mining Pty Ltd; and
·a Bill of Sale over certain plant and equipment.
(see Clause 4 of Agreement Exhibit P1 at 9; see also 7-136)
Gemstone Mining Pty Ltd was a company in respect of which Maxwell Reid had an “association”, though he had been disqualified from acting as a company director since 10^th March 1992 by order of the Federal Court (see Exhibit P2 at 58).
On the 3^rdMay 2002 the Reids executed the Agreement, the mortgage and the Bill of Sale over the opal and provided these documents to CRA (112-118). The Bill of Sale granted by the Reids over certain plant and equipment had to await a valuer attending at Coober Pedy and the compilation of an inventory (118). On the 17^th July 2002 that Bill of Sale was duly executed by CRA’s solicitor, Mr John Taylor, pursuant to a Power of Attorney granted by the Reids in the Agreement (119, 120). The Guarantee, Indemnity and Charge given by Gemstone Mining Pty Ltd in favour of CRA was executed by the sole director, Noel Smith and dated the 3^rd May 2002. The Charge in favour of CRA was also executed by Smith, but dated the 15^th May 2002 (see Exhibit P1 at 41 and 63).
Debt verification
On the 3^rd May 2002, Ciccolella sought confirmation of the three debts which Reid claimed were owed to the Reids trading in partnership as Gemstone Explorations by contacting the three alleged debtors.
This is the major area of conflict in the case. I will set out the conflicting versions and then indicate my findings.
Firstly, I set out a summary of Ciccolella’s evidence.
·On Friday 3^rd May 2002 at 6.19 pm Ciccolella faxed to Ches’ Unley Road office a debt verification form attached to which was a copy of Reids’ invoice detailing the sale of the opal to Ches (126; see also Exhibit P1 at 142, 143).
·At about the same time on the same day he faxed debt verification forms with attached copy invoices to the two other alleged debtors Gemco Australia (Hall) and Excel Opal Export (Dasborough) (126, 127; see also Exhibit P1 at 145-147).
·The debt verification form provided as follows:
Could you please confirm the invoice/s by ticking all correct boxes and faxing this signed form directly back to Cash Resources Australia Pty Ltd as soon as possible.
Invoice Details are:
[]      Date:   20 APRIL 2002
[]      Invoice No. 15
[]      Amount : $191,023,80
We further advise,
[]      The work referred to in the invoice has been completed to our satisfaction & will be paid on the date it is due as per the invoice.
[]      We agree to pay the said invoice to the following bank account as per invoice
Bank Name:ANZ Bank
BSB:013-410
Account Number: 2961 11585
[Yes/No]There are retentions, offsets or counterclaims. If so, specify details of such retention, offset or counterclaim specifying the amount & how it arises
Authorised By:
Title:
·On Saturday the 4^th May 2002 at 12.09 pm Ciccolella received back the debt verification form signed by Shields but the boxes were not touched (129; see also Exhibit P1 at 149).
·Ciccolella then:
·hand wrote on the top left corner of the incompleted form his fax number and the words “please complete”;
·placed an asterix on the left margin of the form adjacent to the instruction pertinent to the boxes;
·underlined that instruction; and
·faxed that form back to Ches at 13:52 hours on the same Saturday
(129, 130; see also Exhibit P1 at 142; Exhibit D11).
·Ciccolella could not recall speaking with Shields on that Saturday and in particular denied that Shields, in any such Saturday telephone call, told him, inter alia, that any debt was contingent on him selling the opal and that he had not completed the form because he did not agree that there was a debt (131-133).
·On Monday the 6^th May 2002 at 8.20 am Ciccolella telephoned Shields in connection with the incompleted form and armed with a working copy of the form Ciccolella “ran through” the boxes and as Shields answered he ticked and completed the boxes and then endorsed on the top right side of his copy of the form the following:
“verbally confirmed
8.20 am with Paul ...”
(134; see also Exhibit P1 at 149 working copy).
·On that same Monday morning the 6^th May 2002 at 9.28 am Ciccolella received the fax from Shields with the boxes completed. Each of the first five boxes was ticked and the “no” was circled in the last and lowest box. Notably the ticks sloped as they would if the writer was a left hander. Shields is a left hander (135; see also Exhibit P1 at 142 original fax Shields’ copy).
·Ciccolella denied that at some early stages in the negotiations for a factoring facility that Reid told him that the Ches invoice, unlike the other two invoices, was a consignment invoice (139, 140).
So, effectively Ciccolella’s evidence was that Shields per medium of the completed form and the oral confirmation verified that Ches was indebted to the Reids in the sum of $191,023.80.
I turn now to Shield’s evidence.
·Shields said that on Saturday the 4^th May 2002 upon seeing the invoice and debt verification form on his fax machine, he immediately telephoned Reid as he “... wanted to know what was going on ...” (329). He said that this was the first time he had seen the invoice (326). According to Shields, Reid acknowledged that he had provided CRA with the “consignment invoice” (329, 330). Shields said that he told Reid, inter alia, that he could not complete the form because there was no debt as the opal was yet to be sold to the Malaysian buyer (329-331). Reid replied that he would telephone Ciccolella and call him back (333-334).
