Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company v Cheng

[2021] NSWSC 1141

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company v Cheng [2021] NSWSC 1141

Hearing dates:

24-26, 28 May 2021

Date of orders:

10 September 2021

Decision date:

10 September 2021

Jurisdiction:

Common Law

Before:

Payne JA

Decision:

Amended statement of claim:

(1)    Defendant to pay the plaintiff damages in the sum of $62,720;

(2)    Defendant to pay the plaintiff’s costs of the proceedings;

(3) Pursuant to s 100 of the Civil Procedure Act 2005 (NSW), defendant to pay pre-judgment interest on the principal sum of $62,720 for the period from 10 January 2017 to 10 September 2021 at the rate identified by Practice Note SC Gen 16.

Amended statement of cross-claim:

(1)    Cross-claim dismissed with costs.

Catchwords:

CONTRACTS – formation – acceptance of offer – whether offer to purchase vessel accepted orally or in writing prior to purported withdrawal of offer – binding contract formed by acceptance of offer prior to withdrawal

CONTRACTS – express terms – precontractual statements – whether contract for sale of vessel included a term that the vessel would “fit” in a dock – no representation made that the vessel would “fit” in the dock

CORPORATIONS – contracts – agency – whether contract entered into with the express or implied authority of the company – implied authority to bind company to contract through acquiescence of the board

DAMAGES – mitigation of loss – whether costs incurred in mitigation are too remote to be recovered – mitigation results in crystallisation of loss

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 100

Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, ss 18, 21

Contracts Review Act 1980 (NSW), s 7

Corporations Act 2001 (Cth), ss 124, 126, 198A, 198C, 198D

District Court Act 1973 (NSW), s 44

Justice Legislation Amendment Act (No 3) 2018 (NSW)

Sale of Goods Act 1923 (NSW), ss 19, 52

Supreme Court Rules 1970 (NSW), r 14.2

Cases Cited:

Australian Medic-Care Co Ltd v Hamilton Pharmaceutical Pty Ltd [2009] FCA 1220; (2009) 261 ALR 501

Biggerstaff v Rowatt’s Wharf Ltd [1896] 2 Ch 93

Birjandi v Todaytech Distribution Pty Ltd [2005] WASCA 44

Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279

Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653; [1986] HCA 81

Cahill v Kiversun Pty Ltd [2017] VSC 641

Castle Constructions Pty Ltd v Fekala Pty Ltd (2006) 65 NSWLR 648; [2006] NSWCA 133

Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd (2017) 251 FCR 404; [2017] FCAFC 75

Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2010] NSWSC 1073

Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50

Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd [2013] VSC 464

Fox v Wood (1981) 148 CLR 438; [1981] HCA 41

Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480

Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353

Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549

Hightime Investments Pty Ltd v Adamus Resources Ltd [2012] WASC 295

James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296

Junker v Hepburn [2010] NSWSC 88

Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; [1990] HCA 32

Nova 96.9 Pty Ltd v Natvia Pty Ltd [2018] NSWSC 1288

Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5

Sapphire Suite Pty Ltd v Bellini Lounge Pty Ltd [2018] NSWDC 160

Simonius Vischer & Co v Holt [1979] 2 NSWLR 322

The NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd [2017] NSWSC 1194

Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603; [1998] HCA 38

Wenkart v Pitman (1998) 46 NSWLR 502

Texts Cited:

GE Dal Pont, The Law of Agency (4th ed, 2020, LexisNexis)

JW Carter, Carter on Contract (2016, LexisNexis)

NC Seddon and RA Bigwood, Cheshire & Fifoot Law of Contract (11th ed, 2017, LexisNexis)

RP Austin, HAJ Ford and IM Ramsay, Company Directors: Principles of Law and Corporate Governance (2005, LexisNexis Butterworths)

Category:

Principal judgment

Parties:

Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (Plaintiff; Cross-Defendant)
Jian Ling Cheng (Defendant; Cross-Claimant)

Representation:

Counsel:
M Hall (Plaintiff; Cross-Defendant)
J Mitchell (Defendant; Cross-Claimant)

Solicitors:
Pure Legal (Plaintiff; Cross-Defendant)
Luminous Legal (Defendant; Cross-Claimant)

File Number(s):

2018/356960

Publication restriction:

Nil

Judgment

1. PAYNE JA: These proceedings concern a contract (the Contract) for the sale of a 48 foot “Princess Open Sports Yacht V48 601” display vessel (the V48 Vessel) entered into in 2016 between the plaintiff, Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (MYSA) and the defendant, Ms Jian Ling Cheng. There is a controversy about whether the Contract constituted a binding agreement between the parties, and about the terms of the Contract.

2. MYSA seeks damages for Ms Cheng’s refusal to perform her obligations under the Contract. Ms Cheng’s response is threefold. First, Ms Cheng alleges that there was an oral term or condition of the Contract that the boat must “fit” within a mooring at her property in Woolwich which was breached or not fulfilled, such that she was entitled to refuse to perform her obligations under the Contract. Secondly, Ms Cheng alleges that the Contract is not binding as it was only signed by one director of MYSA, whereas the signature of two directors is required to authorise MYSA to enter into a valid contract. Thirdly, Ms Cheng submits that MYSA has not proved the loss it claims.

3. Despite the damages sought being well under the jurisdictional limit of the District Court, MYSA commenced proceedings in the Supreme Court in accordance with the decision in Nova 96.9 Pty Ltd v Natvia Pty Ltd [2018] NSWSC 1288 (Nova 96.9 v Natvia), where Rein J held that the District Court does not have jurisdiction to hear any matter arising from a commercial transaction having regard to r 14.2(1)(a) of the Supreme Court Rules 1970 (NSW) as at 2 February 1998. On 28 November 2018 (eight days after these proceedings were commenced), s 44 of the District Court Act 1973 (NSW) was amended in response to Nova 96.9 v Natvia and other similarly decided cases including The NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd [2017] NSWSC 1194 and Sapphire Suite Pty Ltd v Bellini Lounge Pty Ltd [2018] NSWDC 160. The Justice Legislation Amendment Act (No 3) 2018 (NSW) inserted s 44(1)(c1) which provides:

44   Actions

(1)   Subject to this Act, the Court has jurisdiction to hear and dispose of the following actions—

…

(c1)   subject to paragraph (c), any action arising out of a commercial transaction in which the amount (if any) claimed does not exceed the Court’s jurisdictional limit, whether on a balance of account or after an admitted set-off or otherwise,

4. The Explanatory Note to the amending legislation provides that the amendments were designed to clarify that the District Court has jurisdiction to determine actions arising out of a commercial transaction in which the amount (if any) claimed does not exceed the Court’s jurisdictional limit, and to ensure that the District Court is to be treated as having had this jurisdiction since 2 February 1998.

Relevant facts

5. Before descending into the detail of this case it is useful to set out the structure of the companies involved and the relevant actors. MYSA is effectively controlled by Mr Neil Sutton through the entity Enares Pty Ltd (Enares). Enares has the following wholly owned subsidiaries:

1. MYSA t/as The Boutique Boat Company, which imports luxury vessels and RIBs from overseas and from time to time rents marina berths at Rose Bay Marina from Enares Rose Bay Pty Ltd. MYSA owns new and used vessels including demonstration and trade-in vessels;

2. Enares Rose Bay Pty Ltd, managed by Rose Bay Marina, which is the holder of the 43-year sublease for the various marina berths at Rose Bay Marina and receives the rental income from MYSA or customers;

3. Motor Yacht Marine Brokers Pty Ltd t/as The Boutique Boat Brokers (MYMB), which offers boat brokerage services including to MYSA and employs sales and boat staff for the sale of vessels and rental of marina berths;

4. Motor Yacht Marine Holdings Pty Ltd, which employs executive staff (including skippers) and holds assets; and

5. Motor Yacht Marine Pty Ltd (MYM), which undertakes repairs, maintenance and installations of equipment in respect of motor yachts and associated equipment.

6. The directors of all of the companies are Mr Neil Sutton (who gave evidence) and his son Mr Scott Sutton (who did not). Mr Jim Thompson, who gave evidence, is the company secretary of all relevant entities. Mr Damien Johnson and Mr Sean O’Doherty, the remaining important players in the defendant’s case in the events the subject of these proceedings, were marine brokers employed by MYMB at the relevant time. Their duties included brokering the sale of boats and the rental of marina berths at the Rose Bay Marina. They were authorised to negotiate contracts for the sale of MYSA’s vessels but were not authorised to sign contracts on behalf of MYSA. They were required to consult Mr Thompson or other authorised officers of MYSA on discounts to price.

7. On 29 September 2016, Ms Cheng’s son, Mr Cheng Shu, contacted Mr Damien Johnson with an inquiry to purchase one of MYSA’s vessels. Later that day, Mr Cheng Shu visited MYSA’s offices at Rose Bay Marina with Ms Cheng and her husband, where after some discussion Mr Johnson introduced them to the V48 Vessel. Ms Cheng and her husband do not speak English. Mr Cheng Shu translated for his mother. Although Ms Cheng’s husband is apparently the Chairman of the board of a large company operating in China having many thousands of employees, he was not (at least on the evidence before me) directly involved in any negotiations. A draft contract in MYSA’s standard form was emailed by Mr Johnson to Mr Cheng Shu that night.

8. Ms Cheng, her husband, Mr Cheng Shu and some others (who took no part in the negotiations) attended Rose May Marina again on Saturday 1 October 2016. They spoke to a different broker, Mr Sean O’Doherty. Ms Cheng (with Mr Cheng Shu acting as translator for his mother) and Mr O’Doherty negotiated a sale price for the V48 Vessel of $1,180,000 with a deposit of $20,000. Again, it seems that Ms Cheng’s husband was not directly involved in any negotiations. Ms Cheng signed a pro forma contract for sale of the V48 Vessel, which contained handwritten special conditions completed by Mr O’Doherty, and paid the $20,000 deposit by electronic funds transfer.

9. On the evening of 1 October 2016, Mr Johnson telephoned Mr Cheng Shu and informed him that Ms Cheng’s offer of $1,180,000 for the V48 Vessel was accepted by MYSA.

10. There is a controversy about whether on Sunday 2 October 2016 Mr Jim Thompson (the company secretary and group operations manager of Enares and its subsidiaries, including MYSA) and Mr Neil Sutton (director of Enares and its subsidiaries, including MYSA, and ultimate owner of MYSA, through Enares) countersigned the pro forma contract on behalf of MYSA.

11. What is clear is that on 2 October 2016, Messrs Thompson and Sutton motored the V48 Vessel to Ms Cheng’s residence in Woolwich. What was said at the time the V48 Vessel arrived at the wharf adjoining the Woolwich property was controversial, but it is common ground that Mr Thompson and Mr Sutton collected friends of Ms Cheng’s husband and motored those passengers around Sydney harbour for 30 minutes before dropping them back at Ms Cheng’s residence. Mr Thompson and Mr Sutton then motored the V48 Vessel back to Rose Bay Marina.

