Hunter MMI Finance Ltd v Terry Shields Pty Ltd

[1991] FCA 251

JUDGMENT No. r? ........ .. .., 71, 91 -;

M	) )
NEW SOUTH WALES DISTRICT REGISTRY	) No. 200 of 1990
)
GENERAL DIVISION	)

BETWEEN:  HUNTER MM1 FINANCE LIMITED

Applicant

AND: - TERRY SHIELDS PTY LIMITED

First Respondent

ALLEN CYRIL TAUNTON

Second Respondent

D -

Cross Applicant

ALLEN CYRIL TAUNTON

First Cross-Respondent

DAVID CARROLL

Second Cross- Respondent

respondents for the sum of $66,563 and costs.

m:	Davies J.
Date:
-	10 May 1991
Place:	Sydney

IOMAY 1991

AUSTRALIA

PRINCIPAL

REGISTRY

MINUTES O F ORDER

T H E COURT ORDERS THAT:

1.            There be judgment In favour of the applicant against t he first and second

2.           There be judgment on the cross-claim in favour of the first respondent against the secoad respondent for the sum of $66,563 and costs, such costs t o include the costs recoverable by the appilcant against the first respondent.

3.           The cross-claim against the second cross-respondent is dismissed with no order as to costs.

Note:  Settlement and entry of orders is dealt with in Order 36 of the Federal Court
Rules.

conduct in breach of 9.52 of the Trade Practices Act 1974 (Cth) and seeking to recover the damages flowing therefrom. There is a cross-claim brought by Terry Shields against

Taunton and a Mr David Carroll, a finance agent, but the claim against 1Mr Carroll has not

been pursued. Mr Taunton did not appear at the hearing.

It is not seriously in dispute that there was misleading and deceptive conduct in trade

or commerce on the part of Terry Shields which breached s.52 of the Trade Practices Act or
that Mr Taunton was involved in that contravention of the Act.

Mr George Alfred Meier, also known as Raymond George Winslett, sought finance

from Hunter MM1 for the acquisition of motor vehicles.	That application was refused unless
the vehicles were acquired from a recognised dealer.	Subsequently, finance was sought for

the acquisition from Terry Shields, a recognised and reputable dealer, of a new Toyota Supra

sedan, price $75,560.00 and a new Toyota Landcruiser, price $44,428.00. The transactions were to be hire purchase transactions. Invoice statements went from Terry Shields to Hunter

MM1 showing, in the case of the Toyota Supra, a sale of the new vehicle at the retail price

of $75,560.00 and, in the case of the Toyota Landcruiser, a sale of the new vehicle a t the price of $44,428.00. In both cases, the statements had printed crosses against the items

"Amount allowed on trade", Less Payout to" and "Less Cash Refund". As no sum was shown
agalnst "Cash Deposit", the sums I have mentioned were the total payable.	Subsequently,
Hunter MM1 paid the $75,560 and $44,428 to Terry Shields.	Mr Meier executed appropriate
higher purchase agreements and took possession of the vehicles.	This transaction occurred

on 13 November 1989. On the same day, Hunter MM1 paid to Mr Carroll sums of $3,022.40

and $1,777.12 by way of commission on the transactions.

However, contrary to what was stated on the invoices, to the practice in such

IN T H E FEDERAL COURT OF AUSTRALIA	) )
NEW SOUTH WALES DISTRICT REGISTRY	) No. 200 of 1990
)
GENERAL DIVISION	)