·Shields said that Reid rang him back about midday on the Saturday and effectively reassured him. Reid said, according to Shields, that he had a renewable line of credit and if the Ches sale did not “go through” then the debt would revert back to him (ie Reid). Finally, Shields said that Reid told him that the “deal wouldn’t go through unless I ticked all the boxes” (335-338).
·On that basis Shields said he signed the debt verification form and returned it to CRA. But he did not complete the boxes (339-340).
·Having faxed the form back to CRA on the Saturday, Shields said that Ciccolella telephoned him on that Saturday. As indicated, Ciccolella denied the alleged call. Shields said that Ciccolella said to him that he was concerned that he had not ticked any of the boxes and said that the deal would not go through unless all the boxes were ticked (336). Shields said that he conveyed to Ciccolella that the invoice was subject to an “on sale” of the opal. He said that Ciccolella indicated that if the sale did not go through then the debt “would revert to Mr Reid” (338), and moreover Shields said that Ciccolella confirmed that Reid had “put in assets” and had a “… renewable line of credit facility” (336).
·Shields said that having so communicated the position to Ciccolella he was content and completed the form and faxed it back to CRA at 9:28 am on Monday 6^thMay 2002 (339; see Exhibit P1 at 142; and see also Exhibit D10 and D11).

Maxwell Reid’s evidence supported that of Shields. He said:
·that Shields did contact him about having to sign a form verifying the debt and that he Reid may have told him:
·that he had a renewable line of credit with CRA;
·that if the sale to the Malaysian buyer did not “come off” then the debt would revert to him; and
·that he had provided CRA with plenty of security;
(589)
·that at some unspecified time before early May 2002 in the course of discussions with Ciccolella he had made it clear to Ciccolella that the Ches invoice unlike the other two invoices was a consignment invoice (510, 511).
I unhesitatingly prefer the evidence of Ciccolella to that of Shields and Reid on this topic. Ciccolella satisfactorily explained the inconsistency between his testimony and his affidavit. The inconsistency did not relate to the matter of substance, namely what Shields said about the nature of the transaction between Ches and the Reids, but rather related to the sequence of events (Exhibit D6; 210, 211). In all, his evidence, which was given with the assistance of plainly contemporaneous notes, and agreed business records, was coherent, inherently probable and further, in places, was supported by other acceptable evidence. On the other hand, the evidence of both Shields and Reid was incredible and unreliable. The fact that Shields refreshed his memory from a so-called dairy does not deflect me from this view. The diary did not appeal to me as a truly contemporaneous record of daily events or arrangements. Rather, the entries reek of fabrication and reconstruction. The missing page of the 15^thAugust is highly suspicious and was not satisfactorily explained. Reid’s evidence that Ches had the parcel of opals on consignment and that he told Ciccolella that at some early time in negotiations, is wholly inconsistent with paragraphs 3, 4 and 5 of the affidavit sworn by him in the Bill of Sale action number 1192 of 2002 (see Exhibit P17), and is also inconsistent with his pleaded defence in that action (see Exhibit P2 at 8). In all I would not rely on anything he has said to support a finding. Indeed, I accept the evidence of Ciccolella not only as to this topic but generally in preference to that of Reid and Shields.
I find that both Reid and Shields represented to CRA that Ches was unconditionally indebted to the Reids in the sum of $191,023,80 for a parcel of opal.
Purchase of the debts – provisions of the factoring facility – 7^th May 2002
Clause 2 of the standard terms and conditions of the Agreement provides:
2      ASSIGNMENT OF DEBTS
2.1     If the Vendor requests CRA to buy a Debt from it, the Vendor must deliver to CRA a copy of the Invoice for the Debt together with such other documents and information required by CRA.
2.2     If CRA agrees to buy a Debt it will pay to the Vendor, in accordance with clause 5 of the Standard Terms and Conditions, an amount equal to the face value of the Debt less:
2.2.1the 20 per cent Retention; and
2.2.2the initial fee;
which amounts are retained by CRA to be applied by it in accordance with the provisions of clause 6 of the Standard Terms and Conditions.
2.3     All right, title and legal and beneficial interest in a Debt and the Relevant Transaction relating to the Debt and all Proprietary Rights relating to them pass to CRA on payment by CRA of the face value of the Debt less the amounts referred to in clauses 2.2.1 and 2.2.2 of the Standard Terms and Conditions.
The “initial fee” is defined as 3 percent of the face value of the debt (see Exhibit P1 at 17 and 19).
So having agreed to buy the Ches debt together with the other two debts CRA was obliged under the Agreement to pay the Reids 77 percent of the face value of the debts.
On the 7^th May 2002 CRA purchased the debts by paying to the Reids the sum of $147,932.66 which was effectively $50,000 for each of the three debts less some costs and disbursements (141; see also Exhibit P1 at 184). Ciccolella telephoned Max Reid on the 7^th May 2002 and the following conversation ensued:
... 7 May, I telephoned Max Reid. Okay – Max advising that it was okay, the debts had been verified and that he was getting $150,000 less disbursements and the cost in setting up the facility to Max, and it would be in his bank today, meaning that day.
