Mildren Enterprises P/L v Viper Motor Sport P/L and Clarke
[2004] SADC 94
•1 July 2004
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MILDREN ENTERPRISES P/L & ORS v VIPER MOTOR SPORT P/L AND CLARKE
Judgment of His Honour Judge Smith
1 July 2004
CONTRACTS
Personal services - claim for damages for overcharging - contract partly oral and partly evidenced in writing – ascertainment of terms of contract and construction thereof – defendants agreed with plaintiffs to import for them second-hand Japanese motor vehicles for resale at profit – held defendants overcharged plaintiffs in breach of contract – amount of overcharging awarded as damages for breach of contract.
TRADE PRACTICES
Misleading or deceptive conduct in contravention of s52 of Trade Practices Act 1974 (Cth) relating to the importing of second-hand Japanese vehicles into Australia – misrepresentation by importing agent that certain charges were costs and expenses of importation whereas they were further agency fees – claim for damages under s82 of the said Act for return of those moneys paid over and above expenses – held amounts of overcharge were losses and damages suffered by conduct of corporate defendant – further held that the director of the corporate defendant was personally liable in that he was complicit in the corporations breach within the meaning of s75B(2) of the said Act – judgment entered in favour of plaintiffs against personal and corporate defendants for amount of overcharge.
TORTS
DECEIT - Personal and corporate defendants held liable for damages in the tort of deceit for falsely representing that fees charged for importation of second-hand motor vehicles were costs and expenses – discussion of basis upon which both corporate and personal responsibility attaches – whether reliance upon representation was established – discussion of measure of damages – held that amount of overcharging was recoverable as damages.
DAMAGES
Exemplary damages – not available for contravention of s52 of Trade Practices Act 1974 (Cth) – not available for breaches of contract – available for the tort of deceit – discussion of whether in respect of the tort of deceit such damages should be awarded in the circumstances of the case. Held – though deceit by defendants was a conscious falsehood exemplary damages not awarded in the circumstances.
Trade Practices Act 1974 (Cth) s52, 75B, 82; Fair Trading Act 1987 (SA) s56, 84; District Court Act 1991 s39, referred to.
Black's Law Dictionary 6th Ed; Young v Queensland Trustees Ltd (1956) 99 CLR 560; Blatch v Archer (1774) 98 ER 969; Brown v Jam Factory Pty Ltd (1981) 53 FLR 340; Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594); Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; Hornsby Building Information Centre v Sydney Building Information Centre (1978) 140 CLR 216; Wardley Australia Ltd v WA (1992) ATPR 41-189; Janssen-Cilag Pty Ltd v Pfitzer Pty Ltd (1992) 37 FCR 526; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; Enzed Holdings Ltd and Others v Wynthea Pty Ltd and Others (1984) 57 ALR 167; Miller’s Annotated Trade Practices Act 25th Edition 2004 at 612-719; The Law of Torts in Australia 2nd Ed (1993) by Trindade and Cane; Jones v Dumbrell [1981] VR 199; Derry v Peek (1889) 14 App Cas 337; Edgington v Fitzmaurice (1885) 29 ChD 459; Peek v Gurney (1873) LR 6 HL 377; Nicholls v Taylor [1939] VLR 119; Gould v Vaggelas (1984) 157 CLR 215; Musca v Astle Corporation Pty and Anor (1988) 80 ALR 251; Addis v Gramophone Co Ltd [1909] AC 488; Butler v Fairclough (1917) 23 CLR 78; Marks v G.I.O. Australia Holdings Ltd (1998) 196 CLR 494; XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448; Lamb v Cotogno (1987) 74 ALR 188, considered.
MILDREN ENTERPRISES P/L & ORS v VIPER MOTOR SPORT P/L AND CLARKE
[2004] SADC 94CIVIL
JUDGE DAVID SMITHIntroduction
In this action the plaintiffs, Gregory Andrew Mildren (“Mildren”) and Ross Everard Bensley (“Bensley”), claim moneys allegedly overpaid by them to the defendant Viper Motor Sport Pty Ltd (“Viper”) under two contracts whereby each of them appointed Viper to purchase on their behalf and import from Japan into Australia eight (ie four each) second-hand Japanese motor vehicles.
There are multiple causes of action pleaded by Mildren and Bensley and their associated corporations, against both Viper and its sole director and shareholder Matthew Sacha Cameron Clarke (“Clarke”), however, at trial the claims were reduced to:
·Breach of contract against Viper;
·Breach of s52 of the Trade Practices Act 1974 (Cth) against Viper;
·Breach of s75B of Trade Practices Act 1974 (Cth) against Clarke;
·Deceit against Viper and Clarke; and
·Breach of s56 of the Fair Trading Act 1987 (SA) against Clarke and Viper.
The above claims are now made by only the natural persons Mildren and Bensley. Further, the damages sought are limited to the amount of the alleged overcharge, namely $24,667.40 in respect of the Mildren agreement, and $25,130.94 in respect of the Bensley agreement. Any judgment obtained against both Viper and Clarke will necessarily be joint and several.
The Issue – The Claims – The Defence
Mildren and Bensley claim that in September 1999 each of them agreed with Clarke, who was acting for Viper, as follows:
·that Viper would purchase at auction in Japan and cause to be imported into Australia four second-hand Japanese motor vehicles for the purpose of resale in Australia for profit;
·that Mildren and Bensley would each pay to Viper:
·a fee of $1,500 per motor vehicle;
·the cost of purchasing each motor vehicle at auction; and
·the costs incurred in importing the motor vehicles into Australia being such expenses as freight costs, duties and other importation fees.
Mildren and Bensley allege that in breach of the agreements Viper charged them and collected from them not only the cost of purchasing the vehicles at auction and the $1,500 fee per motor vehicle but also further moneys which were in excess of the costs and other importation fees necessarily incurred.
