McCracken, Charles v Equus Financial Services Ltd (ACN 006 012 344)
[1996] FCA 987
•14 Nov 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) No VG 17 of 1994
)
GENERAL DIVISION )
BETWEEN: CHARLES McCRACKEN
(Applicant)
AND: EQUUS FINANCIAL SERVICES LTD
ACN 006 012 344
(First Respondent)
AND: VACATION OWNERSHIP RESORTS LTD
ACN 006 110 603
(Second Respondent)
AND: VACATION OWNERSHIP PTY LTD
(IN LIQUIDATION) ACN 006 097 141
(Third Respondent)
AND: CLUB RESORTS (FINANCE) PTY LTD
ACN 006 277 541
(Fourth Respondent)
CORAM: Ryan J
DATE: 14 November 1996
PLACE: Melbourne
MINUTES OF ORDER
THE COURT ORDERS:
That the following questions set down for trial as a further preliminary issue be answered:
Question No 1
(i) Did
(a) the second respondent;
(b) the third respondent;
(c) either the second respondent or the third respondent
provide grant or confer or agree to provide grant or confer to or on the Applicant the services referred to in paragraph 1 of the order of the Court made herein on 31 July 1995?
Answer
Yes
Yes
Unnecessary to answer
Question No 2
(ii) Was
(a) the second respondent;
(b) the third respondent;
(c) either the second respondent or the third respondent
the supplier of the services referred to in paragraph 1 of the order of the Court made herein on 31 July 1995?
Answer
Yes
Yes
Unnecessary to answer
That the application herein be adjourned to a further directions hearing on a date to be fixed.
That the costs of the applicant and the first respondent of the preliminary question, referred to in paragraph 1 of this Order, be reserved.
That the time for appeal or for seeking leave to appeal from the order of Ryan J of 31 July 1995 be extended until the expiration of 21 days from this day.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
VICTORIA DISTRICT REGISTRY ) No VG 17 of 1994
)
GENERAL DIVISION )
BETWEEN: CHARLES McCRACKEN
(Applicant)
AND: EQUUS FINANCIAL SERVICES LTD
ACN 006 012 344
(First Respondent)
AND: VACATION OWNERSHIP RESORTS LTD
ACN 006 110 603
(Second Respondent)
AND: VACATION OWNERSHIP PTY LTD
(IN LIQUIDATION) ACN 006 097 141
(Third Respondent)
AND: CLUB RESORTS (FINANCE) PTY LTD
ACN 006 277 541
(Fourth Respondent)
CORAM: Ryan J
DATE: 14 November 1996
PLACE: Melbourne
REASONS FOR JUDGMENT
RYAN J: These reasons are to be read in conjunction with my reasons for judgment published on 31 July 1995 furnishing an answer to the following question set down for trial as a preliminary issue:
Does the contract referred to in paragraphs 3 and 4 of the Applicant's Amended Statement of Claim constitute a contract for the supply of goods or services within the meaning of the Trade Practices Act 1974.
I ordered that the preliminary question be answered:
Yes, in the sense that it was a contract for the provision, grant or conferral of rights, benefits or privileges under a contract (being the contract enquired after itself) in relation to the provision of, or the use or enjoyment of facilities for recreation.
The contract alleged in paragraphs 3 and 4 of the amended statement of claim was particularized as having been in writing contained in a document headed "Application for units" dated 14 December 1991 and a letter to the applicant dated 23 December 1991. That letter advised that the application for units in the Club Mildura Trust had been accepted by Vacation Ownership Resorts Ltd ("VOR").
Paragraph 4 of the amended statement of claim was in these terms:
Under the Supply Contract the Suppliers agreed to supply and in large measure did supply to the applicant goods and services within the meaning of the Act ("the Services").
PARTICULARS OF THE SERVICES
These particulars are set out in Schedules 1 and 2.