12. On Wednesday 5 October 2016, Ms Cheng, Mr Cheng Shu and Mr Yaohuan Feng, a friend of Ms Cheng who also goes by the English name “Rock”, visited Rose Bay Marina. Mr Cheng Shu and “Rock” acted as translators for Ms Cheng and spoke with Mr Johnson. There was a controversy about exactly what was said between Ms Cheng and Mr Johnson. It was common ground that at one point Ms Cheng said that she had decided not to proceed with purchasing the V48 Vessel and required a refund of the deposit. It was also common ground that Mr Johnson told Ms Cheng that she was contractually obliged to purchase the V48 Vessel. MYSA’s case is that this dispute arose because, after having signed the Contract on 1 October 2016, Ms Cheng wished to renegotiate the purchase price.

13. On 5 October 2016, after the conversation referred to immediately above, Mr Johnson emailed Mr Cheng Shu attaching a letter. The email provided:

“Hi Cheng,

Thank you for your time today.

As per contract completed on Saturday the 1st of October, you are required to settle the vessel in full, by close of business this Friday the 7th of October.

Formal letter attached.

We have honoured our word and the sales agreement by:

-committing to the large discount and agreeing to your offer of $1,180,000.
-committing to your hand over schedule
-taking the vessel for a sea trial on Sunday the 2nd of October and berthing at your residential premises
-inclusion of fenders, socks and ropes
-Inclusion of safety pack and epirb
-full vessel detail and teak clean
-vessel sold with full new boat warranties
-committing to full hand over and driver training
-ongoing service and support by Princess Yachts Australia

I am not able to offer any further discount or inclusions other than what has been agreed to and contracted.

The vessels that you mentioned today, are not comparable to the build, furnish, finish and performance of Princess Yachts.

I look forward to welcoming you and your family into the Princess family and am sure you will have many memorable experiences in the years ahead.

You can pay the remaining balance into the account used to pay the deposit on Saturday or if you would like to pay by other manner, please advise.”

14. The letter which was attached to that email provided:

“RE: Your Princess V48 Sports Yacht Purchase C/N: 1775 FILE ID: 3955

We refer to the above matter and the contract you entered into on 1 October 2016.

Under the Terms and Conditions of the Contract for the Sale of a Display vessel the contract is to settle by close of business Friday 7 October 2016.

Should settlement not take place on or before that date, we will be left with no other alternative than to enforce our rights under the terms and conditions of the contract.”

15. On 7 October 2016, Mr Johnson telephoned Mr Cheng Shu enquiring when Ms Cheng would pay the balance of the purchase price for the V48 Vessel. Mr Cheng Shu told Mr Johnson that Ms Cheng wanted to cancel the Contract.

16. On 13 October 2016, Mr Cheng Shu lodged a complaint against MYSA with NSW Fair Trading on Ms Cheng’s behalf. The terms of that complaint are important in resolving a number of the factual issues in this case and so will be set out in full:

“We visited Rose bay Marina on the 1 October 2016 and the sales staff showed us the boat ‘Princess V48’. We made a deal on that day and signed the contract irrationally without knowing the term ‘cooling-off period’ (it was not mentioned to us). We paid $20,000 deposit and there was no receipt or a copy of contract given to us until 5th October 2016. So, we couldn’t go through the detail of the contract while we were waiting. We did our research and we believe the sales person Damien was misrepresenting the vessel to us. (He told us Riviera compares to Princess is like Honda compares to Ferrari). So we went back to Rose Bay Marina on the 5th October and requested to terminate the contract and asked for refund of deposit. When we mentioned cooling-off period to Damien, he told us there was no cooling-off period and hence we couldn’t get our deposit back. We want terminate the contract immediately and have $20,000 to be refund in full.”

17. There is a significant issue about MYSA’s damages claim for breach of contract. As I will explain, MYSA sold the V48 Vessel on 10 January 2017 for a Purchase Price of $1,200,000. The $1,200,000 “Purchase Price” was comprised of $600,000 in cash and $600,000 as the agreed value at that time of a Princess Yacht V39 trade-in-vessel (the V39 Vessel). It will immediately be appreciated that the “Purchase Price” is a sum in excess of the sale price under the Contract.

18. Nevertheless, MYSA claims that it suffered a loss as a result of Ms Cheng’s failure to pay the balance of the sale price under the Contract and seeks damages on the following basis. The V39 Vessel itself was not sold until 1 August 2018 (the V39 Sale). The sale price was for $475,000. MYSA’s damages claim comprises the following heads of loss:

1. loss arising from the difference in purchase price under the Contract, and monetary amounts ultimately received by MYSA through the eventual sale of the V48 Vessel and through the V39 Sale;

2. loss arising from expenses in relation to berthing, advertising, maintaining, repairing, cleaning, paying skipper, fuel and transport costs, and obtaining insurance for the V48 Vessel until it was sold;

3. loss arising from expenses in relation to berthing, advertising, maintenance, repairing and obtaining insurance for the V39 Vessel until the V39 Sale; and

4. brokerage paid on the V48 Vessel upon its sale and on the V39 Vessel in the V39 Sale, which otherwise did not need to be paid under the Contract.

19. Ms Cheng resisted MYSA’s claim on the essential bases that:

1. there was a representation made to her on 1 October 2016 that the V48 Vessel would “fit” within the mooring at her property in Woolwich and that the Contract would be cancelled if it did not. This representation was elaborately pleaded in the defence and cross-claim as giving rise to numerous defences and causes of action. It is now clear, however, that the making of this representation is the foundation of each of these claims;

2. at least as at 5 October 2016 when she withdrew her offer to purchase the V48 Vessel, there was no valid agreement binding her to purchase the V48 Vessel because the Contract had only been signed by one director of MYSA, whereas the signature of two directors was required to authorise MYSA to enter into the Contract;

3. however, assuming the Contract was binding, the proper measure of damages for breach of the Contract is for MYSA to be placed in the same, and no better, position as if the Contract had been performed. Ms Cheng submitted that, there being no reduction in the market price at which the V48 Vessel was sold from that which was agreed with Ms Cheng, MYSA prima facie suffered no loss of profits from the loss of the Contract with Ms Cheng. It was further submitted that MYSA could not discharge the onus of establishing the amount of that alleged loss. This was because the invoices MYSA sought to rely on are inadmissible hearsay as they were issued in contemplation of litigation, and in any event the provenance of those invoices is doubtful as most were issued in contemplation of MYSA’s litigation by its parent and sibling entities (which, together with MYSA, share a common ultimate owner), and there is no evidence that any of the invoices were paid by MYSA. It was submitted that Ms Cheng should not be liable for the costs referable to the V39 Vessel because MYSA’s damages are only referable to the price under the Contract and antecedent costs and expenses and the expected profit on the difference between them. It was submitted that MYSA has not demonstrated that a reasonable person in the shoes of Ms Cheng would have realised that the costs of maintaining and selling a trade-in vessel were sufficiently likely to result from the breach of that contract that those costs flowed naturally from the breach.

20. Besides resisting MYSA’s claim, Ms Cheng cross-claimed for the return of the $20,000 deposit. As in her defence to MYSA’s claim, the cross-claim was also based upon multiple causes of action, all of which had as their foundation the making of a representation on 1 October 2016 that the V48 Vessel would “fit” within the mooring at her property in Woolwich and that the Contract would be cancelled if it did not.

20. Whilst the lengthy and confusing pleading of Ms Cheng’s case in the defence and the cross-claim is to be deprecated, I am grateful for the assistance of her counsel, Mr J Mitchell, who clarified the way the case was put and made sensible concessions about the issues to be determined. I am also grateful for the assistance of Ms M Hall, who represented MYSA admirably.

Credit of witnesses

22. Before addressing the factual findings in detail, I will describe my findings about credit in relation to each of the witnesses.

23. Mr Sean O’Doherty worked for MYMB as a sales broker from 2013 to 2019. He now runs his own business in the same industry and his relationship with MYMB is “less amicable”. He appeared in response to a subpoena and did not make a statement. He gave his oral evidence in a forthright and careful manner. The cross-examination of Mr O’Doherty concentrated upon an alleged failure properly to use the computer-based customer relationship management system employed by MYSA. The attempt to impugn Mr O’Doherty’s credibility or reliability failed. I accept Mr O’Doherty’s evidence based both on demeanour and upon the inferences available from all the evidence including the contemporaneous documents.

24. Mr Damien Johnson is the manager of MYMB. In September 2016 he was employed by MYMB as an executive marine broker. He had held that role since February 2016. As at October 2016 he had been working as a luxury motor yacht broker for around four years. Save in one critical respect, Mr Johnson’s evidence was not controversial. Despite the fact that he was the person who had the greatest amount of contact with Ms Cheng and Mr Cheng Shu, it was not alleged by them that he made any promise relevant to determination of the defence or the cross-claim. The critical issue about which Mr Johnson’s evidence was controversial was the time at which he purported to witness the execution of the Contract by Mr Jim Thompson and Mr Neil Sutton. His evidence on this topic was vague and unimpressive. Whilst I do not make an adverse credit finding about Mr Johnson’s evidence, the contemporaneous documents indicate that his account is at the very least seriously incomplete.

25. Mr Jim Thompson is the company secretary and group operations manager of Enares and its subsidiaries, including MYSA. He gave evidence in a careful and convincing manner. He had an impressive grasp of relevant aspects of the detail of the business and was careful not to overstate matters. His recollection was consistent with, and confirmed by, the contemporaneous documents. I accept his evidence.

26. Mr Neil Sutton is the managing director of MYSA, and owner of Enares and ultimately, MYSA. Whilst I make no adverse credit finding against Mr Sutton, I did not find him to be a reliable witness. Mr Sutton’s recollection about critical events was only fair and he seemed remote from the important details his affidavit suggested he could address. His evidence about signing the Contract has a significant problem which he, and MYSA, was not able satisfactorily to explain. His evidence struck me as principally comprising reconstruction and surmise. About important matters of detail, which I will address below, I much preferred the evidence of Mr Thompson, the company secretary and group operations manager of Enares and its subsidiaries.

27. Ms Christine Perry was the solicitor for MYSA and her evidence simply annexed documents. No issue of credit arises.

28. Mr Cheng Shu is the son of Ms Cheng. His evidence was critical because he was the interpreter between Ms Cheng and the witnesses from MYSA. He was a most unimpressive witness. His evidence was completely inconsistent with a number of contemporaneous documents, including documents he drafted. When faced with difficult questions he asserted that he had not read critical documents at the time. He claimed he had not bothered to read his email correspondence about the purchase of a boat by his mother for over $1 million. Mr Cheng Shu struck me as very attuned to what he understood to be Ms Cheng’s case and as seeking to tailor his evidence to say what he thought would assist his mother. About any matter in dispute I do not accept his evidence unless it is corroborated by independent evidence.