............
... Max was okay with that on the proviso that he knew it was an ongoing procedure in assessing the credit worthiness of the debts and other actions that would enable further advances pursuant to those invoices.
(141)
Of course, $150,000 is not 77 percent of the face value of the three factored debts. Ciccolella in his evidence said that the balance or rather the shortfall due to the Reids was credited to a Security Deposit Account in the name of the Reids in the books of CRA.
Counsel for the defendants Ches and Shields, Mr Winter, contended that the account was a fiction and a device to cover the short payment. He argued that CRA was in breach of the Agreement in not paying out to the Reids the full 77 percent of the face value of the factored debts it being effectively a condition precedent to CRA procuring the assignment of the debt.
This was a troublesome matter but in the end I am satisfied that CRA effectively paid the purchase moneys in compliance with the Agreement by making a payment out to the benefit of the Reids and by recording a credit in the Security Deposit Account. I find this because:
·Ciccolella, whose credibility and reliability I accept, said so;
·There were monthly statements of account adduced in evidence which supported the existence of such an account in the name of the Reids (212-217, 277-279; see also Exhibit P1 at 172-177);
·There is provisions for such an account in the Agreement though I note the clause referring to the account anticipates that it will be utilised to hold portion of collected assigned debts and not sums of money “withheld” from the assignor (see Exhibit P1 at 22 per Clause 6.1);
·Ciccolella said in evidence, and I accept it to be so, that “... any time from the 3^rdto 7^th or thereafter of May ...” he would have informed Reid of the establishment of the Security Deposit Account. Unusually there was no note by Ciccolella of any such conversation with Reid but I do not regard this as undermining Ciccolella’s evidence about this topic. In particular, I do not accept Reid’s evidence that he was not told about the account until July 2002 (531, 532).
In my view, there was nothing untoward in CRA using the Security Deposit Account in the manner it did. After all Maxwell Reid required money urgently. For instance, on the 24^th April 2002 he arranged for CRA to pay his overdue account with Energy Power Systems (120; see also Exhibit P1 at 137). CRA began releasing funds notwithstanding that all the required documentation had not been completed. Clearly the agreement with the Reids was intended as an ongoing factoring relationship. It is clear also that the limit imposed by CRA of $250,000 related not to the amount of the purchase price of the debts to be factored, which was fixed by the Agreement but to the ceiling of funds to be actually released to the Reids.
Notably the Reids signed the Agreement on the 3^rd May 2002 after being told that subject to documentation and investigations, CRA had approved the release of a maximum of $250,000. The Reids signed the Agreement and other documents and accepted the advance without complaint. I reject Reid’s evidence that he was “cranky” about it and that he communicated that to Ciccolella (521, 522).
So even if I accepted that the Security Deposit Account was a fiction which I do not, then the Reids nonetheless factored their three debts to CRA on the basis that no more than $250,000 was to be the purchase price. This new understanding was a fully performed arrangement albeit on terms different to those set out in the Agreement. In view of my primary finding it is not necessary to go all the way down this alternative path.
For the above reasons, I reject the argument that CRA effectively repudiated the Agreement and therefore did not complete the purchase of the three alleged debts.
I pause here to summarise my findings as to the purchasing of the three alleged debts.
As indicated, it was early in the dealings between Reid and Ciccolella that Reid offered to sell to CRA the three alleged debts. In due course, after the execution of the Agreement and some of the security documents, and in particular after verifying the three debts, CRA decided to purchase the three alleged debts. The Agreement to do so came into being on the 7^th May 2002 upon the payment to the Reids of $147,932.66 and the crediting of the balance of the purchase price to the Security Deposit Account.
As a consequence of the payment Clause 2.3 of the Agreement operated to pass to CRA “... all right, title and legal and beneficial interest ...” in the debts. This constituted an “assignment of the debts” to CRA (see Norman[5]; William Brandt’s Sons & Co v Dunlop Rubber Co Ltd[6]; Comptroller of Stamps (Vic) v Howard-Smith[7]).
[5] per Windeyer J at 26
[6] [1905] AC 454 at 462 per Lord Macnaghten
[7] (1936) 54 CLR 614 per Dixon J at 623-4
This assignment of the three alleged debts was not in writing. There was no instrument or document which recorded it. The Agreement provided a framework for the purchasing of debts and for the consequential provision of the “factoring facility” but it did not document the particular assignment the subject of this matter.
So on the 7^th May 2002 for consideration and pursuant to an oral agreement with CRA, the Reids assigned the three claimed debts to CRA.
I now return to the narrative.
On the 17^th May 2002 CRA credited the Reids with a further $75,000 from the Security Deposit Account. This further advance was apparently precipitated by the fact that CRA had received a satisfactory bank opinion regarding Ches (143, 144; see also Exhibit P1 at 141 and 184).
It is clear that CRA had in mind further releases of funds to the Reids as their position became more secure by for instance the Reids taking out debtor insurance (see Exhibit P1 at 186). Notably at this stage the Bill of Sale over the plant and equipment had yet to be executed.
Month end verifications – June/July 2002
On or about the 5^th June 2002 Ciccolella’s office contacted the three factored debtors in order to check on the status of the debts (146).