Schedule 1 gave particulars of some 26 "services", the first five of which were:
(a)a time share in Club Mildura ("the Resort");
(b)a unit in the Club Mildura Interim Trust Deed ("the Deed");
(c)a share in Club Mildura Ltd ("the Club");
(d)a fifty first interest in Lot 43 (alternatively a lot on Registered Cluster Plan No 1433Q ("the Cluster Plan")) and an undivided share in the common property for the time being described on the Cluster Plan;
(e)accommodation in a two bedroom villa part of the Resort as described in Schedule 2 together with the supply of all facilities including linen, towels, soap, toilet paper, washing up detergent and tea towels and the supply of access to community laundry facilities including washing machines and irons and of access to facilities including swimming pool, gymnasium, barbeques, bowling green, spa and sauna, tennis court and gardens all maintained and tended by caretakers;
At the request of the parties, the following additional questions have since been set down for separate trial, also as a preliminary issue:
Did
(a)the second respondent;
(b)the third respondent;
(c)either the second respondent or the third respondent
provide grant or confer or agree to provide grant or confer to or on the Applicant the services referred to in paragraph 1 of the order of the Court made herein on 31 July, 1995?
(ii)Was
(a)the second respondent;
(b)the third respondent;
(c)either the second respondent or the third respondent the supplier of the services referred to in paragraph 1 of the order of the Court made herein on 31 July, 1995?
It will be recalled that the "Club Mildura Interim Trust" was established pursuant to a deed of trust dated 6 November 1984. On behalf of the applicant, it was submitted that the property impressed with that trust consisted of a sum of money and the benefit of the covenants (as far as they were expressed to be for the benefit of unit holders) by, respectively, the second respondent, VOR which was identified as "the Manager" and the third respondent, Vacation Ownership Pty Ltd ("VO") which was the owner of the land on which the resort was to be developed. Counsel for the applicant then went on to submit that the beneficial interest in that trust property was broken up into "units", each unit being an undivided part or share of the trust fund. There was conferred on VOR as manager the exclusive power to appoint units to itself or any other person for such consideration as it might think fit. Such a general power of appointment was said to be equivalent to ownership.
The trust fund for the purposes of the Club Mildura Interim Trust was defined in clause 1 of the trust deed of 6 November 1984 as:
`Trust Fund' means the sum settled pursuant to clause 2.2 together with so much of the Application Moneys (if any) paid to the Trustee by Subscribers to be held by the Trustee upon the trusts of this Deed and all investments and property into which the said moneys referred to may be converted and all additions or accretions thereto held by the Trustee and all investments and property into which the said additions or accretions may be converted;
Clause 2.2 of the same deed provided:
The Manager shall forthwith upon demand being made by the Trustee after the execution of this Deed lodge with the Trustee the sum of one hundred dollars ($100.00) and the Trustee hereby declares that it will henceforth stand possessed of the Trust Fund upon the Trusts and subject to the powers and provisions hereinafter expressed concerning the same.
In my view, VOR was not the donee of a general power of appointment enabling it to dispose of beneficial interests in the trust fund. It was, as the designation "manager" suggests, a delegate or agent of the settlor and the trustee charged with the limited function of deciding which applications for units should be accepted and fixing the price payable by each accepted applicant. Upon acceptance, the applicant was entitled either by way of specific performance of a contract or execution of the trust, to have the trust administered in accordance with its terms which included having himself or herself registered as the proprietor of a unit. VOR, as manager, might have been regarded as the supplier of some of those administrative services but it was not itself the supplier of the unit. In that sense, its position was analogous to that of a broker or operator of a share registry charged with processing applications for the allotment of shares to be newly issued in a company.
An application to VOR as manager for a unit and acceptance thereof was said to create a contract between the applicant and VOR capable of enforcement by a decree of specific performance requiring VOR to register the applicant as a unit holder. From that premise it was submitted that the contract between an applicant and VOR was a contract by VOR to provide, grant or confer to or on the applicant the rights, benefits and privileges attaching to a unit being a beneficial interest in the trust property earlier identified as comprising a fund of money and the benefit of the covenants creating obligations owed to unit holders. That contract, so the argument went, was properly to be characterized as one for the "supply" by VOR of "services", "supply" in the context of the Trade Practices Act being a word of wide import. (Castlemaine Toohey's Ltd v Williams & Hodgson Transport Pty Ltd (1985) 7 FCR 509 at 532.)