In response, Viper and Clarke contend that the agreements as to costs were not restricted to the actual “out of pocket” costs and other importation fees but were costs agreed prior to the performance of the contract in part in accordance with the document headed Sample Only of Estimated Costs dated 21st September 1999 (see Exhibit P2).
The Circumstances
I set out hereunder my findings as to the circumstances surrounding the contract and its performance. As I traverse the history of the matter, I will draw attention to the areas of conflict and make specific findings.
The Parties
Mildren is a fully qualified motor mechanic and radio technician. As at 1999 he operated an automotive business in Thebarton which had an expertise in high performance vehicles, in particular Japanese vehicles. Bensley owned a BP Service Station at Westbourne Park and also worked as a business consultant. Mildren knew Bensley because he had employed him to advise him in respect of his business. Clarke worked as a casual console operator at Bensley’s service station. He too was interested in high performance Japanese cars. In July of 1999 he travelled to Japan and purchased six such second-hand cars at auction and imported them into Australia. He purchased a car for each of “five customers” and the sixth vehicle was for himself. At about this time he set up Viper Motor Sport Pty Ltd to operate this importing business.
The Meetings – The Agreements – September 1999
There is disagreement between the witnesses Bensley, Mildren and Gabbusch on the one hand and Clarke on the other as to what happened and what was said in the lead up to his buying trip to Japan. So I will set out the evidence and then after completing the entire narrative make findings as to this conflict.
Bensley said that Clarke approached him initially to seek more flexibility in his employment at the service station so that he could devote more time to his importation business (129). He said that in the course of these discussions Clarke explained his importation business and invited him, Bensley, to participate in it (129). Bensley said that he decided to involve Mildren because “... there was good synergy between what Mr Clarke was proposing and the nature of Mildren’s business activities ...” (130). Bensley said that after an initial discussion with Mildren, he and Mildren asked Clarke to “... explain to us in more detail exactly how the scheme would operate” (130). To that end there were two meetings arranged with Clarke which were hosted by Mildren at his Unley home (133). Bensley said that at the first meeting Clarke gave the following general overview of how the scheme would work:
“... in summary, it was, essentially, Mr Clarke would charge us a fee of $1,500 per vehicle for the sourcing of the vehicles, that there would be direct costs against the purchase of the vehicle, like the importation.
..........
.... there would be an up-front fee of $1,500 per vehicle, Mr Clarke and his associates would source the vehicles by attending auctions in Japan and would purchase the best vehicles, given the general description of the kinds of vehicles that were being looked for, at the best price obtainable in the time frame that he was there in Japan. The other costs were the direct incurred costs of importing those vehicles into Australia, plus the compliance and registration. They were the only costs that we expected to incur and, therefore, the balance would be made from the resale of those vehicles to the clients that Mr Clarke would provide. I think the thing that probably ultimately convinced us to proceed to getting more detail was Mr Clarke’s unqualified commitment: ‘Look, guys, worse case scenario, I’ll buy the cars back from you, there is no way you can actually do your dough’.” (133)
Bensley said that present at the two meetings were Clarke, himself, Mildren and an employee of Mildren (134). He said that he thought that Clarke produced the document headed Sample Only of Estimated Costs (Exhibit P2) at the first meeting (134, 135). He said that Clarke explained that the said document showed the indicative costs that would be incurred and “... it was a basis for us to do our sums ...” (135). Bensley said, in relation to the notation “Stage 1” on the document that Clarke explained that the payments adjacent to that notation were the auction costs which would be incurred up front and so had to be paid quickly and that the other charges would be incurred later, upon the vehicles being bought into Australia and so could be paid later (136, 137). Bensley said that Clarke indicated that he could not be certain about some of the figures until the actual number of vehicles purchased was known but that “invoices would actually be presented, indicating the actual costs ...” (137). Bensley said further:
“The clear understanding that we had was that the fee of $1500 per vehicle would be the only remuneration that Mr Clarke would receive from us, as his role within the scheme. So that what we expected to pay was the fee at auction, plus the other direct costs incurred in importing the vehicle, and that was the end of the arrangement with Mr Clarke. The additional costs that we would then incur would be the compliance and registration.” (137)
Bensley said that he and Mildren came away from the first meeting “... genuinely convinced that the scheme looked as though it was a workable one ...” (133).
Bensley agreed to have Clarke purchase for him four vehicles. He acknowledged his signature on not only the document entitled Sample Only of Estimated Costs 21.9.99 (Exhibit P2) but also the documents entitled Stage One and Stage Two (estimate only) 21.9.99 (Exhibit P10) and Purchase Agreement 23.9.99 (Exhibit P11).
I turn to the evidence of Mildren. Mildren said that Bensley interested him in Clarke’s import scheme and so a meeting was set up with Clarke (55). He said that he remembered two meetings in his house (55). By reference to his diary he said that the meetings were “one or two weeks apart” (56). He suggested the first meeting was on the 13th September 1999 and the second on the 21st September 1999 (57). He said that his employee, Darryl Gabbusch, was present at one of the meetings (58). As to what was said at the meetings Mildren said, inter alia:
“Q. What then was the detail of the arrangement as discussed over the two meetings.
A. To sum up the couple of meetings we had, the concept – a more detailed version of the concept was that Matthew would travel to Japan – either by himself or with someone, it didn’t really matter – and attend auctions over there that he had done before and buy cars on our behalf as like an agent. He would charge us a fee for doing that at $1500 per car. He also said that we wouldn’t be the only ones that he was doing that for. There might be a group of people that he was doing the same thing for as well as buying cars for himself - to resell himself. So I think that, in the particular trip that he made for us, I believe there were between 25 and 30 cars that he purchased in Japan at an auction and then brought back to Australia with Ross’s and my cars.