29. Ms Jian Ling Cheng is the registered proprietor of a waterfront property at Woolwich. Ms Cheng gave evidence using an interpreter. Her evidence was given in an argumentative manner. She was not prepared to make concessions about any issues, even where her evidence was flatly inconsistent with contemporaneous documents. When challenged about obvious inconsistencies, she sought to blame others, particularly Mr Cheng Shu. Ms Cheng used to own another property in Burwood which she bought with the assistance of a Mandarin speaking solicitor. Ms Cheng owns a company which conducts a newsagency business. The business’ accounts are in English and Ms Cheng has them explained to her before she signs them every year. Ms Cheng signed the lease for the business’ premises through a lawyer. Ms Cheng has a lottery ticket licence from the New South Wales Government. Ms Cheng’s husband is the Chairman of the board of a large business in China which has many employees.

30. Despite being the owner of a business and a multi-million dollar property in Woolwich with its own boat ramp, and despite having purportedly purchased a boat for over $1 million (paying the $20,000 deposit from her own at-call funds), Ms Cheng affected not to understand anything about the importance of written contracts or the possible effect of her signing one. I do not believe her evidence about any critical issue. Her evidence was inconsistent with the credible evidence I accept, the logical possibilities and, most importantly, the contemporaneous documents.

31. Ms Cheng’s denial that she had discussed with her son at any time since 5 October 2016 specifically what happened on 1 October 2016 is not credible. I accept Ms Hall’s submission that Ms Cheng was willing deliberately to avoid answering questions that she thought would not assist her case.

32. Mr Yaohuan Feng, known as “Rock”, was not a credible or reliable witness. He was very attuned to the issues and I formed the view that he was tailoring his evidence to suit what he understood Ms Cheng’s case to be. He was not present on any occasion where representations were alleged to have been made and was first involved from 5 October 2016. Mr Feng was not willing to make sensible concessions. He insisted that it was “easy to remember” the exact words that were said during a disputed conversation on 5 October, despite the conversation occurring three years earlier, no note having been taken and despite his being unable to remember the name of the other participant in the conversation. I do not accept his evidence on any contested issue unless it is independently confirmed.

Findings of fact

33. In this section I will set out my principal findings of fact based on the oral and documentary evidence. I will attempt to address the evidence in chronological order rather than the order in which witnesses were called before me. This was a case where, on the principal contested issues of fact, the versions given by the witnesses were irreconcilable.

34. In September 2016, MYSA listed the V48 Vessel for sale for the advertised price of $1,635,000.

35. Mr Cheng Shu, the son of Ms Cheng who interpreted for her at all relevant times, gave evidence that in or about September 2016, his mother told him that his father wanted to buy a boat and that they should look for a boat so that his father could go fishing. Mr Cheng Shu looked on the boatsales.com.au website and found that MYSA had a boat for sale at its marina in Rose Bay and that a Riviera dealer had a boat for sale at the marina in Rushcutters Bay. On or about 28 September, Mr Cheng Shu went with his father to the marina in Rushcutters Bay to see the Riviera dealer in a visit which lasted 20-30 minutes. The significance of this evidence is that other than this one reference in Mr Cheng Shu’s affidavit, there is no suggestion anywhere that Mr Cheng Shu’s father, who is the Chairman of the board of a large Chinese company and who usually resides in China, had any role in the purchase of the V48 Vessel.

29 September 2016

36. On 29 September 2016, Mr Johnson received an inquiry from Mr Cheng Shu in response to an advertisement on boatsales.com.au for the sale of a Princess Yacht V58 vessel, 60 foot in length. That same day, Mr Johnson telephoned Mr Cheng Shu and invited him to inspect the boat at Rose Bay Marina. Mr Cheng Shu, Ms Cheng and her husband attended the Rose Bay Marina that afternoon. There was a 30-minute conversation in the marina office, at the commencement of which Mr Cheng Shu said that all dealings would be through him. All conversations between Mr Johnson and Mr Cheng Shu were in English. After the meeting, Mr Johnson took the Chengs on a walk through the V58 vessel at the marina. When they got off the vessel Mr Cheng Shu said that the boat was outside their budget and asked to look at something else. Mr Johnson then took them through a Princess Yacht V39 vessel, which was too small. He then showed them the V48 Vessel.

37. After viewing the V48 Vessel, Mr Johnson and the Chengs returned to MYSA’s office where Mr Johnson gave a digital presentation on the vessel. The conversation then turned to berthing of the V48 Vessel.

38. Mr Johnson’s evidence was that Mr Cheng Shu only made passing reference to a berth at the Woolwich residence. I accept his evidence that Mr Cheng Shu told him “we have a berth in front of our home which may or may not berth the boat”. In response, Mr Johnson offered a rental berth at Gladesville Bridge Marina. I accept Mr Johnson’s evidence that he was not shown any photos, drawings or plans of the Woolwich home or its berth. At no stage during the conversation or anytime on 29 September 2016 did any person say anything to him about the V48 Vessel needing to fit any particular jetty, berth, pontoon or dock.

39. In his affidavit Mr Cheng Shu insisted that he repeatedly told Mr Johnson that “we will need to make sure the V48 fits our dock”. I reject that evidence. There is not a word in the contemporaneous documents about any requirement that “the V48 fits our dock”. In the written complaint to NSW Fair Trading lodged by Mr Cheng Shu in his mother’s name shortly after this day, there is not a word about any requirement raised with MYSA that the V48 Vessel fit the dock. The suggestion in Mr Cheng Shu’s affidavit that Mr Johnson agreed on 29 September that “we can take the V48 to your place to check if it fits or not” cannot be accepted. It is inconsistent with the actions of the relevant players, the contemporaneous documents and the letter of complaint referred to at [16].

40. I reject Mr Cheng Shu’s evidence to the effect that he talked at length about the features of the dock and that he looked up a Google Maps satellite view of the dock on his phone to show to Mr Johnson. The evidence was self-serving and inconsistent with many other aspects of the evidence including Mr Cheng Shu’s own conduct on and after 1 October. I accept Mr Johnson’s evidence that there was no mention of making the Contract conditional upon the V48 Vessel fitting in any berth.

41. There was then a discussion of boat driver training, delivery of the boat to the Woolwich residence, ropes and the condition of the Vessel at handover. Mr Johnson explained to Mr Cheng Shu the process of formalising and completing a contract. Mr Cheng Shu told Mr Johnson that he and his parents would go home and talk about the details.

42. Mr Johnson was cross-examined about whether he had promised on either 29 September or 2 October to conduct a sea trial and berth the V48 Vessel at the Chengs’ Woolwich residence. This was not the case pleaded and it is inconsistent with the defendant’s evidence. Even if pleaded, I would reject the suggestion that any such conversation occurred and I put it to one side.

43. On 29 September at 5:31pm, Mr Johnson sent an email to Mr Cheng Shu:

“Hi Cheng,

Further to my email below.

I have attached a contract for you to review.

The formalities required to purchase a vessel–

•

   Offer formalised with contract   

•

   Deposit paid   

•

   Provide a photo copy of your drivers license

Any questions please let me know.”

44. The contract attached to that email was a standard form contract. This was an important document. I find that Mr Cheng Shu had discussed the possibility of entering into a contract during his conversation with Mr Johnson on 29 September 2016 and that he had explained to Mr Johnson that he would discuss the details of the contract with his mother that evening.

45. I do not accept Mr Cheng Shu’s evidence that he barely glanced at the email. I also reject his evidence that he did not show the email and the draft contract to his parents. On any view he had spent a considerable period of time that day looking into purchasing a boat with his parents and knew that they were very interested in that topic. He also knew that his parents were relying on him to translate conversations and documents in English to them to facilitate the purchase. Mr Cheng Shu’s somewhat surly denials that he read or considered the email were most unpersuasive.

46. I find that on the evening of 29 September 2016, Mr Johnson telephoned Mr Cheng Shu to confirm that he had received the emails. I find that Mr Cheng Shu told Mr Johnson that he had explained the email and the draft contract to his parents and that they would like to purchase the V48 Vessel. I find that it was agreed that Mr Cheng Shu and his mother would attend Rose Bay Marina on Sunday 2 October 2016 to complete the Contract.

1 October 2016

47. As at 1 October 2016, Ms Cheng knew the dock at her Woolwich property was the subject of a lease. She knew that she was the lessee and I find that she knew that the lessor was Roads and Maritime Services. I find that Ms Cheng had not sought to understand the conditions of the lease and had refrained from obtaining legal advice about the conditions, if any, imposed by the lease on moorings at the dock at her Woolwich property. I find that Ms Cheng understood that she was proposing to buy an asset for more than $1 million without any understanding, one way or the other, about the conditions, if any, imposed by the lease on moorings at the dock.

48. On Saturday 1 October 2016, Mr Johnson received a telephone call from Mr Cheng Shu. I find that he said that his mother would proceed with the purchase of the V48 Vessel but wanted to have another look at the boat. I find that this conversation was the result of the family’s consideration of the draft contract emailed to Mr Cheng Shu on the evening of 29 September and that Mr Cheng Shu was acting at the direction of his mother in saying what he did to Mr Johnson on 1 October.

49. As Mr Johnson was not working at the Rose Bay Marina office on 1 October, he telephoned Sean O’Doherty, the broker rostered for duty at the office on that day, and asked him to deal with Ms Cheng and her son.

50. Mr O’Doherty first met Ms Cheng on Saturday 1 October 2016 when she attended the office at Rose Bay Marina with Mr Cheng Shu (who acted as her interpreter), her husband, a baby and another couple. Mr O’Doherty understood that the Chengs were there to finalise the sale of the V48 Vessel. He showed them the V48 Vessel for 20 or 30 minutes before returning to the Rose Bay Marina office to finalise the Contract. Throughout these events, Mr O’Doherty spoke exclusively to Mr Cheng Shu. Their conversation was in English. Mr O’Doherty regarded Mr Cheng Shu’s English as good. I find that there was nothing that Mr O’Doherty said to Mr Cheng Shu in English that Mr Cheng Shu did not understand or could not translate for his mother.

51. After inspecting the V48 Vessel, the parties returned to the office to finalise the terms of the Contract for the sale of the Vessel. They worked off a printed copy of MYSA’s standard form contract, which had the purchaser’s details filled out in handwriting. Mr O’Doherty identified the handwriting as Mr Cheng Shu’s. I find that there was a conversation lasting approximately 10 minutes about special conditions of the Contract, in which Mr Cheng Shu fully participated and translated for his mother. At the outset of that conversation Mr O’Doherty said words to the effect of “the special conditions, which form part of the contract, we need to include in here for you”. Mr Cheng Shu then raised, one by one, the special conditions sought by Ms Cheng. Mr Cheng Shu dictated those matters to Mr O’Doherty who handwrote each of them on the Contract.

52. Mr O’Doherty’s handwriting on the Contract records that the purchase price for the V48 Vessel is $1,180,000. Mr O’Doherty also had a conversation with Mr Cheng Shu about the deposit. Mr O’Doherty agreed to a $20,000 deposit, an amount below the usual 30% deposit ($354,000 in this case), because he was told by Mr Cheng Shu that $20,000 was the transfer limit on Ms Cheng’s online EFT through Citibank.

