Groom v Creative Cardboard Pty Ltd - [2010] SASC 352

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
GROOM v CREATIVE CARDBOARD PTY LTD
[2010] SASC 352
Judgment of The Honourable Justice Sulan
23 December 2010
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - TIME
TRADE AND COMMERCE - TRADE PRACTICES ACT 1974 (CTH) AND RELATED LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - MISLEADING OR DECEPTIVE CONDUCT GENERALLY - GENERALLY
TRADE AND COMMERCE - TRADE PRACTICES ACT 1974 (CTH) AND RELATED LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - CHARACTER OR ATTRIBUTES OF CONDUCT OR REPRESENTATION - INTENTION
Appeal against order of Magistrate - three contracts entered into by company - appellant was sole director and controller - second and third contracts entered into after company was deregistered by ASIC - respondent did not receive payment - appellant found personally liable on all three contracts by Magistrate - appeal filed out of time - whether time to appeal should be extended - whether appellant was personally liable on contracts - misleading or deceptive conduct - conversion - unjust enrichment.
Held: Appeal dismissed in relation to second and third agreements - misleading or deceptive conduct - appellant purported to act as agent for deregistered company - claim in relation to first agreement remitted to Magistrate - conversion - no evidence of title in goods or time of delivery - unjust enrichment - no evidence of personal benefit - pleadings should identify causes of action and give sufficient particulars.
Corporations Act 2001 (Cth) s 601AB; Magistrates Court Act 1991 (SA) s 40(1); Fair Trading Act 1987 (SA) s 56, s 84; Trade Practices Act 1974 (Cth) s 52, referred to.
Gikas v Police (1999) 202 LSJS 301; Black v Smallwood (1966) 117 CLR 52; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, applied.
Jackamarra v Krakouer (1998) 195 CLR 516, considered.

GROOM v CREATIVE CARDBOARD PTY LTD
[2010] SASC 352
Magistrates Appeal: Civil

SULAN J: This is an appeal by the defendant, Stephen Barry Groom, from a decision of a Magistrate, in which Mr Groom was ordered to pay $18,228.50, plus costs, in respect of goods ordered from the plaintiff, Creative Cardboard Pty Ltd (“Creative Cardboard”).
The issue which arises on this appeal is whether Mr Groom can be held personally liable in respect of three agreements entered into between a company of which he was a director and Creative Cardboard.
Background
Creative Cardboard produces boxes used for packaging. Groom Technologies Pty Ltd (“Groom Technologies”) purchased boxes for packaging bike racks. Mr Groom conducted the business. He was the sole director and controller of the company. Creative Cardboard manufactured specialised cardboard cartons and displays.
Mr Groom approached Creative Cardboard in February 2009 and requested that they produce a number of cartons for bike rack products that Groom Technologies intended to supply to its customers. On 27 February 2009, Groom Technologies agreed to purchase, and Creative…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Groom v Creative Cardboard Pty Ltd

Details

AGLC: Groom v Creative Cardboard Pty Ltd [2010] SASC 352
Case: [2010] SASC 352
Decision Date: 23 December 2010

CaseChat Overview and Summary

Groom v Creative Cardboard Pty Ltd involved a dispute between the appellant, Mr Groom, and Creative Cardboard, regarding three contracts entered into by the company, Groom Technologies, of which Mr Groom was the sole director and controller. The primary legal issues the court had to decide were whether Mr Groom could be held personally liable for the contracts, whether there was misleading or deceptive conduct, and whether there was conversion or unjust enrichment. The central issue was whether Mr Groom could be held personally liable for the contracts entered into by Groom Technologies, which had been deregistered by the Australian Securities and Investments Commission (ASIC).

The court found that Mr Groom had acted on behalf of a deregistered company, thereby misleading and deceiving Creative Cardboard. For the first agreement, the court allowed the appeal and ordered the issues to be remitted to the Magistrate for further consideration. The court found that the Magistrate's reasons were insufficient, and the respondent needed to provide a further statement of claim with particularised causes of action. Regarding the second and third agreements, the appeal was dismissed, and the court ordered judgment in favour of Creative Cardboard for a total of $9,813.25. The court found no evidence to support claims of conversion or unjust enrichment, as there was no evidence of title in the goods or the time of delivery, and no evidence of personal benefit to Mr Groom.

The court's decision highlights the importance of understanding the legal implications of company deregistration and the need for clear and particularised pleadings in legal claims. The outcome ensures that misleading or deceptive conduct is addressed, and that parties are held accountable for their actions, particularly in commercial disputes involving deregistered companies.