Q. What was said about the fee that Mr Clarke would charge.
A. It was a flat rate of $1500 per car. It was as simple as that. He would do his best to minimise all of the other costs and we would pay – we would basically reimburse him for all of other costs as they arrived and/or as he required them to be reimbursed. That’s why the payments paid to Matthew Clarke were staggered in two sections. One section had finished, those costs became payable and due, so they were paid and then another second section was completed.”
(59, 60)
Mildren agreed to enter into the scheme for the four vehicles.
Mildren identified the Sample Only of Estimated Costs document (Exhibit P2) and said that Clarke told the meeting in relation to that document it was designed “as just an estimate” (60). Further, Mildren identified the document entitled Purchase Agreement 2.10.99 (Exhibit P3) and his signature thereon (62). He said that all the handwriting on it was his. He said that he vaguely recalled signing it in his workshop when Clarke called to pick it up on presumably the 2nd October 1999 “possibly just before he left for Japan” (62). Mildren referred to a diary note which suggested that on the 10th October 1999 he telephoned Clarke at Clarke’s hotel in Japan (63).
Darryl William Gabbusch gave evidence for the plaintiffs. In September 1999 he was in the employ of Mildren. He said he first met Matthew Clarke at a meeting at Mildren’s home in Unley. He said that Mildren and Bensley were present and that for approximately two hours Clarke explained “what he did in regards to the importation of vehicles” (117). Gabbusch said of the scheme as follows:
“A. .... he would find the vehicles for us that we were looking for; he would purchase them for us; he would arrange all of the shipping and importation of the vehicles; put his commission on the vehicle and, basically, on-sell it to us with all of those costs included, the exact cost of which I do not know.
Q. Do you recall any amount of the commission being mentioned.
A. I can only vaguely remember the number 1500 coming up - $1500, that is – but as to what it was, I can’t remember.
(118)
...................
Q. Can you tell me again then, what was the proposal that came from Matthew Clarke at the meeting.
A. That we could put in an order for some specialised vehicle from Japan that you can’t buy here; that he would import them for us, at a cost to us which would include freight, import duties, and his commission, and that he could also compliance certain vehicles for us if we required them done by him, but that would be on top of the cost of bringing everything into the country.”
(126)
I turn to Clarke’s evidence.
Clarke disagreed with the evidence of Mildren and Bensley and the witness Gabbusch as to the arrangement with respect to the so-called costs. He said that his contact with Bensley and Mildren began when Bensley’s son Andrew became interested in his importation business, which by July 1999 had just got underway when he made his first buying trip to Japan (187, 188). There were, according to Clarke, discussions with Bensley and Bensley’s son Andrew. Then Clarke said that he met with Bensley at Bensley’s house on about the 4th September 1999 to further discuss the venture (188). He said he took the document entitled Sample Only of Estimated Costs (Exhibit P2) with him. He said that there was no handwriting on it when he first produced it at the meeting (189). He said Bensley asked him what would be the approximate cost of importing four vehicles from Japan (190). He said that he wrote the numerals on the top left corner of Exhibit P2, namely:
Soarer —— (13) (ie $13,000)
300 Z9 —— (9) (ie $9,000)
R33 —— (13) (ie $13,000)
R33 —— (13) (ie $13,000)He said the above were the type of vehicles Bensley was interested in and the figures in brackets are plainly an estimate of the cost of purchase in Japan.
He then wrote the numerals or the amounts of money down the document (Exhibit P2) adjacent to the letters AUD$ (Australian Dollars) as being “the standard charges that our company adapted over the first run” (191). Clarke said that he explained these sums to Bensley (201, 203, 210, 218, 219 and 227). He recounted in evidence the explanations which he said he proffered to Bensley (192-230). It is clear that, on Clarke’s evidence, most of the items from “Import approval/application” down to “Overseas transfer” were not items of expense, in the sense of being out of pocket costs at all, but were allegedly agreed sums, which in some instances, bore but a loose relationship to the labels which were given to them in the document.
Bensley made no mention of this preliminary meeting at his home in his evidence-in-chief. When cross-examined about it, whilst accepting that there had been previous discussions with Clarke, he said he had no memory of such a meeting at his house at which he was provided with the Sample Only of Estimated Costs (Exhibit P2) (152, 154). And further, in cross-examination about the foreshadowed expenses he confirmed his earlier evidence in the following terms:
“Q. What I suggest to you is that, at that meeting, Mr Clarke at no time said words to the effect that you would be charged reimbursement only of full out-of-pocket expenses for matters such as shipping, and quarantine and wharfage.
A. That was not explicitly stated, but the clear nature of the discussion was that the figures that were presented were the actual costs to be incurred, rather than any inflated costs, and that was confirmed by Mr Clarke’s statement on several occasions to the effect that the only money that he was making personally out of this transaction was the $1500 sourcing fee. So, apart from the other direct costs incurred, they were the only other debits against these transactions. That was a part of the argument as to why numerous vehicles needed to be imported at the one time; to actually amortize the air fares and the accommodation costs because the only figure that Mr Clarke was deriving from the transaction was the $1500 fee.”
(171)
I continue Clarke’s version.
Clarke accepted that there was a meeting at Mildren’s house on 21st September 1999 and he confirmed that on that occasion the Sample Only of Estimated Costs (Exhibit P2) and Stage One and Stage Two (Exhibit P10) were signed by Bensley (240). He said that his impression was that the meeting was for the benefit of Mildren. He said “Ross (Bensley) went over again the fees that I had quoted him and wanted me to run through them again in front of Greg (Mildren)” (241, 242). Clarke said he did that and left Mildren with a form he called an Order Form (242) (see Purchase Agreement Exhibit P3). He said it was blank when he left it and it was completed and faxed to him subsequently by Mildren (243).
Clarke denied that he was at two meetings at Mildren’s home about a week apart and that Gabbusch was at one of them (316). He said that at the one meeting at Mildren’s home which he attended which was “to confirm Ross’s purchase” (317) he ran over a few things and Greg (Mildren) overheard the conversation and may have queried a few things (317). Clarke said that in respect of some of the items of so-called costs he told Mildren of the marking up (324-327, 329, 333).