On the 5^th June 2002 John Hall of Gemco confirmed that the sum of $239,985 would be paid by the end of June. On the same day Graham Dasborough indicated that he expected to pay the invoiced sum of $247,233.80 by the 14^th July 2002. And finally, again on the same day, Shields indicated that the Ches invoice of $191,923,80 would be paid by the 30^th June 2002 (146, 147; see also Exhibit P1 at 187). The above detail which emerges from Ciccolella’s evidence is not seriously contested by other evidence. For instance, Shields said that it was possible that he told someone from CRA on behalf of Ches that “payment was expected on the 30^th June 2002” (349). He also agreed that at the same time Ciccolella may have required a confirmation from him that payment would be made direct to CRA (350).
Ciccolella said that he contacted Ches’s offices on the afternoon of the 2^ndJuly and Shields indicated to him that payment would be made “in a week or two ...” (148), and that because of the soccer World Cup there was “no interest” (148; Exhibit P1 at 188). Shields did not take serious issue with this assertion by Ciccolella (351).
I accept counsel Mr Winter’s contention that the conversations of the 5^thJune and 2^nd July between Ciccolella and Shields as particularised by Ciccolella in his evidence, are not necessarily inconsistent with Shields’ contention that Ches had the opals on consignment. However, I am convinced that Shields did not tell those representing CRA that Ches had the opals on consignment until later threatened with legal proceedings. These two conversations are not inconsistent with his earlier misrepresentation.
Legal Action – 4^th July 2002 onward
On the 4^th July Messrs Randle and Taylor, solicitors for CRA, wrote letters of demand to all three factored debtors requiring payment of the debts within seven days (282; see also Exhibit P1 at 190).
In response, Ches, by a letter dated the 15^th July, contended that the parcel of opal the subject of the invoice was on consignment and moreover had been returned to Gemstone Explorations (see Exhibit P1 at 191). On the 16^th July Messrs Randle and Taylor replied to the Ches letter, threatening legal proceedings and protesting that the Ches letter was the first indication to CRA that the opals were “on consignment” (282, 283; see Exhibit P1 at 192, 193).
There followed telephone conversations between Shields and Mr John Taylor of Messrs Randle and Taylor concerning such maters as the tin box which Shields had collected from Chubb Security at the request of Reid, and Shields’ expectation that Reid would be attending to the due payment of the moneys owing to CRA. As to what was said in these conversations where there is conflict I unreservedly accept the evidence of Taylor.
The claim by Ches in its letter of the 15^th July 2002 that it was not indebted to the Reids triggered the “Right of Recourse” provisions in the Agreement (see Exhibit P1 at 23, 24, Clause 9). CRA was entitled firstly, to payment by the Reids of the amount of the Ches debt, and upon default of them so doing, to payment by them of all monies owing under the Agreement. CRA exercised those rights of recourse to the Reids and also gave notices of demand under the various securities (see Exhibit P1 at 197-202). The Reids did not pay.
Accordingly, CRA instituted a battery of legal actions against the Reids and the assigned debtors. In particular, it instituted this action on the 22^nd August 2002.
Other related proceedings
I set out the following summary of the uncontested evidence as to the other related actions instituted by CRA.
·Pursuant to an order of the Supreme Court of the 30^th October 2002, CRA exercising its powers under the mortgages sold two Reid properties in Coober Pedy referred to in the documents as the “vacant land” and “the dugout” (Supreme Court Action No. 1284 of 2002; see also Exhibit D15);
·On the 20^th August 2002, CRA instituted an action in this Court against the Reids seeking possession of the plant and equipment the subject of one of the Bills of Sale (see District Court Action No. 1192 of 2002; see also Exhibit P2); and
·On the 22^nd August 2002, CRA instituted two further actions in this Court, firstly against Graham Ernest Dasborough trading as Excel Opal District Court Action No. 1231 of 2002; see also Exhibit P1 at 207-227), and secondly against John Bernard Hall trading as Gemco Australia (District Court Action No. 1229 of 2002; see also Exhibit P1 at 228-371).
The proceedings against Dasborough and Hall have been fruitless. They were declared bankrupt (156, 157; see also Exhibit P1 at 207-363). The Reids were also declared bankrupt in November 2002 (9).
Also Gemstone Mining Pty Ltd was placed in Administration then Liquidation. This caused problems in the Bill of Sale action. On the 25^th June 2002 Hugh Martin of Messrs Bernardi Martin was appointed Liquidator of Gemstone Mining Pty Ltd. He intervened in the action alleging that some of the plant and equipment the subject of the Bill of Sale was always the property of the company in liquidation and could not validly be the subject of a Bill of Sale granted by the Reids. In his application to intervene Mr Martin also challenged the validity of the Company Charge given by Gemstone Mining Pty Ltd (see Exhibit P2 at 33-56 and 57-73). The action stalled for a time as Mr Martin indicated, inter alia, an intention to examine the directors in the Supreme Court under the Corporations Act 2001. However, just prior to the commencement of the trial of this action, the Liquidator and CRA settled the action on the basis that the proceeds of sale of the disputed plant and equipment was to be distributed on a 50/50 basis (see Exhibit P8).