Orders

Orders of the court

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Background

Background to the litigation

The issue which arises on this appeal is whether Mr Groom can be held personally liable in respect of three agreements entered into between a company of which he was a director and Creative Cardboard. Background Creative Cardboard produces boxes used for packaging. Groom Technologies Pty Ltd (“Groom Technologies”) purchased boxes for packaging bike racks. Mr Groom conducted the business. He was the sole director and controller of the company. Creative Cardboard manufactured specialised cardboard cartons and displays. Mr Groom approached Creative Cardboard in February 2009 and requested that they produce a number of cartons for bike rack products that Groom Technologies intended to supply to its customers. On 27 February 2009, Groom Technologies agreed to purchase, and Creative Cardboard agreed to supply, cartons for a total cost of $15,037 (“the first agreement”). A written order for the sale and purchase of the goods was raised by Creative Cardboard. The parties agreed that 50 per cent of the contract sum would be paid immediately and the balance within 30 days of delivery. Groom Technologies paid $5,537. The balance of $9,500 remains unpaid. The cartons were produced in March 2009. Mr Groom collected the finished cartons some time between 20 March 2009 and 27 March 2009. A tax invoice for this order, dated 31 March 2009, for the balance of $9,500 was issued by Creative Cardboard. On 20 March 2009, Groom Technologies was deregistered by the Australian Securities and Investments Commission (“ASIC”), the company having failed to pay fees and charges to ASIC. On 11 May 2009, Mr Groom caused a new company, Groom Technologies (Aust) Pty Ltd (“Groom Technologies Aust”) to be formed. Mr Groom placed a further verbal order for 1050 cartons, on behalf of Groom Technologies, in late April or early May 2009. Creative Cardboard informed Mr Groom by email, dated 8 May 2009, that they required payment of $9,500, the amount outstanding from the first agreement, before they would produce further cartons. Creative Cardboard then agreed to produce 100 cartons to be delivered upon payment (“the second agreement”). An invoice was raised to Groom Technologies on 20 May 2009 for an amount of $759, with a request that payment be made before the cartons were released. Mr Groom issued a cheque on the account of Groom Technologies on 21 May 2009 for the amount of $759. The 100 cartons were delivered. The cheque was subsequently dishonoured by the ANZ Bank and no further payment has been made. Mr Groom was aware at the time he tendered the cheque to Creative Cardboard that Groom Technologies had been deregistered. Without knowing that Groom Technologies had been deregistered, Creative Cardboard then completed a further 1050 cartons (“the third agreement”). A third invoice for this work, dated 29 May 2009, for an amount of $7,969.50 was raised and sent to Groom Technologies. Payment of this invoice has not been made, and the cartons are still held by Creative Cardboard.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

The oral orders made in late April and May by Mr Groom, the subject of the second and third agreements, were made on behalf of Groom Technologies, after the company had been deregistered. Mr Groom presented a cheque, dated 21 May 2009, for payment of the second invoice, dated 20 May 2009, in the amount of $759 drawn on the account of Groom Technologies. Mr Groom knew that Groom Technologies had been deregistered when he presented the cheque. The cheque was dishonoured by the ANZ Bank. Mr Groom misled and deceived the respondent by purporting to act on behalf of an unregistered company in respect of the second and third agreements.Conclusion Insofar as the Magistrate’s findings relate to the first agreement, I would allow the appeal and order that the issues raised in respect thereof be remitted to the Magistrate for further hearing. I remit that part of the claim to the Magistrate for further consideration. I direct the respondent, Creative Cardboard, to file a further statement of claim identifying, with sufficient particularity, the causes of action upon which it relies. As to the findings and judgment in respect of the second and third agreement, I would dismiss the appeal. I would vary the Magistrate’s order, and order that judgment be entered in respect of those claims in the total amount of $8,728.50, plus the fees of $1,084.75, making a total of $9,813.25. I shall hear the parties as to costs.

Ratio Decidendi

Legal Principle Established

Section 601AB of the Corporations Act 2001 (Cth) provides:Deregistration – ASIC initiatedCircumstances in which the ASIC may deregister(1)ASIC may decide to deregister a company if:(a) the response to a return of particulars given to the company is at least 6 months late; and(b) the company has not lodged any other documents under this Act in the last 18 months; and(c) ASIC has no reason to believe that the company is carrying on business.(1A)ASIC may also decide to deregister a company if the company’s review fee in respect of a review date has not been paid in full at least 12 months after the due date for payment.(2)ASIC may also decide to deregister a company if the company is being wound up and ASIC has reason to believe that:(a) the liquidator is no longer acting; or(b) the company’s affairs have been fully wound up and a return that the liquidator should have lodged is at least 6 months later; or(c) the company’s affairs have been fully wound up under Part 5.4 and the company has no property or not enough property to cover the costs of obtaining a Court order for the company’s deregistration.Deregistration procedure(3)If ASIC decides to deregister a company under this section, it must give notice of the proposed deregistration:(a) to the company; and(b) to the company’s liquidator (if any); and(c) to the company’s directors; and(d) on ASIC database; and(e) in the Gazette.When 2 months have passed since the Gazette notice, ASIC may deregister the company.(4)ASIC does not have to give a person notice under subsection (3) if ASIC does not have the necessary information about the person’s identity or address.(5)ASIC must give notice of the deregistration to everyone who was notified of the proposed deregistration under paragraph (3)(b) or (c). Creative Cardboard did not lead evidence that notice had been given to the company or to Mr Groom, the director, pursuant to s 601AB(3). The Gazette was not tendered. There was no evidence to support the contention that the requisite notice had been given. Counsel simply relied on the Act.Findings of the Magistrate The Magistrate found Mr Groom personally responsible for all three of the outstanding invoices. The Magistrate concluded that Mr Groom had had the benefit of the goods and that he had failed to take action to avoid the plaintiff’s loss. Judgment was entered against Mr Groom in the sum of $18,228.50. The Magistrate’s reasons were brief. As to Mr Groom’s knowledge of when Groom Technologies was deregistered, the Magistrate said:Be that as it may, Mr Geyer has correctly pointed out that the Corporations Act makes it quite clear that ASIC has in place a rigorous system of advice to companies that are about to be de-registered. Based on the extensive notice process and bearing in mind Mr Groom’s changeable and unimpressive evidence, I find in fact that he was aware of the imminent de-registration of the company. He purposely proceeded, did not advise the plaintiff when it was de-registered, and failed to advise the plaintiff at any time thereafter.