Clarke said that Bensley agreed to the venture on the 21st September 1999 and Mildren effectively did so when he completed the Purchase Agreement on the 2nd October 1999 and faxed it back to him (322).
So such was the core of the evidence from both sides as to this single contentious issue.
I return to the balance of the narrative, which is largely uncontroversial.
In October/November 1999 Clarke went to Japan and there purchased at auction for Mildren the following vehicles:
Nissan Skyline 1993 R33 (“M1”)
Nissan Skyline 1994 R33 (“M2”)
Mazda Eunos Cosmos 1991 (“M3”)
Nissan Fairlady 1991 300 ZX (“M4”)and for Bensley the following vehicles:
Nissan Skyline 1995 (“B1”)
Nissan Fairlady Z 1989 300 ZX (“B2”)
Toyota Soarer 1992 (“B3”)
Nissan Skyline 1994 (“B4”)To enable the purchase at auction to take place both Mildren and Bensley transferred the necessary purchase moneys to Clarke in Japan. The cars duly arrived in Australia and were ultimately delivered to Mildren and Bensley for ‘compliancing’ and sale.
Mildren and Bensley paid Clarke the balance of the moneys they assumed they owed him as per the final invoices (see Exhibit P5 and P17). They paid without seeing the original documentation relating to the costs of importation. They said they trusted Clarke. In particular, Bensley paid Clarke in toto $88,965 for his four cars (see Exhibits P12(A)-(D)) and Mildren paid Clarke in toto $86,537 for his four cars (see Exhibits P6(A)-(D)).
Bensley and Mildren had difficulty selling the cars; much less at the profit anticipated by them in the meetings with Clarke. They alleged that Clarke agreed to buy back the vehicles if there was any difficulty in reselling. This alleged guarantee, though the subject of evidence, was not pursued at trial as affording a basis for recovering damages. As previously indicated, Bensley and Mildren seek only the reimbursement of what they claim they overpaid to Clarke. So it is not necessary for me to decide whether this so-called guarantee was a contractual term.
In the course of having the cars ‘complianced’, as a prelude to registering and selling them in Australia, Bensley spoke with a man named Doug Petty who had experience in the importation of such vehicles. As a result, he became suspicious about Clarke’s charges for costs. And so this dual action had its genesis. These proceedings were instituted in January 2001.
Findings as to the conflict in the evidence as to payment of the so-called expenses – Credibility and Reliability
As indicated, the dominant issue in this case is what was agreed as to the expenses or costs of the purchases and importations.
For reasons which I will turn to in a moment, I regard the contracts, the subject of this dual action, to be in part, oral. So the credibility and reliability of the evidence of Mildren, Bensley and Clarke and Gabbusch as to what was said at the meetings in September 1999 is at issue. It can be seen that Clarke’s evidence is diametrically opposed to that of Mildren, Bensley and Gabbusch.
I unhesitatingly prefer the evidence of Mildren, Bensley and Gabbusch to that of Clarke wherever there is a conflict. Demeanour can sometimes be an elusive indicator of credibility and reliability, but in this case I found Clarke’s evidence to be transparently false on this vexed topic of the expenses. His explanation of the so-called estimates of various expenses set out on Sample Only of Estimated Costs (Exhibit P2) was evasive and dissembling. He parried and avoided questions in a vain effort to side step the obvious. To the contrary, Bensley, Mildren and Gabbusch were plainly honest.
In addition to demeanour, there are a number of other indicators which convince me that what Bensley, Milden and Gabbusch said, about the basis of Clarke’s offer, is correct. Firstly, the documents Clarke used for the transactions give the clear impression that most of the items are truly out of pocket expenses. Secondly, it is intrinsically unlikely that there would be both a fixed fee or commission plainly specified in the documents and in addition a series of further fees or “mark ups” ostensibly labelled or disguised as a cost or expense. Thirdly, given that the auction costs would be incurred immediately, and the true out of pocket import expenses would be incurred later, as the vehicles arrived in Australia then the two-stage payment required by Viper is more consistent with the plaintiffs’ contention as opposed to Clarke’s. If the expenses bore no relationship to the actual fees incurred by Viper then there would be no point in collecting those fees later. Fourthly, the accounts of Bensley, Mildren and Gabbusch are consistent one with the other and with the documents.
I consider that Clarke told his two investors, Mildren and Bensley, that the amounts listed by him on the document Sample Only of Estimated Costs (Exhibit P2) were exactly as they appear to be, namely estimates of out of pocket expenses, whereas the amounts indicated as expenses were not that, but rather were either a wholly arbitrary charge fixed by him or a charge related to an expense but well in excess of it.
Proper Parties – Standing – Who sustained the loss and damage
Mildren and Bensley used corporations, namely the first and second plaintiffs as vehicles for their investment in this venture. However, the confined claims for the return of the amounts of the alleged overcharging have been prosecuted by only Mildren and Bensley on the basis that they ultimately borne the amount of the alleged overcharging (353, 354). The defendants have taken no issue with this and so I will proceed on the basis that if there is any overcharging established it is Mildren and Bensley who have sustained it and therefore suffered the loss.
I think it is appropriate to adopt this approach because:
·the natural plaintiffs’ case is confined to the recovery of overcharges (353, 354); and
·it is at least implicit that here, where corporate entities have been used to discharge the personal liabilities of the natural plaintiffs under the two agreements, the corporate entities did so as agents for the personal plaintiffs.
I now turn to the construction of the contracts.
Contract – Claims
The steps are firstly to ascertain the terms of the contracts and having done so, proceed to construe them. The onus is upon the plaintiffs to prove on the balance of probabilities, that the terms of the contracts and their legal effect are as they contend.