53. I find that Mr O’Doherty said to Mr Cheng Shu that “as long as we have a deposit attached to the contract, it makes the contract binding”. Ms Cheng and Mr Cheng Shu agreed to a seven-day settlement. I find that Ms Cheng wanted to buy the boat quickly and that she was the one that offered the short settlement period.

54. Ms Cheng then signed the Contract. By signing the Contract and paying the $20,000 deposit, Ms Cheng made an offer to MYSA to purchase the V48 Vessel for the price of $1,180,000. Mr O’Doherty then went through the process of having Ms Cheng sign or initial each page of the document. Before Ms Cheng signed, Mr O’Doherty said words to the effect of “I need you to sign here, these are the special conditions that we’ve added into the contract”. That was translated for Ms Cheng by Mr Cheng Shu. Prior to the time Ms Cheng was asked to sign the Contract, Mr Cheng Shu could see the Contract and could read all of the words handwritten by Mr O’Doherty as special conditions. I reject Mr Cheng Shu’s evidence that he did not in fact read the words in the special conditions. He had told his mother she was signing a contract. I find that Ms Cheng understood that the document she was signing was legally important and that it would require her to pay more than one million dollars.

55. On 1 October 2016, Ms Cheng paid the $20,000 deposit by electronic funds transfer.

56. After Ms Cheng paid the deposit, Mr Cheng Shu said words to effect of “we need you to help us set up the boat at our berth”. Mr O’Doherty replied in words to effect that “as part of the process we will assist you to set up the boat at your marina berth”. Mr O’Doherty gave evidence, and I accept, that this was the full extent of any conversation on that day about the boat “fitting” the berth at the Woolwich property. I find that Mr O’Doherty received no commission from the sale and would not have received any commission from the sale had Ms Cheng paid the remainder of the contract price.

57. The issue of the boat “fitting in the berth” at Woolwich was simply not discussed on 1 October 2016. I accept Mr O’Doherty’s evidence that if such a conversation had happened, he would remember it because it would be “abnormal”. I accept that never in his experience as a yacht broker had he been asked to arrange a “test” to check whether a boat would fit in a dock. I accept that, if asked, he would not agree to conduct such a test so late in the negotiations.

58. If any mention had been made by Ms Cheng about the boat “fitting” in the Woolwich dock, it would have been written in the Contract as a special condition. I accept Mr O’Doherty’s evidence that a special condition about the boat “fitting” in the dock was never raised with him.

59. I accept Mr O’Doherty’s evidence that the possibility of selling the Chengs a berthing package at Gladesville Marina was mentioned on 1 October 2016. This evidence is flatly inconsistent with Ms Cheng’ assertion that she had agreed with Mr O’Doherty that if the boat did not fit in her berth she could withdraw from the Contract.

47. I reject Ms Cheng’s evidence that on 1 October she asked her son to “ask [Mr O’Doherty] if we need to have the boat driven to our jetty tomorrow to check if it fits” or that Mr Cheng Shu told her “he says that to do this, he will need you to sign the contract” and that “he promises that he will drive the boat to our house tomorrow if we sign the contract”. I also reject Ms Cheng’s evidence that there was any conversation to the following effect:

Ms Cheng:   “I need to make sure the boat fits our jetty. If it cannot fit our jetty, I won’t buy it.”

Mr Cheng Shu:   “[Mr O’Doherty] says that they can’t drive the boat out until we have a contract of purchase signed … He says that if you pay the deposit and sign the contract now, he will make the test happen tomorrow.”

61. Shortly put, I find that this entire conversation was a fabrication by Ms Cheng and Mr Cheng Shu. I reject Ms Cheng’s evidence that she was told that “[Mr O’Doherty] says he can take $20,000 for the deposit”, that “if it does not fit then we can get the money back” and that “[Mr O’Doherty] will put something in the contract about it”. I reject Ms Cheng’s evidence that she signed the Contract because Mr O’Doherty promised she could have the boat tested the next day.

62. I reject Mr Cheng Shu’s evidence that he told Mr O’Doherty that his mother was worried about the boat fitting in the dock and that she did not want to buy the boat if it did not fit in the dock. Mr Cheng Shu’s evidence that Mr O’Doherty said “if the boat doesn’t fit in your dock, you don’t need to buy the boat and can get your money back” was a fabrication.

63. Mr Cheng Shu’s evidence about the handwritten special conditions of the Contract is flatly inconsistent with his sworn evidence and that of his mother about these detailed conversations. There is nothing about a “boat test” or “fitting in the dock” in the special conditions. Mr Cheng Shu’s evidence that he was too far away to read the special conditions is, I regret to say, deliberately false. I reject Mr Shu’s evidence that he said before leaving that “it’s very important to have the boat test tomorrow morning”.

64. As I have set out above, by signing the Contract and paying the $20,000 deposit, on 1 October 2016 Ms Cheng made an offer to MYSA to purchase the V48 Vessel for $1,180,000. Also as I have mentioned above, this was a discounted price negotiated with Mr O’Doherty that same day. That discount was required to be considered by an authorised person at MYSA, as the owner of the Vessel. Accordingly, on the evening of 1 October 2016, Mr O’Doherty emailed a copy of the Contract signed by Ms Cheng to Mr Hugh Simson, Mr Neil Sutton, Mr Scott Sutton and Mr Jim Thompson. As, respectively, the general manager for sales, managing director, director, and group operations manager (and company secretary) for MYSA, these four individuals had authority to agree to the discounted price. That same evening, Mr Thompson forwarded Mr O’Doherty’s email to Mr Johnson. The email from Mr O’Doherty attached a copy of the Contract and provided:

“Hi all,

See attached signed contract at $1,180,000 and a $20,000 remittance paid via eft.

They are going to pay 50% of the balance on Tuesday and the remainder on Thursday, ready for handover on Friday.”

65. Mr Thompson was content to agree with the discount of the price of the V48 Vessel to $1,180,000 based upon the offer made by Ms Cheng on terms which included:

1. that she was a cash buyer;

2. that she was prepared to sign the Contract to purchase the Vessel for $1,180,000;

3. settlement would take place within seven days of entering into the Contract (by 7 October 2016), by which time the balance of the purchase price ($1,160,000) would become due and payable, Ms Cheng would take delivery and title to the V48 Vessel would pass to her;

4. Ms Cheng would pay a deposit of $20,000 at the time of her offer to enter into the Contract on 1 October 2016; and

5. subject to acceptance by MYSA of Ms Cheng’s offer at the discounted price, the Contract for the purchase of the V48 Vessel was otherwise unconditional.

66. On the evening of 1 October, Mr Hugh Simson, then the general manager for sales at MYSA, telephoned Mr Johnson and said that Ms Cheng’s offer to purchase the V48 Vessel had been accepted. As I will explain, I find that Mr Simson had implied authority to enter into the Contract on behalf of MYSA.

67. Mr Simson authorised Mr Johnson to convey MYSA’s acceptance of her offer to Ms Cheng which Mr Johnson did by telephone to Mr Cheng Shu on the evening of 1 October. I find that Mr Johnson congratulated Mr Cheng Shu and informed him that his mother’s offer to buy the V48 Vessel had been accepted by MYSA. Mr Cheng Shu said to Mr Johnson that he was looking forward to getting on the water. Mr Cheng Shu did not say anything about the sale being conditional on the Vessel fitting in the dock or complain about not having a copy of the Contract.

68. Mr Johnson was not cross-examined on his evidence of having communicated to Mr Cheng Shu that Ms Cheng’s offer had been accepted by MYSA and I find that he did have that conversation. The absence of cross-examination about this conversation is telling in circumstances where, if Mr Cheng Shu were telling the truth, that day had been littered with promises made by Mr O’Doherty about the Contract being conditional upon a successful test of the boat fitting the dock. It is another indication that no such representations were made.

2 October 2016

69. As to the events of Sunday 2 October 2016, I find that Mr Johnson was not at the MYSA office at the Rose Bay Marina on that day. Mr Johnson could not remember if he was at work that day and Mr O’Doherty, whose evidence I accept, was clear in his recollection that Mr Johnson was not in the Rose Bay office on that day. This is a significant matter in relation to one aspect of the case to which I will return.

70. I find that Mr Cheng Shu telephoned Mr O’Doherty multiple times on the morning of Sunday 2 October requesting that the V48 Vessel be taken to the Chengs’ residence. Mr Cheng Shu told Mr O’Doherty that his father wanted to show the boat to a business associate who was returning to China the following Monday.

71. I reject Mr Cheng Shu’s evidence that on 2 October 2016 he was told the test drive could not happen that day as “our driver is sick”, or that Mr Cheng Shu required Mr O’Doherty to bring the boat to the Woolwich residence to test if it would fit in the dock.

72. Around 10 or 10:30am on 2 October 2016, Mr Thompson attended the Rose Bay Marina office. Mr O’Doherty was the only other person in the office when he arrived. While he was there, Mr Neil Sutton also arrived at the office 20 minutes later. I accept Mr Thompson’s evidence that he signed the Contract on that day and also Mr O’Doherty’s evidence that he saw Mr Thompson sign the Contract.

73. I reject Mr Neil Sutton’s evidence that he too signed the Contract, and Mr Johnson “witnessed” his signature, on 2 October 2016. This is because on 5 October Mr Cheng Shu was given a copy of the Contract signed by only Mr Thompson and “witnessed” by Mr Johnson. As I have said, Mr Johnson was not at the Rose Bay office on 2 October. His signature could only have been affixed to the Contract, at the earliest, on 5 October when he was next in the Rose Bay office. The document given to Mr Cheng Shu on 5 October also does not bear either Mr Neil Sutton’s signature, or Mr Johnson’s as witness to that signature. Although I find that Mr Neil Sutton signed the Contract at some point, I am not satisfied that it was signed before 5 October 2016 and find it was not signed on 2 October 2016 as he says.

74. Mr Johnson was cross-examined about how it was that he witnessed Mr Thompson’s signature on 2 October 2016 when he did not recall whether he was at work on that day:

“Q.   When you fixed your signature to this page, when you signed this, did Mr Thompson sign it in front of you?

A.   I can't recall. He would, he would have had to of I believe.

Q.   Now, it's dated 2 October 2016. But you weren't actually at work on that day were you?

A.   What day was that? Was that–

Q.   2 October 2016 I think was a Sunday.

A.   I can't recall.

Q.   Does it assist you, if I were to tell you that the next day, 3 October 2016 was a Labour Day long weekend holiday?

A.   Long weekend, yep.

Q.   Does that assist you?

A.   No, it doesn’t no sorry.

Q.   Now, you weren't at the Rose Bay marina on 2 October 2016, were you?

A.   I'm not sure. I wasn’t there on 1 October.

Q.   You were not on the 1st?

A.   Yeah.

Q.   Because that's when–

A.   That's the–

Q.   –Mr O'Doherty–

A.   That's when Sean was there, yes.

Q.   –was there?

A.   Yes. So, I can't recall if I came in on the Sunday or not, but I'm not sure, I can't recall.”

75. On 2 October 2016, Mr Thompson and Mr Neil Sutton took the V48 Vessel to Ms Cheng’s Woolwich house. They manoeuvred the Vessel to within 6 inches of the dock and remained there for a minute or two to allow five people (two elderly men, a young woman and two children) to board. The boat was moored only to one pylon because they were going to be there for a brief moment. They did not have any trouble parking the V48 Vessel at the dock. I find that the boat fitted easily into the dock. Mr Thompson and Mr Neil Sutton then drove the V48 Vessel in a joy ride around the harbour for approximately 30 minutes before returning to the Woolwich residence. The joy ride was not a “sea trial”. I accept Mr Thompson’s uncontradicted evidence that a sea trial is only conducted by MYSA with a licenced skipper. Neither Mr Thompson nor Mr Neil Sutton was a licenced skipper or had ever sea tested a boat for MYSA. When Mr Thompson returned with Mr Neil Sutton to the Woolwich residence at the end of the joy ride to drop off the guests, he did not attempt to moor the Vessel parallel to the dock and neither he nor Mr Neil Sutton disembarked.