The evidence indicates that taking into account the settlement with the Liquidator, CRA have recovered as follows:
Vacant land  22,896.42
Dug out  133,428.28
Mining plant  173,299.47
Café Plant  12,000.00
^{____________________}
        Total  $341,684.17
^{____________________}
Further, by the time of final addresses the parties had settled the Ches counterclaim. CRA agreed that Ches retained title in some of the café plant and equipment and that CRA has seized and sold some of this equipment the value of which was $2,000. That sum is included in the $12,000 set out above.
Conclusions – Application of Law – Arguments
Plaintiff’s claim against Ches pursuant to the assignment
CRA claims against Ches the amount of the debt assigned to it by the Reids whether or not it was in fact a debt. If it is found that there was no debt CRA relies upon the doctrine of estoppel to prevent Ches denying its existence. In particular, CRA claims on the basis that there was an equitable assignment to it by the Reids of a legal chose in action, namely the Ches debt.
For the following reasons I agree that there was, on the face of it, an equitable assignment of a legal chose in action.
·“Chose in Action” is a legal expression which describes “rights of a proprietorial or quasi-proprietorial nature which are claimable or enforceable by action, such as a right to sue for debt or for damages or for damages for breach of contract ...” (see Starke at 1, 2; see also Loxton v Moir[8]). Legal choses in Action are those recoverable or enforceable in the common law courts such as a debt (see Loxton at 368), while equitable choses in action such as beneficial rights to funds held in trust, are those which could only be enforced in courts of equity (see McCaughey v Commissioner of Stamp Duties[9]).
[8] (1914) 18 CLR 360 at 379
[9] (1945) 46 SR (NSW) 192
·At common law, generally speaking choses in action could not be assigned as they constituted maintenance which is “... the giving of assistance or encouragement to one of the parties to litigation by a person who has neither an interest in the litigation nor any other motive recognised by the law as justifying his interference ...” (see Halsbury’s Law of England[10]; see also Norman[11]).
[10]       4^th Ed, 1974 Vol 9 para 400
[11]       (supra) per Windeyer J at 26
·The common law prohibition was in practice circumvented by a means of a number of legal devices which need no elaboration here (see Norman[12]).
[12]       per Windeyer J at 27
·In equity, choses in action were however assignable. It was considered that an assignment, be it of a legal or equitable chose in action, was in the nature of an agreement which ought to be given effect to (see Starke[13]; Williams v Commissioner of England Revenue[14]). If it was an equitable chose in action the assignee could sue in his own name whereas if it was a legal chose in action then equity would compel the assignor to sue on behalf of the assignee or would facilitate the joining of the assignor as a party to the proceedings (see Starke[15]).
[13]       (supra) at paras 13 and 14
[14] [1965] NZLR 395 at 398
[15]       at para 14
·Then by s25(6) of the Judicature Act 1873 (UK) the legislature intervened to require the law to recognise assignments. Section 25 prescribed a number of statutory parameters which, if fulfilled, resulted in an assignment being “... effectual in law ...”. There are like provisions in most of the jurisdictions in Australia. Section 15 of the Law of Property Act 1936 (SA) provides as follows:
15. (1) Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be effectual in law (subject to equities having priority over the right of the assignee), to pass and transfer from the date of such notice—
(a)     the legal right to such debt or chose in action; and
(b)     all legal and other remedies for the same; and
(c)the power to give a good discharge for the same, without the concurrence of the assignor.
(2)     However, if the debtor, trustee, or other person liable in respect of such debt or chose in action has notice—
(a)that such assignment is disputed by the assignor, or any person claiming under him; or
(b)of any other opposing or conflicting claims, to such debt or chose in action,
he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or pay the debt or other chose in action into court, under the provisions of the Trustee Act 1936.
It is accepted that the above provision sets out statutory parameters for the assignment of all choses in action be they legal or equitable (see Federal Commissioner of Taxation v Everett[16]; see also Equity Doctrines and Remedies[17]).
[16] (1979) 143 CLR 440 per Barwick CJ at 447
[17]       3^rd Ed Meagher, Gummow & Lehane at paras 605, 606

So it can be seen that the alleged Ches debt is a legal chose in action. The assignment of it will only be “... effectual at law ...” if s15 of the Law of Property Act applies to it. In this case, whilst the assignment was “absolute”, that is one whereby the entire interest was unconditionally transferred (see Starke[18]), it was not “... in writing under the hand of the assignor ...”. Rather, as indicated above, the assignment was pursuant to an oral agreement.
[18] at para 16
So s15 does not apply and therefore the alleged assignment in this case remains an assignment which can only be recognised in courts of equity.
So for the above reasons I agree that, on the face of it, there has been an equitable assignment of a legal chose in action.
Was there a Ches debt as represented?
Subject to the estoppel argument proving the existence of a debt would be a precondition to enforcing the assignment of it.
In this case, I find there was no such debt.