First of all, there is no doubt that each of Bensley and Mildren entered into a contract with Viper, whereby for agreed consideration, Viper arranged for the purchase in Japan and importation into Australia of eight (ie four each) second-hand Japanese motor vehicles.
In my view, the Mildren and Bensley agreements were in part oral, in part evidence in writing, and in part evidenced by the conduct of the parties.
I start with the Bensley agreement. What was said on the 13th and 21st September 1999 at Mildren’s home amounted to an offer by Clarke and so constituted the oral part of the agreement once accepted. The following documentation was also evidence of the entry into the agreement:
·Sample Only of Estimated Costs 21.9.99 (Exhibit P2);
·Stage One and Stage Two 21.9.99 (Exhibit P10); and
·Purchase Agreement 23.9.99 (Exhibit P11)
The conduct of the parties in performing the contract, that is Clarke procuring the vehicles and importing them, Bensley paying the consideration and the further documentation, is evidence of the contract.
I turn to the Mildren agreement. What was said on the 13th and 21st September 1999 at Mildren’s home amounted to an offer by Clarke and so constituted the oral part of the agreement once accepted. The following documentation was also evidence of the entry into the agreement:
·Sample Only of Estimated Costs 21.9.99 (Exhibit P2); and
·Purchase Agreement 2.10.99 (Exhibit P3).
The conduct of the parties in performing the contract, that is Clarke procuring the vehicles and importing them, Mildren paying the consideration and the further documentation is also evidence of the contract.
I find the terms of the two contracts are as follows:
It was an express term of the agreements that Viper would cause to be imported into Australia eight (8) (ie four (4) each) second-hand motor cars from Japan for the purpose of resale in Australia for profit. It was a further express term of the agreements that Mildren and Bensley each would pay to Viper:
·a fee per motor car imported of $1,500.00;
·an amount to reimburse Viper for:
·the costs properly incurred of the price of purchasing the motor cars; and
·the costs properly incurred of importing the motor cars, being costs of Freight, Shipping, Stamp duty, and other importation fees actually and necessarily incurred by Viper.
Breach of Contract
So in addition to the fee of $1,500 per vehicle, Viper was entitled to be reimbursed by Mildren and Bensley for only the out of pocket incurred expenses relating to the purchasing and importing of the vehicles. In breach of the agreements, Viper charged and collected sums in excess of those costs from Bensley and Mildren. Bensley and Mildren are entitled to recover the amounts of the overcharging as damages for the breaches of the contracts by Viper.
The quantum of the contractual damages
Mildren and Bensley contended that the documents demonstrate the following overcharge:
· Re Mildren in respect of four vehicles M1, M2, M3, and M4 $24,667.40 · Re Bensley in respect of the four vehicles B1, B2, B3 and B4 $24,130.94 (See schedules Exhibits P19 (as corrected) and P20)
Viper and Clarke, on the other hand, contended that in the event that the contract was construed as I have done, the evidence and documents demonstrated the following overcharge:
·Re Mildren $17,212
·Re Bensley $13,659
(See schedules Exhibit D6 and D7)
The points of difference are four-fold and require findings by me.
The first contention could usefully be labelled the “Free On Board” argument.
“Free on board (FOB). The term “F.O.B.” is an abbreviation for “free on board” and means that seller will deliver subject matter contracted for, on certain conveyance, without expense to buyer. Tyson v. Seaport Grain, Inc., Tex.Civ.App., 388 S.W.2d 731, 735. In sales price quotation, means generally that the seller assumes all responsibilities and costs up to the point of delivery, including insurance, transportation, etc. See U.C.C. § 2-319.”
(see Black’s Law Dictionary 6th Ed)
In the context of this case I take ‘FOB’ to mean that the vehicle cost indicated in the invoice included delivery to the wharf.
Clarke said in evidence, and it formed the basis of this argument, that the invoices from International Boeki Corporation Ltd (“IBC”) for effectively the auction costs of the vehicles (see second page of Exhibits D1(A)-(D) and D2(A)–(D)), though expressed to be ‘FOB’ (ie Free on Board) were not really FOB and IBC actually charged him a further ¥100,000 per vehicle to which he added a mark up of his own of a further ¥10,000. This charge of ¥110,000 for what he called ‘Freight on Board’ was included in the documents (Exhibit P2). To further this argument, over the weekend of the 19th and 20th June 2004, in the midst of this trial, Clarke caused to be faxed from Japan a further bundle of documents from IBC (see Exhibits D3, D4 and D5) which on their face supported this argument. They, of course, contradicted the earlier invoices from IBC by inflating the FOB cost by ¥100,000. So, effectively Clarke contended that the out of pocket calculations of Mildren and Bensley should have included an additional ¥100,000 per vehicle. I reject this contention despite counsel, Mr Tredrea’s, compelling argument. There is a clear evidentiary onus on Clarke to prove any such payment (see Young v Queensland Trustees Ltd (1956) 99 CLR 560; Blatch v Archer (1774) 98 ER 969). The inconsistent Invoices (Exhibit D3) and the Proforma Invoice (Exhibits D4 and D5) do not discharge that onus. It was surely within the power of Viper and Clarke to establish such payments by, for instance, adducing in evidence appropriate banking records or the like. So I reject what I have called the ‘FOB argument’.
The next contention by Viper and Clarke was that the auction cost of the vehicle B4, namely ¥480,000 as allowed for in the plaintiffs’ schedule P20, was much less than it should be having regard to the Proforma Invoice Exhibit D4 which suggests an FOB price of ¥750,000 albeit with the ¥100,000 loading. Again, I reject that contention for the same reasons as I have rejected the ‘FOB argument’.