76. I accept Mr Sutton’s evidence that upon their initial arrival at Woolwich, Mr Cheng Shu did not say to him “if the boat doesn’t fit the dock, we’re not interested in buying the boat anymore.”

77. From MYSA’s viewpoint, the high point of there being the slightest evidence of any conversation about whether the V48 Vessel fit in the dock was provided in the cross-examination of Mr Neil Sutton. Mr Sutton gave the following evidence:

“Q.   So Cheng [Shu] says that you said to him, ‘You'll need to do something about the dock, it’s a bit small. The boat won't fit in either direction’. What do you say about that, is that a correct statement?

A.   No, because there’s only one way you moor a boat in a marina, you back them in or you can – in some marinas you can drive them in frontwards, but that’s more of a commercial marina application. So just backing the boat in is the normal way of backing into a marina.

Q.   But do you accept that you said to Mr Cheng [Shu] that the mooring is a bit small?

A.   No, because we got the boat in so easily.

Q.   The next line, Cheng [Shu] says that he said to you, ‘If the boat doesn’t fit the dock we’re not interested in buying the boat any more’, do you recall him saying that to you?

A.   Not at all. Because we weren't there to test whether the boat fitted or not and it’s not up to me whether the boat fits into a marina.

Q.   Right. Cheng [Shu] then says that you said to him, ‘You’ll need to speak with the sales person about that by calling the office after the holiday’?

A.   There was no mention of berthing anywhere on our deal or anything, so I wouldn’t – I don’t know why I’d say that. The only reason maybe is to get a marine surveyor to have a look at their pen, because I can’t – we’re not experts on whether boat fits or not.

Q.   No. Do you accept that you might have said it though, you might have said this statement, ‘You’ll need to speak with the salesperson about that by calling the office after the holiday’?

A.   I might have said to him to call the office, to be able to get a marine surveyor to look at it.”

78. I find that it is likely that at some point on 2 October there was a limited discussion between Mr Neil Sutton and Mr Cheng Shu about the size of the mooring at the Woolwich dock, and that in response to a question from Mr Cheng Shu about the size of the mooring Mr Neil Sutton said words to the effect of “call the office, and get a marine surveyor to look at it”. This offhand remark made by Mr Neil Sutton suggesting that Mr Cheng Shu consult a marine surveyor fell far short of any pleaded representation either that the V48 Vessel would fit into the dock, or that the Contract would be cancelled if it did not.

79. I find that there was no inspection of the V48 Vessel from a mechanical or specification viewpoint, or any test of the Vessel’s ability to fit in the berth, at any time on 2 October 2016. The V48 Vessel plainly fit in the dock for the purpose of dropping off and picking up passengers. I find that the V48 Vessel, however, was not permitted to be moored at the Woolwich dock by reason of the terms of the Ms Cheng’s lease with Roads and Maritime Services.

5 October 2016 and after

80. On Wednesday 5 October 2016, Mr Johnson was working at the office at the Rose Bay Marina. Mr Cheng Shu, Ms Cheng and another person who was introduced as “Rock” (Mr Yaohuan Feng) visited. They had a 30-minute meeting in the meeting room adjacent to the sales office around a round table. I find that Mr Cheng Shu began the conversation by attempting to renegotiate the purchase price of the V48 Vessel to a lower price.

81. Mr Cheng Shu said that if MYSA did not give a further discount on the price of the V48 Vessel then they would not buy the boat and would exercise what he called the “cooling off period”. Mr Johnson told him that there was no cooling off period in the Contract and provided a copy to Ms Cheng and Mr Cheng Shu. This is a copy of the Contract I have found was signed on 2 October by Mr Thompson but not by Mr Neil Sutton. At some point on 5 October, prior to handing it over, Mr Johnson signed the Contract as a “witness” to Mr Thompson’s signature, which had been affixed on 2 October.

82. I find that Mr Cheng Shu said that a friend had told them they paid too much for the V48 Vessel and if a better price was not offered they wanted their deposit back.

83. I find that throughout the meeting there was no mention of testing the V48 Vessel or whether it fit the dock at the Woolwich residence.

84. It will be recalled that Ms Cheng and Mr Cheng Shu each assert that on 1 October the most elaborate and detailed promises had been made by Mr O’Doherty about the V48 Vessel fitting the dock. Mr O’Doherty was working in the office next door to the meeting room when the Chengs visited again on 5 October. If what Ms Cheng and Mr Cheng Shu allege happened on 1 October was true, and Mr Johnson was (as they would have it) denying any such promise, it is inconceivable that they would not have demanded to speak to Mr O’Doherty again. Yet on their account his name was barely mentioned. Further, if there had been any suggestion of unwritten conditions attaching to the Contract, I find that Mr O’Doherty would immediately have been called into the meeting. He was not.

85. I reject Ms Cheng’s evidence that she asked Mr Feng to tell Mr Johnson “I am not proceeding with the matter as the boat does not fit into our jetty. We agreed that we could cancel the contract if this was the case”. It may be that Mr Feng was involved, as he says, in some version of seeking a further discount, but the context was not, as he asserts, any complaint about the V48 Vessel not fitting the berth.

86. Mr Feng’s affidavit evidence set out in detail the exact words of a conversation that he said occurred on 5 October 2016. During cross-examination Mr Feng said that he was not willing to entertain the possibility that he might be mistaken in any aspect of his evidence, and that it was “easy to remember” the exact words that were said during the conversation on 5 October, despite the conversation occurring three years earlier and despite being unable to remember the name of the sales broker he was speaking to. His evidence was not credible or reliable and I do not accept it.

87. At 9:13pm on 5 October 2016, Mr Johnson sent an email to Mr Cheng Shu attaching a letter addressed to Ms Cheng dated 5 October 2016 notifying her that the sale of the V48 Vessel was due to settle by Friday 7 October 2016 and that payments were required under the Contract.

88. On 7 October 2016, Mr Johnson telephoned Mr Cheng Shu and asked whether his mother was going to complete the Contract and pay the balance of the purchase price. Mr Cheng Shu replied “not unless you are going to agree to a further discount of the price”. I accept Mr Johnson’s evidence about the terms of this conversation and that there was no mention of the dock or any testing of the V48 Vessel.

89. On 13 October 2016, Mr Cheng Shu lodged a complaint against MYSA with NSW Fair Trading. The complaint was lodged in Ms Cheng’s name. I find that Ms Cheng asked Mr Cheng Shu to write the letter of complaint to NSW Fair Trading. I have set out the terms of that letter at [16] above. I reject Ms Cheng’s evidence that she was unaware of the contents of that letter. It is highly likely that she dictated the contents of the complaint to her son. Given what she says (that she thought she was a victim of a “scam” by MYSA) it is inconceivable that Ms Cheng did not ask Mr Cheng Shu to explain to her, in detail, the contents of the letter. It is equally inconceivable that Ms Cheng allowed the complaint to Fair Trading to be sent in her name without having its contents conveyed to her by Mr Cheng Shu. I reject Ms Cheng’s evidence that she knew her son was sending the complaint but that she “can’t remember the details”. The contemporaneous letter of complaint contains no mention whatever of the V48 Vessel “fitting” the Woolwich dock or failing any “test” about its suitability. The idea of the V48 Vessel “fitting” the dock or failing any “test” about its suitability only emerged a considerable time after the commencement of this litigation and after Ms Cheng had changed legal representatives, at least once.

90. A few days before the NSW Fair Trading complaint, on 10 October 2016 Mr Cheng Shu had replied by email to the email and letter from Mr Johnson of 5 October 2016. The contents of Mr Cheng Shu’s email were substantially similar to the terms of the complaint he lodged on behalf of his mother with NSW Fair Trading. The email was as follows:

“On 29th September when we visited your marina for first time we mentioned a Australia brand called Riviera and you told us Riviera compare to Princess is like Honda compare to Ferrari which it isn’t really the fact, as a result of your misrepresentation we sign the contract on 1st Oct without full understanding of Princess brand. Soon after we learned what you told us isn’t the truth we visited your marina again on 5th Oct, this time we asked to cancel the deal and refund our deposit, we mentioned about cooling-off period however you told us there is no cooling-off period and we can’t get our deposit back.

During the whole deal what you have told us misguided us again and again and influenced our decision thoroughly, as results we not only ask to stop the contract immediately but also refund our full deposit.”

91. As with the Fair Trading complaint, the absence of any reference in the email to the size of the V48 Vessel or any “test” to fit the boat in the mooring at Woolwich is telling.

92. On 1 November 2016, MYSA offered to mediate the dispute in accordance with cl 9 of the Contract. On 9 November 2016, Ms Cheng’s legal representative made a written offer on her behalf to vary the purchase price to $1,100,000:

“I act for the above as instructed by Lawside Lawyers of Burwood. I am in possession of a number of letters forwarded by you to Ms. Cheng regarding the purchase of the vessel. I am also now in possession of the contract for sale of the vessel dated 1 October, 2016.

I am instructed to make an offer to you with the hope of resolving the impasse that currently exists. Ms. Cheng proposes that she purchases the vessel at a price of one million one hundred thousand dollars ($1,100,000).

Ms. Cheng proposes that the contract be varied to reflect this variation to the purchase price and that, in the event this proposal is accepted, settlement of the contract take place in 14 days from such acceptance

I look forward to hearing from you at your earliest convenience”

93. From these contemporaneous documents, it is clear that even when lawyers first became involved for Ms Cheng shortly after her refusal to complete the Contract, there was no complaint about the Vessel not fitting into the dock or any failed “test” for the boat in a mooring. Rather, there was only a request for a lesser price. This is consistent with my findings about Ms Cheng’s approach on 5 October.