On behalf of the first respondent, Equus Financial Services Ltd ("Equus"), reference was made to s. 73(1)(b) of the Trade Practices Act 1974 which is set out at pp. 28-29 of my reasons for judgment of 31 July 1995. It was accepted by Counsel for Equus that the acceptance of an application for a unit created a contract between the applicant and VOR as manager and the trustee. As I described it in my earlier reasons for judgment, that was a contract "for the proper and efficient management and administration in good faith of the trust which, it was expected would result in the allotment to Mr McCracken of a share in Club Mildura Ltd with its attendant entitlement to use the facilities, chattels and services available at the resort". Counsel on both sides were agreed that the credit provided by the assignor to Equus was in respect only of the contract arising from the application for a unit in the trust.
Nor did Counsel for the applicant demur from the proposition advanced for Equus that the right to use the facilities, chattels and services available at the resort was derived from the holding of a share in Club Mildura Ltd. It was Club Mildura Ltd, so the argument of Equus went, which was the supplier of those recreational services and its position was equated with that of Paradise Timeshare Club Ltd ("the Club") in AFA v Garendon Investments Pty Ltd (1995) 37 NSWLR 221 where Sheller JA with whom Priestley and Clarke JJA agreed, observed at 231:
For the sake of argument Mathews J assumed that the allotment of units in the Trust Fund did constitute a sale and considered whether it was a contract of sale of "services" within the definition in the Act. Her Honour accepted that the contract under which the unit was acquired involved the provision of facilities for amusement, entertainment, recreation or instruction. This may be correct. But as Mr Stowe QC, who appeared for the respondents, argued, it has to be shown that the services are to be supplied under the contract. There is, it seems to me, a powerful argument for saying that the services were supplied not under the agreement for the allotment of the units but under the memorandum and articles of the Club. However it is not necessary to resolve this question because as her Honour said, Garendon, the credit provider, was not the supplier of the services.
All that VO and VOR were required to do, on the submission of Mr Archibald QC who appeared with Mr Ribbands for Equus, was to procure the allotment by the directors of Club Mildura Ltd to each unit holder of a share in Club Mildura Ltd. The performance of the services involved in procuring the allotment of shares was not, so it was submitted, the supply of the services attendant on the holding of those shares.
It was next submitted on behalf of Equus that the words "provide grant or confer" were relevantly used in the Trade Practices Act in two different senses. The first such sense was in the definition of "services" which I have already held is capable of applying to the rights under the contract which arose upon acceptance of the application for units. The second was said to occur in the definition of "supply" and "supplier" which is set out at p. 21 of my earlier reasons for judgment. In that context it was submitted that "a person who lacks the capacity to provide, grant or confer the services cannot supply them and cannot be a supplier of those services".
On this argument neither VO nor VOR had the power to supply or withhold the services in question because that power resided entirely in Club Mildura Ltd. The transaction pursuant to which the applicant derived his share in Club Mildura Ltd was between the applicant and Club Mildura Ltd or, possibly, between the applicant and the trustee under the deed of trust of 6 November 1984.
The corollary, it was argued, was that the only services that either or both of VO and VOR could provide, grant or confer on the applicant were the services under the contract between themselves and the applicant. They were unable to confer on the applicant the right to use any of the facilities in which he would be entitled to participate upon becoming a shareholder in Club Mildura Ltd.
Mr Berkeley QC, who appeared with Mr Bingham for the applicant, submitted that the argument advanced on behalf of Equus which I have just outlined conflates two types of "services" as defined in the Trade Practices Act. The contract as pleaded in paragraphs 3 and 4 of the amended statement of claim was one conferring certain rights, benefits and privileges being those entitling the applicant to the proper administration and management of the trust. They were rights, benefits and privileges, so Mr Berkeley contended, which were to be provided under the contract referred to in paragraphs 3 and 4, which, as I held in my earlier reasons for judgment, was a contract "in relation to ... the provision of, or the use or enjoyment of facilities for, amusement, entertainment or recreation" of the kind specified in the definition of "services" in s. 4 of the Trade Practices Act.