It was also contended that the exchange rate used by the plaintiffs in their schedule was inappropriately advantageous to them in the calculation of “out of pocket” expenses. This is a small matter. In the calculations, where possible, counsel, Mr Hoile, used the exchange rate in the customs documents. I do not think this unreasonable. Again, Clarke had it within his power to provide first‑hand documents evidencing the actual payment and therefore the applicable exchange rate. He did not do so.
Finally, in the defendants’ schedules, Exhibits D6 and D7, there are a number of items of claimed “out of pocket expenses” which have no support other than the oral evidence of Clarke (eg Import approval/application $50, Overseas Transfer $30, Detailing $110 per car, Petrol $10 per car). He proffered no other evidence (eg documentary) supporting these ‘out of pocket’ expenses. Again for the reason that I do not accept his evidence as credible and reliable and also for the same reasons as I rejected the ‘FOB’ and ‘vehicle Before’ arguments, I also reject this final argument.
So I find that Viper breached its contracts with Mildren and Bensley and overcharged both, Mildren to the extent of $24,667.40 and Bensley to the extent of $25,130.94. Accordingly, Mildren and Bensley are entitled to damages in those sums.
Claims by Mildren and Bensley against Viper for damages pursuant to Section 82 of the Trade Practices Act 1974 (Cth) for breach of Section 52 of the said Act
Section 52(1) of the Trade Practices Act provides:
“A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
The above section “establishes a norm of conduct, failure to observe which has consequences provided for elsewhere in the same statute ...” (see Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 per Fox J at 348). A breach of s52(1) above gives rise to a right under s82 to recover the amount of the loss or damage.
Section 82(1) provides:
“A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.”
Section 52 is within Part V of the Act.
The claim of Mildren and Bensley under this heading is necessarily confined to Viper, the corporation. There is a claim that Clarke was personally responsible under the complicity provision s75B of the Act which I will deal with later.
Trade Practices Act claim - Parameters
Some of the principles which touch upon this case which have emerged from the volume of litigation spawned by s52 are as follows:
·Beneficiary of action can be other than ‘consumer’:
Though s52 is found in Part V of the Act which is headed “Consumer Protection” it is well settled that a person other than a consumer is entitled to claim for a breach of s52 (see Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594).
Accordingly, in this case there need be no debate as to the correct characterisation of Mildren and Bensley.
·Conduct must be misrepresentative or lead into error:
For conduct to be misleading or deceptive, the conduct must convey in all the circumstances of the case a misrepresentation (see Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202). In each case “it is necessary to examine the conduct whether representational in character or not, and ask the question whether the impugned conduct of its nature constitutes misleading or deceptive conduct” (see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 per Lockhart J at 93). Whether particular conduct is misleading or deceptive is a question of fact which turns upon the circumstances of each case. In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, Gibbs CJ at 198 said of the words of s52 as follows “... one meaning which the words mislead and deceive share in common is to lead into error.” Whether conduct is “misleading or deceptive or is likely to mislead or deceive” is an objective question of fact for the Court to decide in all the circumstances of the case. The section contemplates the effect of the conduct on reasonable people (see Puxu (supra) per Gibbs CJ at 198-9).
This is an issue in this case. I will return to it in a moment.
·Corporation is the usual respondent:
Subject to limited exceptions, s52 proscribes the behaviour of “a corporation”.
·Conduct must be ‘in trade or commerce’:
The proscribed conduct must be “in trade or commerce”. In Concrete Constructions (NSW) Pty Ltd v Nelson (supra) at 604 Mason CJ, Deane, Dawson and Gaudron JJ said as follows:
“What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character. Such conduct includes, of course, promotional activities in relation to, or for the purposes of, the supply of goods or services to actual or potential consumers, be they identified persons or merely an unidentifiable section of the public.”
It is clear in this case that Viper was engaged “in trade or commerce” within the meaning of the section when in the course of negotiating its contracts with Mildren and Bensley.
·‘Intent’ is not relevant:
The intent of the defendant is not relevant. All that is required is that in fact the conduct was misleading or deceptive or likely to be so (see Hornsby Building Information Centre v Sydney Building Information Centre (1978) 140 CLR 216 per Stephen J at 223).
·Reliance and causation:
To recover damages pursuant to s82 the plaintiffs must prove that the loss or damage was sustained “by” the conduct which breached s52. In Wardley Australia Ltd v WA (1992) ATPR 41-189 Mason CJ said at 40, 571:
“The statutory cause of action arises when the plaintiff suffers loss or damage ‘by’ contravening conduct of another person. ‘By’ is a curious word to use. One might have expected ‘by means of’, ‘by reason of’, ‘in consequence of’ or ‘as a result of’. But the word clearly expresses the notion of causation without defining or elucidating it. In this situation, s 82(1) should be understood as taking up the common law practical or common-sense concept of causation recently discussed by this court in March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506, except in so far as that concept is modified or supplemented expressly or impliedly by the provisions of the Act. Had Parliament intended to say something else, it would have been natural and easy to have said so.”
Counsel for Viper, Mr Tredrea, submitted that both Mildren and Bensley relied not so much on what was said by Clarke as to the costs or expenses but rather what he said about the likely profit on resale here in Australia and that he would buy back the vehicles if they could not sell them. This submission has support in the evidence. I did not take the evidence of Mildren and Bensley to be an assertion that they relied upon those matters to the exclusion of the other representations or promises. In any event, strict reliance on the proscribed conduct is not a precondition to recovery under s82. This issue of the necessity for reliance is canvassed at length in Janssen-Cilag Pty Ltd v Pfitzer Pty Ltd (1992) 37 FCR 526, where Lockhart J, after an exhaustive analysis of the authorities, concluded, correctly in my view, that entitlement to recover loss or damage under s82 of the Act is not necessarily confined to persons who rely on the representation made in contravention of s52. At 531 Lockhart J said:
“Section 82(1) should not be given a restricted meaning to be available only to the person who suffers loss or damage by reason of his own reliance upon the representations which constituted the relevant contravention of Pt IV or V; nor for that matter should it be given an extended meaning which strains the language used by the legislature. But a person who suffers damage by reason of or as a result of the conduct of the contravener (albeit that that person does not himself rely upon the representations) is not to strain the language of the subsection, but to interpret it according to its ordinary and natural meaning. For a person to recover under the section he must suffer loss or damage by reason of or as a result of the contravention. There is nothing unduly wide about that.”