I accept Shields’ evidence to the extent that he maintained that he had never purchased a parcel of opals from the Reids as documented in the invoice. Moreover, I accept as probably true, his assertion that he had never seen the invoice before receiving it that Saturday from Ciccolella. It was little wonder that he rang Reid to find out “... what was going on” (329). Reid’s evidence as to any sale transaction is totally unreliable. It changed at his whim. At one point in time he asserted that Ches had the opal on consignment and at another he claimed that there was an outright sale. The evidence from both Shields and Reid as to the whereabouts of this parcel and the sample was evasive, vague and unconvincing. I am convinced that the debt was a fiction. In my view when Shields was confronted with the verification form and the invoice he was initially reluctant to join Reid in the false pretence. He was prepared only to sign the form and not complete the boxes so leaving it ambiguous. Ciccolella put him on the spot so that he had to decide whether to join the deceit or not. He chose to make the false entries. He reluctantly became ensnared in Reid’s scheme to obtain money from CRA by joining in the false pretence that his company was indebted in accordance with the invoice. I note that Reid said that he intended to pay his debt to Ches out of the factoring facility (522). Perhaps therein was the motive for Shields involvement though I emphasise that I am not in a position to find that such was the case. I suspect that the other two debts were a like fiction. In my view there was no sale to Ches and further I doubt if there was even a consignment arrangement in place.
Estoppel – is Ches estopped from denying it was indebted as alleged?
There being no debt, the question which then arises, is whether by reason of Shields’ representations, Ches is estopped from denying that there was a debt.
The contention of the plaintiff here is:
·that Ches by its servant and agent Shields represented to CRA that it was indebted to the Reids in the sum of $191,923.80;
·that the said representation was accepted by CRA;
·that CRA was thereby induced to provide the factoring facility to the Reids; and
·that in providing the facility without the backing or security of the assigned debt CRA acted to its detriment.
Counsel for the CRA, Mr Howard, submitted that as a result of the above matters which were established in the evidence Ches was estopped from denying its indebtedness. The species of estoppel relied upon was estoppel by representation or estoppel in pais. In the Commonwealth v Verwayen[19] Brennan J at 422 briefly summarised the parameters of this species of estoppel in the following terms:
Estoppel by representation of a fact (estoppel in pais) precludes a party who, by his representation, has induced another party to adopt or accept the fact and thereby to act to the other party’s detriment from asserting a right inconsistent with the fact on which the other party acted: ....
[19] (1990) 170 CLR 394
I was referred to many authorities in this vexed an unresolved area of the law. What is suggested here is that Ches be forced to make good the assumption which it fraudulently induced CRA to make, by estopping it from denying that it was indebted to the Reids in the sum of $191,923.80. Without purporting to be exhaustive, I would suggest that the cases on the various categories of estoppel are predominantly to do with a party inducing another party to make assumptions about past or future states of affairs far removed from the false pretence which I have found was made here. Rather, the detriment suffered by CRA can and should be compensated for by means of a range of other more direct remedies offered by the civil law such as those which are sought here, namely deceit, misrepresentation and misleading or deceptive conduct.
Finally, to apply the doctrine of estoppel here would be to erode the principle that the assignee of a chose in action can only take the assignment subject to “equities”.
It is clear law that an assignee of a chose in action cannot expect to be in a better position than an assignor (see Starke[20]). In Clyne v Deputy Commissioner of Taxation[21] Mason J said at 20 and 21:
The rule that an assignment is subject to equities has been described as a paramount rule (Redman v. Permanent Trustee Co. of N.S.W. Ltd (1916) 22 CLR 84, at p 92. The effect of the rule is that an assignee of a non-negotiable chose in action acquires no greater right than was possessed by his assignor and simply stands in the shoes of the latter. The assignee cannot expect to be in a better position than his assignor was prior to notice of the assignment.
The word "equities" is not used in its technical sense as meaning an equitable interest or something in the nature of an equitable interest. It is a general expression calculated to comprehend defences which would have been available to the debtor in an action brought against him by the assignor as well as set-off and counterclaims. The assignee takes subject to any defence or set-off available to the debtor at the time when notice of assignment is given, unless the right of set-off is excluded by the contract between the assignor and the debtor - see Phoenix Assurance Co. Ltd. v. Earl's Court Ltd. (1913) 30 TLR 50, at p 51; Halsbury's Laws of England, 4th ed., vol. 6, par. 64 (at p21).
[20] (supra) paras 38-40
[21] (1981) 150 CLR 1
In this case the Reids had nothing to assign, and so CRA “cannot expect to be in a better position” than the Reids.
So the plaintiff’s action against Ches based on the assignment of the Ches debt fails and is dismissed.
It is not necessary therefore to deal with those arguments of counsel Mr Winter which were based upon a finding that there was a debt.
I now turn to the claims against the defendant Shields.
Plaintiff’s claims against Shields for damages for deceit, misrepresentation and misleading and deceptive conduct
The plaintiff’s claims under this heading are inexplicably confined to the defendant Shields.
I turn firstly to the claim against Shields for damages for deceit.
The tort of deceit is committed when the defendant makes a false representation with knowledge of its falsity or is reckless as to its truth or falsity, with the intention that the plaintiff should act in reliance on it. To be actionable the plaintiff must suffer loss and damage in consequence of relying on the representation (see Law of Torts[22]).