It is true that Mathews J, in reviewing at first instance the orders of the Commercial Tribunal of New South Wales in AFA v Garendon Investments Pty Ltd (1994) ASC 58,943 noted at 58,952 that, as here, "it is the sale of the unit in the Trust Fund carrying with it the eventual entitlement to use the Resort facilities, which is the relevant transaction...It was the holding of a share in the Club which carried the recreational entitlements. And these were allotted by the Club, not transferred by Garendon" [which occupied a position analogous to that of either or both VO and VOR in the present case]. However, in Garendon her Honour was required to determine whether the contract for allotment of units was a "credit sale contract" within the meaning of the Credit Act 1984 (NSW). That, in turn, required consideration of whether the contract was one "of sale of goods or services" and led next to application of the following definition in the same Act of "services":
`Services' includes the rights and benefits that are, or are to be, supplied under:
(a)a contract for or involving:
(i)... or
(ii)the provision of, or the use or enjoyment of, facilities for amusement, entertainment, recreation or instruction;
Her Honour was inclined to doubt whether the contract for the allotment of units was one of "sale" but, assuming that it was, she was able to conclude that it was a contract "involving" the provision, use or enjoyment of recreational facilities. However, even that assumption and first conclusion did not avail the plaintiff because her Honour was unable to regard Garendon as the "supplier" of the recreational facilities.
For some reason, perhaps to be found in the different statutory provisions, no attention was directed in AFA v Garendon Investments Pty Ltd, either at first instance or before the Court of Appeal, to the question of whether Garendon was the "supplier" of the narrower, non-recreational services to which the applicant became entitled on the making of a contract for the allotment of units. However, that question arises squarely in the present case and I consider that, on the making of the contract constituted by acceptance of an application for units, each of VO and VOR as manager agreed to provide, grant or confer to or on the applicant services of that narrower kind. Those services in no sense included the recreational facilities and services stipulated, for example, in paragraph (e) of Schedule 1 to the statement of claim. It follows that each of VO and VOR was the supplier of at least some of the services which I earlier described as "the proper and efficient management and administration in good faith of the trust which, it was expected would result in the allotment to Mr McCracken of a share in Club Mildura Ltd with its attendant entitlement to use the facilities, chattels and services available at the resort". The further questions set down for trial as a preliminary issue must be answered accordingly. In case it be necessary, I shall extend the time for appeal or seeking leave to appeal from my order of 31 July 1995 until the expiration of 21 days from the date of this judgment.
It was further argued on behalf of Equus that finance was not provided "in respect of the supply by the supplier of services" to the applicant within the meaning of s. 73(1)(b) of the Trade Practices Act. Section 73(1), it was said, by its concluding words makes the credit provider liable if the consumer suffers "loss or damage as a result of misrepresentation, breach of contract or failure of consideration in relation to the contract" which must be a reference to the contract between the supplier of the services and the consumer. The contract for the supply of recreational services was between the applicant, Club Mildura Ltd, and the other members of that company and was constituted by its articles of association. The provision of credit by the assignor to Equus occurred well before the making of that contract and cannot be said to have been in respect of it.
That argument may well preclude the applicant from recovering damages from the linked credit provider if he is unable to establish that he has suffered loss or damage as a result of misrepresentation, breach of contract, failure of consideration or breach of implied conditions in relation to the contract under which I have found that each of VO and VOR was the "supplier" of a narrower class of services. That, it is now common ground, was a different contract from that for the supply of the recreational services attendant on the applicant's holding of shares in Club Mildura Ltd. However, these further issues are outside the restricted preliminary questions which I have been required to answer.
I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment of his Honour Justice Ryan.
Associate:
Date:
Counsel for the Applicant : Mr H.C. Berkeley QC
with Mr P. Bingham
Solicitors for the Applicant : Madgwicks
Counsel for the First Respondent : Mr A.C. Archibald QC
with Mr J.A. Ribbands
Solicitors for the First Respondent : Alan Herskope
Date of Hearing : 29 September 1995
Date of Judgment : 14 November 1996
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