Dennison v the ANZ Bank

[1987] TASSC 54

TASSC A50/1987

CITATION:               Dennison v The ANZ Bank [1987] TASSC 54; A50/1987

PARTIES:  DENNISON
  v
  THE ANZ BANK

TITLE OF COURT:  SUPREME COURT OF TASMANIA
JURISDICTION:  ORIGINAL
FILE NO/S:  361/1987
DELIVERED ON:  9 October 1987
DELIVERED AT:  
HEARING DATE:  
JUDGMENT OF:  Cosgrove J

CATCHWORDS:

REPRESENTATION:

Counsel:
             Plaintiff:  
             Defendant:  
Solicitors:
             Plaintiff:  
             Defendant:  

Judgment Number:  A50/1987
Number of paragraphs:  15

Serial No A50/1987
  File No 361/1987

DENNISON v THE ANZ BANK

REASONS FOR JUDGMENT  COSGROVE J
  9 October 1987

1. In 1985 Mr Dennison purchased a 1966 TK Bedford truck and a pantechnicon. He put the pantechnicon on the flat tray of the Bedford truck and thereby had a fifty cubic metre furniture removal van. His intention was to make the van available to removalists who required a van for a specific job, in return for which he would receive 70% of the fee charged for the removal in question. The intention was that the vehicle was to be operated only on inter–state trips and therefore, a cart licence would not be required. Mr Dennison at this time was working as a mechanic–diesel fitter for Benders Spreading Services. He had been a mechanic–diesel fitter for some 35 years.

1. In about February/March of 1985 the vehicle was in Queensland when it broke down and was taken to a firm called Leyspares for repairs. It appears that the vehicle was probably taken to Leyspares by one Silver. Leyspares repaired the vehicle and claimed $5,939.91 as the cost of repairs. It is admitted that this charge is reasonable. Leyspares also claim storage fees from the 1st day of June 1985 at the rate of $100 per calendar month and it is agreed that that rate is reasonable.

1. It was probably in April or early May 1985 that Mr Dennison discovered that the vehicle was at Leyspares and discovered the amount of the charges claimed, plus the storage fees claimed if the vehicle was to remain with that firm. Mr Dennison got in touch with a Mr Smith from Loken Transport, who promised that if the vehicle could be released, he would find a back load from Queensland for it and would arrange for drivers to bring the vehicle back to Tasmania. Mr Dennison then approached the defendant bank and applied for a loan of $6,000. The bank required security for the loan and Mr Dennison persuaded his wife to join with him in the application, and to permit a block of land on the eastern shore which they jointly owned to be used as security for the loan. The bank granted the loan at an interest rate of 16.6% on the terms that it was to be repayable over 12 months, and held the title documents as security. There was no mortgage.

1. The next step was that the plaintiffs obtained from the bank, by lodgment of a requisition therefore, a "bank cheque" payable to "Leyspares old account 2152" for $5,939.91, the amount of the cost of repairs. Mr Dennison took this cheque to Mr Smith and asked him to take it to Leyspares and obtain the release of the truck, if necessary paying the few hundred dollars required for storage charges and perhaps interest. Mr Smith agreed. Some days later Mr Smith suggested to Mr Dennison that he send off his own cheque to Leyspares and that Mr Dennison should arrange for a bank cheque to be issued to him, ie Smith. He said that he had rung the accountant at Leyspares and he was agreeable to accepting this arrangement. Mr Dennison was, not unnaturally, a little doubtful about this proposal and he returned to the bank, and discussed it with Mr Chatterton, the relieving accountant. Mr Chatterton advised him that he should insist on the original bank cheque made payable to Leyspares being used for the purpose of satisfying that firm's demand, and that the only occasion which would cause the bank to agree to the issue of a cheque in favour of Smith would be if Smith could produce a receipt or some other proof that he had in fact paid Leyspares. Mr Chatterton was not authorised to make this decision. Mr Dennison then gave the cheque to Mrs Smith (Smith being unavailable) and told her that her husband must take it to Queensland and pay Leyspares with it. He told her that if Smith had in fact sent a cheque to Leyspares, he should stop payment on it.

1. The next step was that Mr Smith called at the bank and spoke with Mr Chatterton, and produced a purported carbon copy of a letter which he had written to Leyspares enclosing his cheque for the amount due for repairs. Mr Chatterton then took possession of, and retained, the original bank cheque and issued a bank cheque in favour of Loken Transport for the same amount. Mr Smith took the Loken Transport cheque to Westpac and negotiated it, thereby obtaining for his benefit the sum of $5,939.91.

1. When the original bank cheque was drawn, the bank had debited the account of Mr and Mrs Dennison with its value, so that Mr and Mrs Dennison now had a debit at the bank of $5,939.91 and the truck was still at Leyspares. Some time later, the bank offered to consider an application by Mr and Mrs Dennison for a further loan of about $8,500 to enable them to pay off Leyspares provided that the title deeds which were still with the bank were used as security for this further loan. The bank suggested that it may be that it would defer payment of interest on the original $6,000 provided the $8,500 additional loan was repaid within 12 months. It was to bear interest at the same rate of 16.6%. Mrs Dennison, like a wise woman, refused to join in such an application and refused to allow her share of the jointly owned property to be further encumbered. In the meantime, Mr Dennison had made three payments off the original loan amounting to some $1,639.20.

1. Mr and Mrs Dennison have now brought an action against the bank for damages. The pleadings have gone through a number of metamorphoses over the last few months and it is better to draw a veil over them. The question is, is the bank liable to Mr and Mrs Dennison and if so, for what amount, and, I might add, for what reason.