[22] 1^st Ed by Balkin & Davis at 733
Clearly on my findings, Shields has falsely represented to CRA that he was indebted to the Reids. Further, he knew and intended that CRA act upon the representation. The very process which drew the representation from him, namely the seeking by CRA of an assurance of indebtedness must have flagged to Shields that any response would be relied upon. Further, it is clear that CRA in fact relied upon Shields’ misrepresentation as to indebtedness. On Ciccolella’s evidence the representation of Shields was a material contribution to CRA providing the factoring facility to the Reids (140). Reliance to that extent is sufficient to found an action in deceit (see Edgington v Fitzmaurice[23]; Nicholls v Taylor[24]; Gould v Vaggelas[25]).
[23] (1885) 29 Ch D 459
[24] [1939] VLR 119 at 122
[25] (1984) 157 CLR 215 per Wilson J at 236-239
Finally, the plaintiff must prove on the balance of probabilities that as a result of acting upon the misrepresentation it suffered loss and damage.
The tortious measure of damages, is placing the injured plaintiff, so far as money can do it, in the position in which he or she would have been, had the tort not been committed (see Gates v City Mutual Life Assurance Society Ltd[26]). For the tort of deceit the measure of damages is more generous and is expressed to be “a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentation by the defendant” (see Toteff v Antonas[27]). So, as is the case here, where the representation induces the entry into a contract then the victim of the representation is entitled to recover all the consequential losses which result or flow from the entry into the contract. The question is how much worse off is the plaintiff as a result of entering into the transaction which the representation induced him to enter into (see Gould v Vaggelas[28]; see also Doyle v Olby (Ironmongers) Ltd[29]).
[26] (1986) 160 CLR 1 per Mason, Wilson and Dawson JJ at 12
[27] (1952) 87 CLR 647 per Dixon J at 650
[28] (supra) at 223
[29] [1969] 2 KB 158
In this case then, what are these losses? As indicated, CRA has already recovered $341,684.17 from the Reids. On the basis that there is loss and damage outstanding after having taken into account the sums recovered, then CRA is entitled to a judgment against Shields for that sum being damages for deceit.
I will return to this issue of the damages under the heading of quantum. I turn now to one of the arguments of counsel, Mr Winter, as to Shields’ liability for the deceit
As indicated at the outset, counsel for the third and fourth defendants, Mr Winter, submitted that if Shields misrepresented Ches’ indebtedness as alleged, he did so with authority from his disclosed corporate principal and so did not attract any personal liability. He cited authority for this bold contention. I do not agree for the following reasons.
In his text entitled “Vicarious Liability in the Law of Torts”[30], P.S. Atiyah said at 398:
The fact that a master or a principal may be vicariously liable for the acts of his servant or agent is not in itself a ground for exempting the servant or agent from personal liability in respect of his own acts, for obedience to superior orders is not in itself a defence to an action in tort. Indeed, as has been seen, in most cases of vicarious liability the servant or agent and his master or principal will be joint tortfeasors. There is no doubt about this general principle which has been affirmed many times by the courts.
[30] 1^st Ed, 1967
In The Koursk[31], Scrutton LJ said:
Certain classes of persons seem clearly to be “joint tortfeasors”: The agent who commits a tort within the scope of his employment for his principal, and the principal; the servant who commits a tort in the course of his employment, and his master; two persons who agree on common action, in the course of, and to further which, one of them commits a tort. These seem clearly joint tortfeasors; there is one tort committed by one of them on behalf of, or in concert with another.
[31] [1924] P 140 at 155
Shields, who was the sole director and shareholder of Ches Pty Ltd, was the agent of Ches and was acting within the scope of his authority when making the representations of indebtedness. His deceit was therefore the deceit of the corporation. They were joint tortfeasors. Ches Pty Ltd is vicariously liable for Shields’ fraudulent misrepresentation. It matters not, that what Shields said and did, amounted to fraud. The principal Ches is liable as is the agent Shields (see Lloyd v Grace Smith & Co[32]).
[32] [1912] AC 716
Counsel Mr Winter relied upon Tesco Supermarkets Ltd v Nattrass [1972] AC 152; Beach Petroleum v Johnson (1993) 115 ALR 411 and Ballard v Sperry Rand Australia Ltd (1975) 6 ALR 696. As I understand it his argument was that the liability for the fraudulent misrepresentation was truly that of the company, Ches Pty Ltd, because Shields being the sole director and shareholder was “the embodiment of that company”. Accordingly, what Shields said and did was said and done by the company. Therefore, the company’s liability was not vicarious but primary so that the fraudulent misrepresentation was not that of Shields but that of Ches Pty Ltd. Shields was thereby freed of personal responsibility. I took Mr Winter to be relying upon what Von Doussa J in Beach described as the “Tesco principle”. Von Doussa J described the principle in the following terms:
The Tesco principle creates primary liability in the company, not a vicarious liability as with principal and agent. The mind of the directors or officers who speak and act as the company is treated as the mind, the ego, of the company itself. The development and application of this rule since Lennard's case has occurred almost exclusively in the area of criminal and statutory responsibility.