·Vicarious liability:
The conduct of a servant, such as Clarke in this case, which is “within the scope of the actual or apparent authority of the servant”, is deemed to be the conduct of the corporation - in this case Viper (see s84(4) of the Act).
There is no issue in this case as to Clarke doing other than acting within the scope of his authority as servant of Viper.
·Measure of Damages - Tort or Contract
The Trade Practices Act, in particular Parts IV and V, does not prescribe the measure of damages. So the question arises should the measure of damages be assessed in tort or contract. In Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Mason, Wilson and Dawson JJ said at 11, 12 and 14 that the tortious measure of damages, namely 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 “is appropriate in most, if not all, Part V cases, especially those involving misleading or deceptive conduct ...”.
Again, in this case, restoring to Mildren and Bensley the amount of the overcharge satisfies both the tortious and contractual measure of damage. The contractual measure is, so far as money can do it, placing the plaintiff in the position in which he would have been had the defendant performed the obligation breached. The tortious measure is, so far as money can do it, placing the plaintiff in the position in which he or she would have been had the tort not been committed.
Such then are some of the parameters for claims arising from breaches of s52 of the Trade Practices Act. I now turn to my findings under this heading of claim.
Findings as to Trade Practices Act claim
I find that Viper, by its servant Clarke, misled and deceived Mildren and Bensley by telling them that the amounts listed by him on the document Sample Only of Estimated Costs (Exhibit P2) were estimates of out of pocket expenses and so having struck an agreement with them on that basis obtained payment from them on that basis. However, the amounts were either a charge arbitrarily fixed by Clarke or an amount which, whilst it related to an expense, was in excess of the actual expense. This conduct was engaged in by Clarke in his capacity as director of Viper so it was misleading or deceptive conduct by Viper. The misrepresentative conduct was made up of the misleading assertions about what was to be charged in addition to the $1,500 fee and the costs of the vehicle together with the deceptive nature of the particulars on the document used for negotiation (ie Exhibit P2) and used in the balance of the contractual documents.
I find that the impugned conduct was engaged in by Viper by its servant Clarke “in trade or commerce”. Further, Mildren and Bensley suffered loss or damage “by” that conduct as required by s82. They paid more than the expenses.
Therefore, I conclude that Mildren and Bensley have established that Viper was in breach of s52, and pursuant to s82, each of them are entitled to the consequential loss or damage amounting to the respective amounts of the overcharge.
Claims by Mildren and Bensley against Clarke (personally) for damages pursuant to Section 82 of Trade Practices Act 1974 (Cth) for being a person as defined by Section 75B involved in a contravention by Viper of Section 52
Section 75B(1) provides:
“(1) A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB, V or VC, or of section 75AU or 75AYA, shall be read as a reference to a person who:
(a) has aided, abetted, counselled or procured the contravention;
(b) has induced, whether by threats or promises or otherwise, the contravention;
(c)has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention.
(2) In this Part, unless the contrary intention appears:
(a)a reference to the Court in relation to a matter is a reference to any court having jurisdiction in the matter;
(b) a reference to the Federal Court is a reference to the Federal Court of Australia; and
(c) a reference to a judgment is a reference to a judgment, decree or order, whether final or interlocutory.”
This section when read with s82 empowers this Court to award damages against any person knowingly concerned in a contravention of s52 by a corporation (see Enzed Holdings Ltd and Others v Wynthea Pty Ltd and Others (1984) 57 ALR 167).
It can be seen from a perusal of s75B that there are a number of, what could be called, concepts of complicity, namely aiding, abetting, counselling, procuring, inducing, knowingly concerned in, being a party to and conspiring which convey the need for a mental element.
Counsel submitted that I should proceed on the basis that the section requires intentional involvement. The authorities usefully gathered in Miller’s Annotated Trade Practices Act 25th Ed 2004 at 612-719 suggest a range of mental elements depending on the degree of complicity alleged. I am content to proceed on the basis that specific intent is required. So there is no need to canvass any lesser state of mind.
Clarke, as the sole shareholder and director, was, in practical terms, the company. He was the ‘alter ego’ of the company. He intentionally procured the company’s contravention by himself knowingly and deliberately misleading and deceiving Mildren and Bensley in the way I have set out above. He was therefore knowingly concerned in, or a party to, the contravention of s52 of the company Viper within the meaning of s75B.
Therefore, Mildren and Bensley are entitled to recover from Clarke personally the amount of their loss and damage, namely the amounts of the overcharges.
Claim for damages against Viper and Clarke for the tort of deceit
“The tort of deceit is committed when a defendant makes a false representation to the plaintiff knowingly, or without belief in its truth, or recklessly, not caring whether it be true or false, with the intention that the plaintiff should believe and act on the false representation. To be actionable, the plaintiff’s reliance on the false representation must result in actual damage to the plaintiff.”
(The Law of Torts in Australia 2nd Ed (1993) by Trindade and Cane)
So there are effectively five elements to this tort, namely:
·the false representation;
·knowledge of the falsity;
·the intention of the defendant that the plaintiff act upon the false representation;
·the plaintiff must have acted upon the false representation; and
·as a result of so acting the plaintiff must have sustained actual damage.
Clearly, on my findings, Clarke has made a false representation as to what will be charged in addition to the fee per vehicle and the cost of the vehicles at auction. It could be said that what he said to both Mildren and Bensley constituted a misstatement of intention or purpose as opposed to one of existing or specific fact. That is, when Clarke explained the venture by reference to the document Sample Only of Estimated Costs (Exhibit P2) he was indicating a future intention. However, whilst it was not strictly a misstatement of existing fact, because the expenses were yet to be incurred and yet to be billed, it still is sufficient to found an action in deceit (see Jones v Dumbrell [1981] VR 199).