Findings relevant to damages

94. Evidence about damages was given by Mr Thompson. MYSA’s damages claim as explained by him was as follows:

Selling price

$1,180,000

Less deposit

$20,000

Plus berthing fees

1.    Rent Rose Bay Marina: V48601: October to December 2016 and January 2017 @ $4400 per month = $17,600

2.    Rent Gladesville Bridge Marina: V48601: February and March 2017 @ $1,950 per month = $1,950

3.    Rent Sovereign Island Queensland: V39: March to November 2017 – 9 months @ $1,495 per month = $13,455

4.    Rent Rose Bay Marina: V39: December 2017 to February 2018 @ $2,500 per month = $7,500

5.    Rent Gladesville Bridge Marina: V39: March to May 2018 @ $1,950 per month = $5,850

6.    Rent Rose Bay Marina: V39: June 2018 @ $2,500

7.    Rent Rose Bay Marina (Sydney Boat Show period): V39: July and August 2018 @ 4,400 per [cuts off]

Plus total skipper, fuel and transport charges incurred

$10,122 ^[1]

Plus advertising costs in relation to the Vessel being available for sale at boat shows being together with associated photography costs of $385 and advertising of $745

$1,130

Plus ongoing maintenance and repairs to the Vessel to maintain the Vessel and trade-in vessel in saleable condition between 7 October 2016 and 10 September 2018

$125,047

Plus insurance on the Vessel between 7 October 2016 and 10 September 2018

$7,557

Plus cleaning costs to the Vessel and Trade in Vessel from October 2016 to 10 September 2018

$40,290

Plus brokerage on V48 601 @ 5.3% of Sale value

$63,600

Plus brokerage on V39 017 @ 5.3% of Sale value

$25,175

Loss on sale

Cash ($600,000)

($200,000)

($275,000)

Total damages (excluding legal costs)

$415,676

1. This figure was incorrectly recorded in the table in Mr Thompson’s affidavit as $10,222. The primary documents tendered make clear that $10,122 is the correct figure.

95. I find that MYSA sold the V48 Vessel to a third party in January 2017 for a purchase price of $1,200,000. The purchase price consisted of $600,000 cash and a trade-in vessel, being the V39 Vessel, with a value of $600,000 attributed by agreement between MYSA and the purchaser.

96. At the time of the sale, MYSA commissioned Rod Twitchen Marine Pty Ltd to perform an out of water marine survey for the V39 Vessel. It is standard industry practice in all boat sales and trade-ins for a qualified marine surveyor to inspect a used vessel and provide a survey report. The conclusion of that report was consistent with MYSA’s own valuation of the V39 Vessel of $600,000. I find that the market value of the V39 Vessel in January 2017 was $600,000.

97. The V39 Vessel was eventually sold to Princess V39 Syndicate Pty Limited for $475,000 on 27 August 2018.

98. I accept that the total fees incurred by MYSA for berthing the V48 Vessel and V39 Vessel were $57,655 and the total skipper, fuel and transport fees incurred by MYSA in relation to both vessels was $10,122.

99. I find that the V48 Vessel:

1. remained at the Rose Bay Marina for four months between October 2016 and January 2017. MYSA was liable for berthing fees payable to Enares Rose Bay Pty Ltd, the leasehold owner of the marina, at the rate of $4,400 a month ($17,600 in total);

2. was transferred to Gladesville Bridge Marina until completion of the resale. During February 2017 berthing fees payable to Gladesville Bridge Marina Pty Ltd were incurred by MYSA at the rate of $1,950 for the month; and

3. was delivered to the purchasers in March 2017.

100. MYSA took delivery of the V39 Vessel at Sovereign Islands in Queensland on completion of the sale of the V48 Vessel in March 2017. It remained there until 17 November 2017.

101. Attempts to sell the V39 Vessel during that period were unsuccessful and MYSA incurred berthing fees at Sovereign Island Marina at the rate of $1,495 per month ($13,455 in total).

102. Mr Thompson determined that the V39 Vessel should be brought to Sydney to be offered for sale at the Boutique Boat Company Summer Boat Show at Rose Bay Marina. MYSA incurred delivery, skipper and mate fees associated with transporting the V39 Vessel from Sovereign Islands to Sydney Harbour on 17 and 18 November 2017 in the sum of $9,345 (these formed part of the $10,122 total skipper, fuel and transport fees incurred on both vessels set out at [98] above).

103. The V39 Vessel was then berthed at Rose Bay Marina, where MYSA incurred berthing fees from December 2017 to February 2018 payable to Enares Rose Bay Pty Ltd at the rate of $2,500 per month ($7,500 in total).

104. The V39 Vessel was later moved to Gladesville Bridge Marina where it was offered for sale for a 3-month period from March 2018 until May 2018 and incurred berthing fees payable to Gladesville Bridge Marina Pty Ltd at the rate of $1,950 per month ($5,850 in total).

105. The V39 Vessel was brought back to Rose Bay Marina and berthed there in June 2018 at the rate of $2,500 per month, and from July to August 2018 at the rate of $4,400 per month, during which time it was displayed at the Sydney Boat Show ($11,300 in total).

106. The V39 Vessel was sold for $475,000 following an inquiry at the Sydney Boat Show in August 2018. It was delivered to the buyer in September 2018. The purchase price was paid by way of $200,000 cash and the balance by instalments.

107. I find that MYSA incurred total brokerage fees of $88,775 on the resale of the V48 Vessel and the sale of the V39 Vessel comprising:

1. $63,600 on the resale of the V48 Vessel (the weighted average in the last 12 months, being 5.3% of the purchase price); and

2. $25,175 on the sale of the V39 Vessel (the weighted average in the last 12 months, being 5.3% of the purchase price).

108. The brokerage fees were payable to MYMB.

109. I find that MYSA incurred photography costs of $385 and advertising costs of $745 in advertising the V48 Vessel for resale and the V39 Vessel for sale.

110. I find that the detailing costs incurred while the vessels were for sale amounted to $40,290 comprising:

1. 100 hours of detailing work at $120 per hour for the V48 Vessel ($12,000 in total); and

2. 235.75 hours of detailing work at $120 per hour for the V39 Vessel ($28,290 in total).

111. The work involved washing and polishing the vessels, including to prevent any build-up of materials to protect the gelcoat and provide UV protection and prevent osmosis, detailing, cleaning and system checks. This work is standard industry practice for the sale of any vessel by MYSA and the boat brokering industry as well as most boat owners. The work was undertaken by MYM and the detailing costs were payable to that entity.

112. Between 7 October 2016 and 10 September 2018, the repairs and maintenance costs incurred by MYSA on the V48 Vessel and the V39 Vessel were $125,047 (comprising $3,819 for the V48 and $121,228 for the V39). These fees were also payable to MYM.

113. I find that both vessels were insured as a mandatory condition of their remaining at the Rose Bay Marina and Gladesville Bridge Marina at a total cost of $7,557.

114. After MYSA acquired the V39 Vessel it was advertised for $675,000 for several months online on boatsales.com.au, but was ultimately sold for $475,000. Mr Thompson authorised the sale of that vessel at the lower price due to its depreciation over time and a galvanic corrosion problem which was not identified at the time of the survey report but which subsequently required considerable repair work to rectify. The offer accepted for the sale of the V39 Vessel was the best offer that was then available and that had been made for some time.

115. Mr Thompson was cross-examined at length on matters concerning MYSA’s quantification of loss, including the operations of MYSA and other related entities within the wider corporate group, how the expenses the subject of the claim had been incurred and paid by MYSA and how the matters invoiced from other related entities within the corporate group had been paid. I do not accept that any real damage was done to the credibility or reliability of his evidence in the cross-examination.

116. There was also extensive cross-examination based on the thesis that the amounts paid were excessive as they were charged by entities related to MYSA who were therefore not arms-length parties. Whilst, of course, those charges may in theory have been excessive, I am persuaded by Mr Thompson’s evidence that the prices charged which were the subject of his evidence were market prices.

117. There was also a deal of cross-examination about the time at which certain invoices were created and whether they were prepared for the purpose of this case. There were shown to be curiosities about the dates of some of the invoices. A number of the invoices were dated 1 July 2018 but related to various periods of time between October 2016 and May 2018. Another invoice related to the period from July 2018 to August 2018 but was dated 1 July 2019. Nevertheless, I am satisfied on the basis of Mr Thompson’s evidence that the amounts he described were charged to MYSA, that those amounts were at market rates and that MYSA actually paid those amounts.

118. I find that the expenses about which Mr Thompson gave evidence were incurred and paid by MYSA.

Issues in the proceedings

119. Despite Ms Cheng’s unhelpfully prolix defence and cross-claim, the issues were eventually confined by counsel for Ms Cheng making some sensible concessions on the last day of the trial. So confined, the issues were thus:

1. was there an oral term about the boat fitting the Woolwich dock (and if so did it constitute a contractual term as an oral term incorporated into the Contract)? Did non-satisfaction of this oral term entitle Ms Cheng to terminate the Contract?

2. was there a contract between MYSA and Ms Cheng?

1. when and how did MYSA accept Ms Cheng’s offer to purchase the V48 Vessel?

2. was Ms Cheng’s offer capable of oral acceptance, or could MYSA only accept the offer by signature so as to enter into a binding contract?

3. if Ms Cheng’s offer was capable of oral acceptance, did Mr Simson have authority on 1 October 2016 to orally accept the offer and bind MYSA to the Contract?

4. if the Contract could only be made in writing, was the Contract signed on 2 October by Mr Thompson only, or by both Mr Thompson and Mr Neil Sutton? If Mr Thompson only, did he have the express or implied authority of MYSA on 2 October 2016 to enter into the Contract for MYSA?

5. did MYSA need to communicate its acceptance to Ms Cheng before her offer was revoked? If so, did MYSA do so?

3. was the Contract materially amended by MYSA without Ms Cheng’s approval, consent or knowledge after 1 October 2016, so that it was incapable of acceptance by MYSA?

4. was Ms Cheng entitled to cancel the Contract and to require MYSA to refund the deposit by reason of any of the following claims, all based on the making of an oral representation or promise that the V48 Vessel would “fit” in the berth at the Woolwich pier (Ms Cheng conceded that these claims must all fail if the pleaded representation was not made):

1. if the oral promise did not form part of the Contract, did MYSA represent that it would be a term of the Contract, and is it prevented from resiling from that representation by reason of promissory estoppel?

2. did MYSA engage in misleading or deceptive conduct in breach of s 18 of Sch 2 to the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law, hereinafter ACL)?

3. if the oral promise did not form part of the Contract, would it otherwise be unconscionable at general law or pursuant to s 21 of the ACL for the Court to enforce the Contract?

4. was the Contract unjust pursuant to s 7 of the Contracts Review Act 1980 (NSW)?

5. was MYSA entitled to damages in the sum of $415,676 or some other lesser sum:

1. what is the loss and how is it calculated? Are the invoices tendered admissible and probative of MYSA suffering loss, and the amount of that loss?

2. has MYSA satisfied its duty to mitigate and is the loss claimed legally recoverable (or too remote)?

3. are the measures of damages in s 52 of the Sale of Goods Act 1923 (NSW) (Sale of Goods Act) applicable to the sale of the V48 Vessel and if so has MYSA proven a loss and the amount of that loss?

Consideration

Issue 1 – was there an oral term of the Contract that the V48 Vessel would fit into the Woolwich dock, breach of which would entitle Ms Cheng to terminate the Contract?