First of all I could find nothing in the expositions of this principle in the above cited authorities which necessarily exempted the natural persons who were said to be the embodiment of the company from personal liability. The focus of the cases was whether or not the corporation attracted statutory responsibility of a criminal type. But quite apart from that and more importantly I agree with Von Doussa J’s comments to the effect that the Tesco principle is not readily to be transferred into the area of “civil responsibility arising under the general law”. Rather, he suggested, the principles of agency should be left to determine responsibility. In particular at 571 His Honour said:
It is understandable that where the subject matter of a civil claim is conduct that also amounts to a criminal offence as in Entwells Pty Ltd v National and General Insurance Co Ltd and in claims based on a conspiracy, that there may be reference to the Tesco principle, but it should be recognised that principles of agency are the principles which ultimately determine civil liability. It is not without significance that in the chapter on vicarious liability, Professor Fleming in The Law of Torts, 8th ed, pp 366 and following, makes no reference to the decisions in Lennard, Bolton and Tesco.
The Tesco principle is one appropriate to be applied to determine criminal responsibility of a company, but the wider notions of the principles of agency should be applied where the issue is civil responsibility arising under the general law. Cases on the Tesco principle may nevertheless give helpful guidance, as where corporate responsibility attaches under Tesco, it will also attach under ordinary agency principles.
Accordingly, I reject Mr Winter’s argument and confirm my earlier conclusion that subject to quantification of the loss, Shields has been proven to have committed the tort of deceit.
As pointed out, only Shields is sued for damages for deceit and accordingly given the pleadings as they stand there can be no judgment against the corporation Ches Pty Ltd for its vicarious liability for this as yet unspecified damage.
By a parity of reasoning the plaintiff CRA is entitled to succeed against Shields in respect of both the remaining two causes of action, namely misrepresentation pursuant the Misrepresentation Act and misleading or deceptive conduct pursuant the Fair Trading Act 1987. The measure or quantum of damage will be the same. But there will only be one lot of damages recoverable.
Quantum
As indicated, CRA has recovered the sum of $339,684.17 (ie $341,684.17 less $2,000) from the Reids by taking action on the mortgage and on one of the Bills of Sale.
Any judgment against Shields in favour of CRA must take into account that recovered sum. As a result of the deceit, the misrepresentation, and the misleading and deceptive conduct, of the Reids, Ches and Shields, CRA purchased the three debts and provided a factoring facility in accordance with the Agreement. As a result, CRA suffered loss and damage. The recovery of portion of this loss from any one of them should be taken into account in calculating the loss to be recovered from any others of them. In a sense, they, namely the Reids, Ches and Shields, are joint tortfeasors. It matters not that separate proceedings of even a different character effected the recovery of some of the loss. It is the one loss and any recoveries must be taken into account.
The $2,000 obtained by CRA by the mistaken sale of Ches’ property is not a legitimate recovery for this purpose. It can be the subject of a set-off but there is no scope for that in this action since on my findings there can be no damages award against Ches.
The evidence as to the quantum of the loss and damage is somewhat unsatisfactory and I am not prepared to attempt to draw from it what sums still remain as unrecovered. I indicate, as indeed was anticipated in the course of argument, that this could be the subject of, if not agreement then, further evidence and argument. I will hear the parties as to that.
Ches is entitled to judgment for the agreed $2,000 on its counterclaim against CRA.
In respect of the causes of action, namely the deceit, misrepresentation and misleading or deceptive conduct, loss and damage is an essential ingredient and therefore until there is a quantified loss established I cannot enter judgment in favour of the plaintiff even for damages to be assessed. So if and when CRA establishes by agreement or further evidence, that, of the losses which were consequential upon or flowed from the purchase of the debts and the provision of the factoring facility, there is a further sum still outstanding, taking into account the $339,684.17, then it will be entitled to judgment for that sum.
Summary of conclusions
I summarise my conclusions as follows:
·On the face of it there was an equitable assignment by the Reids to CRA of a legal chose in action, namely the debt of Ches.
·But the Ches debt was a fabrication and notwithstanding the representation to the contrary by Shields the doctrine of estoppel has no application to prevent Ches denying its indebtedness.
·CRA is, therefore, unable to enforce the assignment because the Ches debt purportedly assigned by the Reids was a fiction.
·Therefore, CRA’s action against Ches to enforce the assignment is dismissed.
·I declare that subject to quantifying any outstanding consequential loss Shields was guilty of the tort of deceit, misrepresentation pursuant to the Misrepresentation Act, and also misleading or deceptive conduct pursuant to the Fair Trading Act 1987, and if CRA quantifies the said loss it will be entitled to judgments in respect of each of the three causes of action for that loss and damage.
·The sum of $339,684.17 recovered from the Reids by CRA is to be bought into account in assessing the loss and damage.
·Ches is entitled to judgment against CRA in the sum of $2,000 on its counterclaim, but I will not enter that judgment until I have heard from the parties. There appeared to be some last minute reservation as to whether a further $1,000 should be added to the agreed $2,000 (738, 739).
I will hear the parties as to the next steps to be taken.