BETWEEN:  HUNTER MM1 FINANCE LIMITED

Applicant

AND:  TERRY SHIELDS PTY LIMITED

First Respondent

ALLEN CYRIL TAUNTON

Second Respondent

TERRY SHIELDS PTY LIMITED

Cross Applicant

ALLEN CYRIL TAUNTON

First Cross- Respondent

DAVlD CARROLL

Second Cross-Respondent

W:	Davies 1.
w e :	10 May 1991
Place:	Sydney

REASONS FOR JUDGMENT

These proceedings were brought by a finance company, Hunter MM1 Finance Limited

("Hunter MMI"), against a Toyota dealer, Terry Shields Pty Limited ("Terry Shields") and a

former employee of tha t company, Allan Cyril Taunton, alleging mlsleading and deceptive transactions and to the authority which he had as a salesman for Terry Shields, Mr Taunton

had in fact arranged a discount for Mr Meier of $12,520.00 in the case of the Toyota Supra

and of $9,483.00 in the case of the Toyota Landcruiser. And subsequently, without authority, he arranged for a cheque to go from Terry Shields to Mr Meier for the total of those two amounts, namely $22,003.00.

Mr Meier made 3 payments under each hire purchase agreement totalling $7,087.85

in respect of the Toyota and $4,167.54 in respect of the Toyota Landcruiser but then

defaulted. The Toyota Supra was subsequently recovered by Hunter MM1 but the

whereabouts of the Toyota Landcruiser are not known.	I was informed by both counsel that
Mr Meier is presently in prison in another country.	As Mr Meier defaulted so soon after

these transaction occurred and as the transactions were not consistent with ordinary practice

or with Mr Taunton's authority, the conclusion can he drawn that the transactions were effected as means by whlch Mr Meler could, by the mere signing of documents, obtain funds of $22,003.00 and the possession of valuable assets, the new vehicles.

Hunter MM1 became aware of the problem early In 1990. On 2 1 March 1990, it

wrote to the solicitors for Temy Shields, claiming tbat there had been a false representation

as to the name of Mr Meier and that the Supra vehicle had been overpriced by $6,000.00.

The letter commented that, "Our client understands that certain payments were subsequently

made to Mr Winslett by your client." The letter said tbat Hunter MM1 would attempt to sell the Toyota Supra and the letter claimed $44,428.00, representing the moneys paid in respect

of the Toyota Landcruiser and the difference between the $75,560.00, the price of the Toyota Supra, and what would be received on sale. On 23 March 1990, the solicitors wrote a

further letter advising that Hunter MM1 had been informed that "Mr Meier (Winslett) was

paid a sum of $22,000.00 by your client ... and that a further sum of $3,500.00 was paid by

Mr Meier to Mr Taunton." The letter then sought the invoice price of both the vebicles and

said that "In exchange our client will return the Supra vehicle and will assist your client in

locating the missing Landcrulser."

Subsequently, on 3 Aprll 1990, the solicitors wrote a formal letter directly to Terry

Shlelds alleging incorrect or misleading or deceptive statements and advising that "our client

now elects to rescind each of the contracts and will be returning the Supra sedan to you forthwith. Should the Landcruiser come into our client's possession it will also be returned

to you." Payment of the purchase price for each vehicle was demanded. The Supra was

physically returned to Terry Shields but acceptance of it was refused and the vebiele has

simply remained in Terry Shields' yard.

The abovementioned correspondence does not amount to an affirmation by Hunter

MM1 of the transactions made in the llgbt of knowledge of the fraud which occurred.

Rather, it seems that Hunter MM1 acted promptly to rescind once the substantial details of

the fraud were known.

However, by that time, i t was not possible to restore the parties substantially to tbeir

pre-transaction position. In &tJ v. m r (1955) 94 C.L.R. 216 at 223-4, Dixon C.J.,

Webb, Kitto and Taylor JJ. emphasised that, unlike equity, the common law will permit

rescission if "by the exercise of its powers ... it can do what is practically just between the parties, and by so doing restore them substantially to the status quo", even if precise

restitutio in integrum is impossible. See also Henio Investments Ptv Ltd v. u s Marrickville Ptv Ltd (1988) 79 A.L.R. 83 at 102-3. By the time the fraud was known,

although Hunter MM1 could restore the title of the two vehicles to Terry Shields, i t could not return the Toyota Landcruiser, for its whereabouts were unknown, and it could not return the Toyota Supra in a new or practically new condition, for its condltlon and value had substantially depreciated.