120. In relation to issue 1, by the amended defence filed on 24 May 2021, Ms Cheng resisted MYSA’s claim on the following basis:

1. the Contract was conditional in that it included a term to the effect that a test would be conducted at Woolwich and if the V48 Vessel did not fit in the dock Ms Cheng did not need to complete the purchase and could recover her deposit (the Conditional Term);

2. that term was part of the Contract either because it formed a separate collateral contract, or an oral term alongside the written agreement, or a term implied pursuant to s 19 of the Sale of Goods Act;

3. the Conditional Term has not been satisfied and Ms Cheng is not required to pay the balance of the purchase price as she is entitled to rescind or terminate the Contract and recover her deposit; and

4. Ms Cheng’s signing of the Contract only constituted an offer, which was not accepted until MYSA countersigned on 2 October 2016, which it was not entitled to do after it was allegedly known that the V48 Vessel did not fit in the dock.

121. At the hearing, Ms Cheng abandoned the overlapping pleaded claims that the Conditional Term was a collateral contract or that it was an implied term as to fitness for purpose. The sole argument in issue 1 pressed by Ms Cheng at trial was that the Conditional Term was an oral term of the Contract.

122. I have concluded that there was no oral term of the Contract about the V48 Vessel “fitting into” the dock at Woolwich. Shortly put, I find that no discussion to this effect was had on 1 October 2016, let alone was any representation of the elaborate kind pleaded by Ms Cheng made to her by Mr O’Doherty. I find that the elaborate and detailed conversations with Mr O’Doherty on 1 October that Ms Cheng and Mr Cheng Shu deposed to did not occur and have been invented for the purposes of these proceedings.

123. I find that after having signed the Contract on 1 October 2016, Ms Cheng wished to renegotiate the purchase price on 5 October 2016. Ms Cheng defaulted in her obligations and did not pay the balance of the purchase price when MYSA insisted on performance of the Contract. I am comfortably satisfied that the pleaded representation was never made.

124. As I have found, the absence of any reference to the size of the boat or its ability to “fit” into the Woolwich dock in either the letter of complaint to NSW Fair Trading on 13 October 2016 (at [16] above) or the email of complaint to MYSA on 10 October 2016 (at [90] above) is telling contemporaneous evidence.

125. Ms Cheng had no credible or adequate explanation for why she did not tell her son to complain in his emails to MYSA, to its lawyer and to NSW Fair Trading about the pleaded representation having been made or an agreed term to that effect having deliberately been left out of the Contract by MYSA’s representative. She says she told her son on 10 October 2016 that she was the victim of a “scam”. I do not believe that evidence. She agreed that if the pleaded representation had been made, then the “obvious thing to write” to Fair Trading was that the term she claimed had been agreed had “not been included in the contract”. Her explanation for the absence of any reference to that matter, that she only told her son “we got scammed and we need to cancel the contract” before he sent the complaint email to MYSA, is inherently implausible. Mr Cheng Shu ultimately agreed that he had no real explanation about why he failed to refer to the alleged representation made by Mr O’Doherty in the complaints to Fair Trading and MYSA. The absence of any contemporaneous complaint in these records about the pleaded representation is telling and significant.

126. There was no oral term of the Contract that:

“the Plaintiff would sell to the Defendant the Princess Yacht V48 on terms which included:

(i)   on 2 October 2016, the [Plaintiff, sic: Defendant] would motor the Princess Yacht V48 to the Woolwich Mooring to conduct the Princess Yacht V48 Woolwich Mooring Test;

(ii)   if the:

(A)   Princess Yacht V48 Mooring Test

(B)   [intentionally omitted]

was satisfactory, the Defendant would be required to:

(C)   pay the Plaintiff the balance of the $1.18 Million Amount, namely $1.16 million ($1.16 Million Amount), within seven days;

(D)   take delivery of the Princess Yacht V48 upon payment of the $1.16 Million Amount to the Plaintiff;

(iii)   if the:

(A)   Princess Yacht V48 Mooring Test

(B)   [intentionally omitted]

was not satisfactory:

(C)   the Plaintiff would repay the $20,000 Deposit to the Defendant;

(D)   the Defendant would not be required to:

(1)   pay the Plaintiff the $1.16 Million Amount;

(2)   take delivery of the Princess Yacht V48;

(iv)   the Plaintiff would complete its form of contract for sale of a boat and:

(A)   the Plaintiff would include in the contract the matters in paragraphs [(i) to (iii)] above;

(B)   the Defendant would have to:

(1)   sign the form of contract prepared by the Plaintiff;

(2)   pay the Plaintiff the $20,000 Deposit,

before the Plaintiff would permit the Princess Yacht V48 to undergo:

(3)   the Princess Yacht V48 Woolwich Mooring Test;

(4)   [intentionally omitted]

on 2 October 2017.”

Issue 2 – was there a contract between MYSA and Ms Cheng?

127. The resolution of issue 2 requires the consideration of a number of subsidiary questions, being:

1. when and how did MYSA accept Ms Cheng’s offer to purchase the V48 Vessel?

2. was Ms Cheng’s offer capable of oral acceptance, or could MYSA only accept the offer by signature so as to enter into a binding Contract?

3. if Ms Cheng’s offer was capable of oral acceptance, did Mr Simson have authority on 1 October 2016 orally to accept the offer and bind MYSA to the Contract?

4. if the Contract could only be made in writing, was the Contract signed on 2 October by Mr Thompson only, or by both Mr Thompson and Mr Neil Sutton? If Mr Thompson only, did he have the express or implied authority of MYSA on 2 October 2016 to enter into the Contract for MYSA?

5. did MYSA need to communicate its acceptance to Ms Cheng before her offer was revoked? If so, did MYSA do so?

128. MYSA has the legal capacity and power to enter contracts: Corporations Act 2001 (Cth), s 124(1) (Corporations Act). That power to contract must be exercised either by the company itself through an organ of the company, or by an agent with authority to exercise that power.

129. The answer to the questions posed by issue 2 lies in the doctrine of implied authority. The directors of the company are the primary organ of the company and derive their power and authority to act as the company from Corporations Act, s 198A. Although s 198A is a replaceable rule and therefore liable to be displaced or modified by the company’s constitution, there is no evidence that the provision, which otherwise applies by default to MYSA as a proprietary company registered after 1 July 1998, has been so displaced. Section 198A provides:

173. The concept of mitigation is concerned with steps which the plaintiff ought, as a reasonable person, to have taken to attempt to contain or avert its loss and the reasonableness of any steps so taken. The standard of reasonableness against which conduct undertaken by a plaintiff in mitigation of its loss is measured is not a high one, since it is the defendant who was the wrongdoer: Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5 at 9. The onus is on the defendant to show that the plaintiff has not taken reasonable steps to mitigate its loss: Wenkart v Pitman (1998) 46 NSWLR 502 at 523.

174. The concept of mitigation is linked with that of causation, in the sense that if the steps taken by a plaintiff to mitigate its loss are so unreasonable so as to break the chain of causation between the defendant’s breach and the plaintiff’s loss, the plaintiff is prevented from recovering damages for that loss which was properly caused by its own unreasonable conduct: Castle Constructions Pty Ltd v Fekala Pty Ltd (2006) 65 NSWLR 648; [2006] NSWCA 133 at [21] (per Mason P); Australian Medic-Care Co Ltd v Hamilton Pharmaceutical Pty Ltd [2009] FCA 1220; (2009) 261 ALR 501 at [364]-[365].

175. The concept of mitigation is also linked with that of remoteness, in the sense that it would not reasonably be in the contemplation of the defendant that the plaintiff will fail to prevent loss that can be reasonably avoided. Remoteness therefore provides a similar limitation as mitigation where an act by the plaintiff is required to put an end to the losses resulting from the defendant’s breach of contract: Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 673; [1986] HCA 81 (per Brennan J) (Burns v MAN Automotive).

176. MYSA submitted that I should follow a “separatist” approach which treats remoteness and mitigation as separate issues. Under this approach, so MYSA submitted, I should first determine whether the loss claimed by the plaintiff is properly characterised as a cost of mitigation, or an item of damage caused by the defendant’s breach. If the loss is a cost arising from an act in mitigation, then considerations of remoteness do not apply. In support of this submission, MYSA referred to comments by Brennan J in Fox v Wood (1981) 148 CLR 438 at 446-7; [1981] HCA 41 (Fox v Wood). It is worth setting these comments out in full (footnotes omitted):

“Where the plaintiff is able to take steps to restore his regular receipt of income and thereby to avoid further loss, and where he incurs costs in doing so, the costs may be recoverable from the defendant. In principle, a tortfeasor’s liability for the cost of mitigation of damage is not to be tested in the same way as his liability for an item of damage which is said to have been caused by the tort. Where particular steps in mitigation are a commonplace, it is natural to think of their costs as items of damage which are foreseeable by the tortfeasor and not too remote to be excluded from the items for which he is liable: for example, the cost of a surgical operation to ameliorate personal injury (cf. McGregor on Damages, 14th ed. (1980), p. 174, par. 242). But foreseeability and remoteness are not the criteria of a tortfeasor defendant’s liability for a cost incurred by the plaintiff in mitigating or attempting to mitigate damage for which the defendant is liable or for which he would have been liable but for the plaintiff’s ability to avoid the damage by taking a step in mitigation. The criterion is whether the plaintiff has reasonably incurred the costs in mitigating or in reasonably attempting to mitigate that damage and it is a question of fact whether the plaintiff has acted reasonably (see Simonius Vischer v. Holt and Thompson; Moore v. DER Ltd).”

177. Those comments were made in relation to a plaintiff’s right to damages for tort, and not for breach of contract. However, those principles apply equally in contract. This is because Brennan J cited a passage in Simonius Vischer which dealt with damages for breach of contract. Although dicta, as it was written by Brennan J I would follow it, unless persuaded that it is inconsistent with binding authority. Acceptance of that dicta, however, raises a further question, namely whether a “loss” has arisen which should be characterised as a “cost of mitigation”.

178. There is some support for MYSA’s proposition that steps taken by a plaintiff to mitigate its loss are foreseeable, and therefore any costs incurred in taking those steps are not outside the scope of the remoteness principle. A footnote in NC Seddon and RA Bigwood, Cheshire & Fifoot Law of Contract (11^th ed, 2017, LexisNexis) at [23.41] provides:

“Foreseeability extends to the point at which it would be unreasonable for the injured party to fail to act to mitigate the loss: Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 673 (Brennan J) … See also Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 at 608.”

179. However, the High Court cases referred to are authority for a more limited proposition; that loss is no longer foreseeable and therefore too remote to be recovered where it had become unreasonable for the plaintiff to fail to mitigate that loss, or where the steps taken by the plaintiff in mitigation were unreasonable. Those cases do not stand for the further proposition that remoteness no longer applies to losses incurred after or as a result of steps taken in mitigation, whatever those losses or steps may be. To make clear the limited point made in those two cases, it is worthwhile setting out the passages in full. In Burns v MAN Automotive Brennan J stated at 673:

“A party who, when he gives a warranty, has such knowledge that he can foresee that the loss which will result from a breach of the warranty will continue until the other party acts to stop the loss, can foresee that the loss will continue until it is reasonable to expect that the injured party will act to stop it. Foreseeability extends until it would be unreasonable for the injured party to fail to act to mitigate his loss, and the onus of proving such a failure is on the party in breach.”