1. When the bank continued the debit in the Dennison's loan account after return of the first cheque, it was doing so on the basis that it had, in issuing the cheque in favour of Loken Transport, acted on the instructions of the Dennisons. If it had so acted, it would not matter that the Dennisons received no benefit from the cheque. On the other hand, if it did not have instructions or authority from the Dennisons to do so, it was not entitled to continue the debit. It is plain that the bank had no direct authority from the Dennisons to issue the second cheque and continue the debit. It must rely on the establishment of a link between the Dennisons and Smith of such a nature as to make Smith the agent of the Dennisons for the purpose of requesting the issue of the second cheque. In my opinion, the evidence fails to establish that Smith was the agent of the Dennisons, and the Dennisons did nothing to suggest to the bank that Smith was their agent. He had neither actual nor ostensible authority to act for the Dennisons. The issue of the second cheque was a combination of Smith's fraud and persuasiveness, and Mr Chatterton's credulity and disregard of the bank's usual procedure. The bank therefore wrongly continued the debit in the Dennison's account and has failed to perform the loan agreement. It is in breach of its contract. (See generally Union Bank of Australia Ltd v McClintock & Ors [1922] 1 A.C. 240; Perel v Australian Bank of Commerce Ltd [1923] 24 SR [NSW] 62; Australian Bank of Commerce Ltd v Perel [1926] AC 737).

1. At the time when the loan agreement was made, the bank was well aware that Mr Dennison's business was a small fringe operation, that he had no reserves, and could not without its help, regain possession of his van. Had it considered the consequences of a breach by it of the agreement, it must have foreseen that one consequence would be that the van would remain with Leyspares, that charges would mount, and that the van would produce no income. It is therefore liable for losses of this nature suffered by Mr Dennison. (See Monarch Steamship Co Limited v Karlshamns Oljefabriker (A/B) [1949] AC 196 at 224 per Lord Wright). Further, as Mr Dennison made some payments to the bank by way of repayment of the non–existent loan, he is entitled to recover these. It is agreed that, after due allowance had been made, they amount to $1,579.15.

1. The claim for storage charges is not entirely free from difficulty, depending as it does on Leyspares' compliance with the Disposal of Uncollected Goods Act 1967 – 1973 (Qld). However, having considered the whole Act, and in particular ss3, 5 and 17, I am persuaded that Leyspares probably has a valid claim for $2,500. In any event the bank, having exposed an impecunious person to such a claim, can hardly require him to litigate on its behalf. He should settle as soon as possible.

1. The claim for the unavailability of the van as an income producing object also requires fairly close examination. I had the benefit of opinion evidence from two men, each of whom has had long experience in the removal trade. They are Mr Cooper and Mr Price. Of the two, I prefer the evidence of Mr Price. I do not reject Mr Cooper's evidence, some of which was most helpful, but I think much of it was based on over–optimistic assumptions, which may possibly go some way towards explaining Mr Price's success in business and Mr Cooper's unfortunate failure. Mr Dennison's truck is old; he has no regular driver; he has no office, no salesman and no means to advertise. He has no interstate connections; no entry in interstate Yellow Pages, and no connection with an established local firm. So far as trips northward are concerned, he must always be on the outer fringe of the trade. When one turns to back–loading to Hobart, he is at even greater risk. His likely share of the trade is very small, and he is at risk not only with back–loading, but from being forced to associate with impecunious or disreputable principals, from whom collection of his share of the overall fee may be both difficult and doubtful. Basically, all that he has is a van for casual lease.

1. It is necessary to bear in mind that the actions of the bank deprived him not of profits only, but of income. In measuring his loss, attention must be directed to his loss of income, not of profit. In measuring profit, one would offset against income the account from Leyspares, or if that firm were paid, his debt to the bank or other lending institution. But that is Profit and Loss account profit. Operating profit, i.e. the excess of income over operating expenses is another matter. If Mr Dennison had received the loan moneys, and obtained work for his van and made an operating profit, he could have used that profit to defray the loan to the bank. What, therefore has to be measured is his likely operating profit. In insurance terms this is called gross profit, and can be calculated by adding standing charges to the net profit, or by deducting prime costs from turnover (see MacGillivray & Parkington on Insurance Law 6th Ed at par2374).

1. Using Mr Cooper's figures, one can see that Mr Dennison's fixed costs are basically only $200 for registration and $1,000 for insurance. Perhaps one should add $1,000 for maintenance. That totals $2,200. If one allowed him, on balance, the equivalent of two Victorian trips, one New South Wales trip, and one Queensland trip per annum (all successful and all backloaded), one arrives at a profit and loss sheet something like this.

   Income  Expenditure

   2 Victorian Trips               11,340  Sea freight  8,000

   1 NSW trip  6,300  Air Fares  600

   1 Queensland trip                7,500  Bus Fares  40

   Total  $25,140  Tyres, say  600

   Further Repairs      and Maintenance  1,000

   Fuel  3,300

   Profit  $5,500  Labour  3,300

   Loading Labour     600

   $17,440

   Plus Fixed Costs                    2,200

   $19,640

2. As this is probably assuming too many uncertainties in Mr Dennison's favour, and ignoring real risks of breakdown, failure to obtain back–loading and non payment or late payment, I feel bound to discount it fairly heavily, bearing in mind, however that reducing Mr Cooper's estimate of work by 80% is itself allowing a certain amount for risk. I judge $4,000 per annum to be fair and note that, even so, I am allowing Mr Dennison an operating profit of more than 50% of his investment. On this head, therefore the damages amount to $8,000. The total award, on this basis, is:

Money paid to the bank under a total failure of consideration  $  1,579.15
  Liability for storage  $  2,500.00
  Loss of operating income  $  8,000.00

Total  $12,079.15

1. As I previously indicated, I will hear counsel as to the orders to be made.