In my oplnion, the present is not an appropriate case for rescission, particularly as

Hunter MM1 will be adequately compensated for any loss by an award of damages. That is

the matter to which I now turn.

Unfortunately, counsel for Hunter MM1 treated the matter as one ralslng, after proof

of the sums that Hunter MM1 had paid to Terry Shields, the issue of mitigation of damages
and a matter on which the onus of proof lay on the respondent.

The principles upon which damages should be assessed were stated by Gihbs C.J. in

Gould v. Vaneelas (1985) 157 C.L.R. 215 at 220-1 where his Honour said:-

"It is well established that in an action of deceit where t h e plaintiff bas been induced by the fraudulent misrepresentation of the defendant to enter into a contract of purchase, the measure of damages usually applicable is the difference between the real value of the property at the time of the purchase and what the plaintiff paid for

it: Holmes v. Jones (1907) 4 C.L.R. 1692, a t pp.1702-1703; Potts v. Miller (1940) 64

C.L.R. 282, a t pp.289, 297; Toteff v. Antonas (1952) 87 C.L.R. 647, a t pp.650-651;

Foster v. Public Trustee [l9751 1 N.Z.L.R.	26, a t p.28; Ted Brown Ouanies Ptv Ltd
v. General Ouarries (Gilston) Ptv Ltd (1977) 16 A.L.R.	23, a t p.31.
The usual rule is, however, only a special application of the general principle that 'In	an action of deceit a plaintiff is entltled to recover as damages a sum representing
the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant': Toteff v. Antonag (1952) 87 C.L.R., a t p.650. In other words, the general principle is tha t the plaintiff is to be put, so f a r as possible, in the position he would have been in if he had not acted on the fraudulent inducement: Holmes v. Jones (1907) 4 C.L.R., a t p.1709; see also Canavnn v. Wrinht [l9571 N.Z.L.R. 790, at p.802; Dovle v. Olbv (Ironmoneers) Ltd [l9691 2 Q.B. 158, at p.167; and South
Australia v. Jobnson (1982) 42 A.L.R. 161, a t pp.169-170."

See also Henio Investments Ptv Limited v. Collins Marrickville Ptv Limited (1989) 89 A.L.R.

It lollows that Hunter MM1 Is not entitled to recover the whole of the sum 01

$119,988 which it paid to Terry Shields. That is only the stnrt of the calculation. Arising

out of that payment, Hunter MM1 obtained title to the Toyota Landcruiser and the Toyota Supra and it also obtained agreements under which Mr Meier agreed to make hire purchase

payments. Payments totalling $11,255.39 were made by Mr Meier. And payments totalling

$4,799.52 were made to Mr Carroll.

So far as the vehicles are concerned, only the Toyota Supra has been recovered. In

my view, its value on 3 April 1990 should be taken into account. Any deterioration in value since that date should not be put to the account of Terry Shields. Hunter MM1 knew of the fraud by the end of March 1990 and had repossessed the vehicle and had had an opportunity

to consider its position. This is not a case where Hunter MM1 was locked into retaining the

vehicle or where any commercial advantage was sought to be obtained by retaining it. Hunter MM1 knew that the vehicle was a depreciating asset hut chose to retain i t simply

because it wished to pursue its allegation that it had rescinded the transaction. I need not

discuss the relevant authorities which In thls respect were sulficiently mentioned in M v.

Vaceells and Henio Investments v. Collins Marrickviile.

The price 01 the Toyota Supra in November 1989 was $75,560. It is agreed that its

present value is between $35,000 and $40,000 wholesale and between $40,000 and $45,000

retail. However, the only evidence of value as at 3 April 1990 is an extract from Glass's Dealers' Guide lor May 1990 which puts the value of the most expensive 1989 Toyota Supra,

said to cost $64,500, at $43,500 wholesale and $51,000 retail. This evidence is most unsatisfactory taking into account the lac1 that Hunter MM1 is a financier of motor vehicle transactions and that Terry Shields is a car dealer. However, i t is necessary for me to do the

best I can on the evidence. The wholesale value is the appropriate value.	But the Guide
does not appear to list a vehicle of which the new price was $75,560.	1 shall adopt the value

of $50,000, which appears appropriate in the lift of the agreed current value.