Again, on the basis of my findings, Clarke had knowledge of the falsity. He knew that the projected expenses foreshadowed by him in the discussions were not all true expenses or costs of the importations but in most instances included further fees for himself. The classic exposition of the mental element required is that of Lord Herschell in Derry v Peek (1889) 14 App Cas 337, 374:
“I think the authorities establish the following propositions: First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly careless whether it be true or false ... To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth.”
Further, Clarke intended that both Mildren and Bensley act upon this representation when he made the offer of his services to them on the basis of a fee of only $1,500 per vehicle. There were no doubt other encouragements but the untrue representation as to the expenses was one of the attributes of the venture which Clarke intended would attract Mildren and Bensley into the venture (see Edgington v Fitzmaurice (1885) 29 ChD 459 at 482; Peek v Gurney (1873) LR 6 HL 377).
Clearly Mildren and Bensley relied upon the misrepresentations as to the costs and expenses. It was a material feature of the scheme. It does not need to be the sole reason why they participated in the venture. I am satisfied that it was a material contribution. Reliance to that extent is sufficient to found an action in deceit (see Edgington v Fitzmaurice (supra) at 482; Nicholls v Taylor [1939] VLR 119 at 122; Gould v Vaggelas (1984) 157 CLR 215 per Wilson J at 236-239).
Finally, as a result of the acting upon the misrepresentation, Mildren and Bensley suffered loss and damage in that they each paid to Viper more than Viper was entitled to pursuant to the agreements. The amounts of the overcharging are recoverable damages in deceit (see The Law of Torts in Australia (supra) at 178-1979; Gould v Vaggelas (supra)).
So, in my view Mildren and Bensley are entitled to recover as damages for the tort of deceit the respective amounts of the overcharge. Further, they are entitled to recover from both Viper and Clarke. Clarke’s fraudulent misrepresentation in his capacity as director of Viper is the fraudulent misrepresentation of Viper. Both entities are liable (see Musca v Astle Corporation Pty and Anor (1988) 80 ALR 251 at 261).
I turn to the claim for exemplary damages.
Exemplary Damages
Exemplary or punitive damages cannot be awarded in contract (see Addis v Gramophone Co Ltd [1909] AC 488; Butler v Fairclough (1917) 23 CLR 78 and 89 per Griffith CJ). So too, exemplary damages are not available under s82 of the Trade Practices Act 1974 (Cth) (see Musca (supra); Marks v G.I.O. Australia Holdings Ltd (1998) 196 CLR 494) or by a parity of reasoning, under s84 of the Fair Trading Act 1987 (SA). However, this heading of damages is available for the tort of deceit (see Musca (supra)).
The damages which I have thus far awarded to Mildren and Bensley are compensatory. By restoring to them, as damages, the respective amounts by which they have been overcharged places them in the position they would have been in if the defendants had not committed the tort. However, they seek exemplary damages which is a punitive enlargement of the compensatory damages.
Exemplary damages are intended to rebuke and punish a defendant for conduct which displays a conscious and contumelious disregard for a plaintiff’s rights. Such an award is designed to deter a defendant from such conduct (see XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 471; Lamb v Cotogno (1987) 74 ALR 188 at 192).
Whilst I have found that Clarke acted with conscious falsity, I am convinced that there was a component of naivety in his behaviour. I do not consider his tortious wrongdoing so contumelious as warranting punishment in addition to ordinary damages. I am mindful that French J said in Musca (supra) at 268, with considerable justification, that the tort of deceit “is a paradigm case” for the awarding of exemplary damages. Nonetheless, I am not minded to award exemplary damages.
I now turn to the last heading of claim.
Claims by Mildren and Bensley against Clarke and Viper for damages pursuant to Section 84 of the Fair Trading Act 1987 (SA) for breaches of Section 56 of the said Act
Neither counsel nor Mr Clarke expended much time on this basis of claim. In the light of my findings thus far, I am disinclined to embark upon an examination of this remedy which is an alternative several times removed. I was intending to seek further argument from counsel on this heading of claim. For instance, I was rather attracted to counsel, Mr Tredrea’s, argument that the person carrying on the trade or commerce, within the meaning of s56, was the company Viper and therefore no remedy lies in s84 for Mildren and Bensley. However, there was neither elaboration of, nor reply to, that contention. Further, delaying judgment would not be warranted.
Conclusion
The plaintiffs, Mildren and Bensley, are entitled to recover as damages the amounts overcharged, namely $24,667.40 and $25,130,94 respectively from:
·Viper for breach of contract;
·Viper pursuant to s82 of the Trade Practices Act 1974 (Cth) for breach of s52 of the said Act;
·Clarke pursuant to s82 of the Trade Practices Act 1974 (Cth) for complicity in the breach by Viper of s52 of the said Act; and
·both Clarke and Viper for the tort of deceit;
to the intent that the respective damages awards will be borne joint and severally by the two named defendants.
So there will be a judgment in favour of Mildren against Viper and Clarke in the sum of $24,667.40 plus interest.
And there will be judgment in favour of Bensley against Viper and Clarke in the sum of $25,130.94 plus interest.
As to interest, pursuant to s39 of the District Court Act 1991, the plaintiffs are entitled to interest on the judgment sums calculated from the date they paid the amounts of the overcharge until today’s date. The rate of interest should be the commercial rate which can conveniently be found in the Third Schedule to the Supreme Court Rules. I would suggest a rate of 6.25%.
As the evidence does not disclose precisely when the final payments were made I have been unable to complete the calculation.
I will therefore hear the parties as to the calculation of interest and as to costs.
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