The evidence with respect to the value of the contract with Mr Meler is equally unsatisfactory. Relying upon his contention that the onus of proof was on the respondent, counsel failed to adduce any direct evidence that attempts to recover any sum lrom Mr Meier

would he fruitless. However, it Is agreed that the financial worth of Mr Meier is unknown.

This is not a case such as Pilkineton v. Wood [l9531 1 Ch. 770 or London & South of Eueland Buildine Society v. Stone [l9831 1 W.L.R. 1242 in which it was held that a plaintiff was not under an obligation to mitigate his loss by entering into legal proceedings against a third party. The contracts with Mr Meier were part and parcel of the whole transaction

which was induced by the representations.	These were hire purchase transactions between
Mr Meier and Temy Shields in which Hunter MM1 was the financier.	Therefore, the loss

which Hunter MM1 suffered from the transaction should take into account the value of the vehicles, the amounts which it has received from Mr Meier and the amounts w h ~ c h it should

expect to recover from him.	The onus of proof of those matters is on Hunter MMI.
However, what saves the claim for damages is, I think, that i t is proper to draw the conclusion from the rather desperate Fraud that occurred, fraud both on Hunter MM1 and Terry Shields, that Mr Meier's financial position was parlous. When I add to that

information the fact that only one of the vehicles has been recovered and the agreed facts

that Mr Meier is currently in prison overseas and his financial position is unknown, it seems

to me that I should draw the prima facie conclusion that the recovery of any sum from Mr
Meier cannot he expected.

At this stage, the ordinary principles of mitigation come lnto play. If Terry Shields

alleges that there is some particular action that Hunter MM1 should have taken to mitigate its loss and did not do so, then the onus is on Terry Shields to raise that matter. No such

matter has been raised.

I therefore assess the damages as the sums paid out to Terry Shields, $119,988, plus

the sums paid to Mr Carroll, $4,799.52, less the instalments received from Mr Meier totalling

$22,255.39, and less the value of the Toyota Supra as at 3 April 1990, $50,000, giving a

balance of $52,532. There should be interest on that sum from the date when the payments

were made by Hunter MMI, namely 13 November 1989. 1 calculate the interest a t $14,031.

It was faintly argued that the interest should be at the rate of 22%, the rate charged

by Hunter MM1 in the course of its business rather than the rate ordinarily adopted, namely

the rate fixed under the practice of the Supreme Court of New South Wales. However, I

would not depart from the ordinary practice in the absence of clear proof that a higher

interest rate was justified. Mere proof that Hunter MM1 was the financier and lent money

a t the rate of 22% does not seem to me to provide a sufficient justification. Certainly, it

does not in itself show that Hunter MM1 lost the use of money a t 22% by entering lnto the

transaction. In this light, counsel for Hunter MM1 was content not to press the claim for

the additional interest.

There will therefore be judgment in favour of Hunter MM1 agalnst Terry Shields and

Mr Taunton for the sum of $66,563 and costs. There will be judgment on the cross-claim in

favour of Terry Shields against Mr Taunton for the sum of $66,563 and costs, such costs to

include the costs recoverable by Hunter MM1 agalnst Terry Shields. The cross-claim against

Mr Carroll will be dismissed with no order as to costs.
I certify that this and the preceding 8 pages
are a true copy of the reasons for judgment herein
of the Honourable Mr Justice Davles.

Date:	10 May 1991
Counsel for the appellant:	Mr N. Cotman
Solicitors for the appellant:	David Jackson & Associates
Counsel for the respondent:	Mr D.J.  Higgs & Mr I. McGillicuddy
Solicitor for the respondent:	Messrs Coleman & Greig
Dates of hearlng:	4 March 1991
Date of judgment:	10 May 1991