180. Similarly, in Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603; [1998] HCA 38 Brennan CJ stated:

“[3]   … As the insured was obliged to act reasonably to mitigate any loss suffered by reason of the broker’s breach of retainer or negligence, the loss incurred by the acceptance of an unreasonably low sum in settlement could not be attributed to the broker’s wrongful conduct, either because the acceptance of such a sum was not a reasonable step to take in mitigation of the insured’s loss or because it was not foreseeable that the insured would act unreasonably: Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 673.”

181. These passages do not provide that remoteness no longer applies to losses incurred after the plaintiff takes steps to mitigate its loss. Rather, they illustrate the relationship between remoteness and mitigation by demonstrating that steps taken in mitigation which are reasonable are foreseeable and not too remote to be recovered, while an unreasonable failure to mitigate (or unreasonable conduct in mitigation) is not foreseeable and therefore too remote to be recovered. It is the reasonableness of the plaintiff’s conduct which both characterises that conduct as mitigation and as something which the defendant should foresee (and so not too remote to be recovered). Remoteness is therefore superseded as a consideration once the plaintiff takes steps with a view to mitigate its loss because the relevant question becomes whether those steps taken were reasonable and properly characterised as mitigation. Once that question is answered in the affirmative, any costs incurred are foreseeable, because they were reasonably incurred in mitigation, and hence not too remote to be recovered. This is the better view of the dicta of Brennan J in Fox v Wood on which MYSA relied.

182. Assuming that MYSA is correct that a plaintiff can recover the entirety of its “costs of mitigation” no matter how remote the loss, that does not assist in concluding here that MYSA’s loss includes the depreciation in value of the V39 Vessel between when MYSA accepted it as a trade-in and the V39 Sale. MYSA’s submission proceeded on the basis that its loss of bargain in relation to the V48 Vessel should be assessed at the time it fully converted the V39 Vessel, an entirely separate vessel, into “cash”. That assumption is contrary to legal principle and commercial common sense.

183. First, as a matter of legal principle, in the context of contracts involving the sale of goods, ordinarily a plaintiff mitigates its loss by entering into a substitute contract to sell the goods. Such entry into a substitute contract “crystallises” the plaintiff’s loss. The fact that entry into a substitute contract crystallises the plaintiff’s loss is the foundation for the general rule that the measure of damages for breach of a contract for the sale of goods is the difference between the contract price and market price (since the plaintiff is expected to immediately go to market to mitigate its loss). As Lord Brown said in Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] 2 AC 353 at [79]:

“the injured party should ordinarily go out into that market to make a substitute contract to mitigate (and generally thereby crystallise) his loss.”

184. Other cases also describe entry into substitute contracts as conduct which “crystallises” the plaintiff’s loss: Simonius Vischer at 356; Fenridge Pty Ltd v Retirement Care Australia (Preston) Pty Ltd [2013] VSC 464 at [309] (Hargrave J); Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2010] NSWSC 1073 at [329] (McDougall J).

185. Given that the plaintiff’s loss crystallises upon entry into a substitute contract, it follows that the plaintiff’s loss should be the difference between the value of the original contract and the value of the substitute contract as at the time it is entered into. There is no authority for holding that the value of the substitute contract is anything other than its value at the time of formation. It would therefore not be relevant to a court’s assessment of the plaintiff’s loss that the subject matter of the plaintiff’s substitute contract depreciated in value after formation. If it were the case that the value of the resale is determined by reference to some other point in time, then the concept of “crystallisation” of the plaintiff’s loss is effectively meaningless. No doubt for this reason, in the course of her very able submissions, Ms Hall for MYSA was not able to identify any case where a plaintiff had, as here, entered into a contract to mitigate its losses under which it accepted as consideration goods of an agreed value and subsequently sought to recover as a cost of mitigation losses suffered in the subsequent sale of the goods earlier accepted in payment.

186. Further, as a matter of commercial common sense MYSA’s submission leads to the unrealistic requirement that the consideration received by the plaintiff on a resale must take the form of, or ultimately be converted to, Australian currency; ^[2]  the Court cannot place any value on a contract until and unless it is represented entirely in cash terms. This means that where a plaintiff decides to mitigate its loss by entering a subsequent sale under which it accepts goods rather than cash, which it might then sell in exchange for another trade-in of goods, the defendant cannot know its liability to the plaintiff until the plaintiff finally puts an end to these iterative transactions and completely settles any subsequent transactions for a cash amount. As Ms Hall accepted, a consequence of her submission was that Ms Cheng remained liable to MYSA unless and until a cash amount (presumably in Australian dollars) was obtained. MYSA’s submission, if correct, also restricts the plaintiff to ultimately only accepting cash in exchange for a good, since on MYSA’s submission the Court cannot recognise any other non-cash consideration as the value of a subsequent contract. This is so even in circumstances where the plaintiff might be content to accept non-cash consideration and despite the fact that such consideration, being valuable consideration, is capable of supporting a contract.

     2. If MYSA is correct, even if it had accepted the market value equivalent of A$1,200,000 in January 2017 in US dollars, Ms Cheng would still be liable if, six months later, acting reasonably in the interim, MYSA coveted those US dollars to Australian currency and suffered a loss on conversion.

187. The understanding that the plaintiff’s loss is “crystallised” upon entry into a substitute contract is not inconsistent with the proposition set out earlier that the defendant is liable even if steps taken by the plaintiff in (reasonable and foreseeable) mitigation in fact increased its loss. The cases which establish this latter proposition relate only to losses arising before crystallisation by entry into a substitute contract (for example by reasonably delaying entry into a substitute contract in an unfavourable market). There are no cases which hold the defendant accountable for losses arising after crystallisation of the loss.

188. A case which illustrates this, and which was also relied upon heavily in MYSA’s submissions, is Simonius Vischer. In this case, the defendant breached its duties under an audit contract with the plaintiff. Consequently, the plaintiff held an excessive number of wool jobbing contracts which it wished to close out. Upon conducting a survey of the wool market, the plaintiff considered the market would likely fall, and decided to hold the excess contracts until the market took a more favourable turn with a view to minimising its losses. However, the plaintiff’s assessment of the market turned out to be incorrect. Instead, the market moved against the plaintiff, who eventually closed out the excess contracts for a lesser amount than it would otherwise have obtained if it had acted immediately upon discovery of the breach.

189. The Court of Appeal upheld Sheppard J’s finding that the defendant was liable for the full extent of the plaintiff’s loss, even though the plaintiff had increased the amount of that loss through its own conduct. This is because the decision to wait for more favourable market conditions:

“was reasonably and bona fide made in an endeavour to restore their trading position at a time when they had not finally determined to sue the defendants, and were primarily concerned to secure their own situation.” (at 355)

190. The Court then explained, in a passage quoted earlier at [172], that the plaintiff may recover losses reasonably incurred in mitigation even if that loss is greater than what might have arisen if the plaintiff had not taken those steps or had adopted some other course of conduct. The Court concluded at 356 that:

“It would seem to follow that, once the plaintiffs’ conduct is found to have been reasonable, the defendants are bound to make good the loss thereby sustained.”

191. What was relevant in Simonius Vischer was that the changes to the market which increased the plaintiff’s loss occurred before the plaintiff crystallised its loss by closing out the jobbing contracts. The case is quite different from the present case where subsequent transactions and subsequent movements in the market meant that the final amount of cash proceeds ultimately received in exchange for the V48 Vessel (including through resale of the V39 Vessel) was less than the purchase price ascribed at the outset by MYSA on the resale of the V48 Vessel. Simonius Vischer does not support an argument that Ms Cheng’s liability must be assessed according to the amount of cash received by MYSA for the V48 Vessel and the subsequent sale of any trade-in Vessel, or that Ms Cheng’s liability extends to any movements in the market beyond the point of the resale of the V48 Vessel in January 2017.

192. For the purpose of assessing the value of the bargain which MYSA lost on account of Ms Cheng’s breach of the Contract, the price for which the V48 Vessel was sold was the value MYSA obtained at the time the contract to resell it was entered into (i.e. $1,200,000), rather than the amount of cash for which it was ultimately realised upon the sale of the V39 Vessel (i.e. $1,075,000 consisting of the $600,000 cash paid on its resale, and $475,000 cash paid under the V39 Sale). MYSA’s loss crystallised when it sold the V48 Vessel in January 2017, so that depreciation in the value of the V39 Vessel and costs incurred in relation to the V39 Vessel do not form part of MYSA’s relevant loss. By reselling the V48 Vessel for $1,200,000, MYSA in fact made a better bargain than it did under the Contract in the amount of $20,000.

193. As I have found, however, MYSA is entitled to losses suffered in the sale of the V48 Vessel which comprised the loss arising from expenses incurred in relation to berthing costs, advertising costs, maintenance and repair costs, detailing costs, skipper, fuel and transport costs, payment of insurance premium, and brokerage paid on the V48 Vessel upon its sale.

194. The damages to which MYSA is entitled for breach of the Contract are therefore:

1. the “loss” of the bargain of the Contract, being the difference between the purchase price under the Contract and the price at which the V48 Vessel was resold. This was in fact a gain of $20,000 and is to be deducted from the losses set out below. Also to be deducted is the $20,000 deposit paid by Ms Cheng which MYSA retained;

2. the loss arising from expenses incurred in relation to the V48 Vessel prior to its resale in the total sum of $39,120. This was composed of the following expenses:

1. berthing costs of $19,550;

2. advertising costs of $85;

3. maintenance and repair costs of $3,819;

4. detailing costs of $12,000;

5. skipper, fuel and transport costs of $778;

6. payment of insurance premium to the value of $2,888; and

3. brokerage paid on the V48 Vessel upon its sale in the sum of $63,600 (being 5.3% of the purchase price).

195. Accordingly, I find that MYSA is entitled to damages of $62,720. That award comprises $102,720 (the sum of the amounts in [194(2)]-[194(3)]) less profit on resale ($20,000) less deposit retained ($20,000) = $62,720. This amount reflects the loss of the bargain that MYSA suffered by reason of Ms Cheng’s repudiation of the Contract, and the costs reasonably incurred by MYSA in mitigation of its loss until it crystallised that loss on sale of the V48 Vessel in January 2017. That amount is the same in contract as it is if considered through the prism of the Sale of Goods Act.

Cross-claim

196. As I have explained, the issues in the cross-claim were all determined adversely to Ms Cheng being:

1. the “no binding contract” allegation;

2. rescission of contract (i.e. unconscionability);

3. claims under the ACL; and

4. a claim under the Contracts Review Act.

197. The cross-claim must be dismissed with costs.

Costs of the trial

198. MYSA has succeeded, albeit in recovering a much smaller amount than that claimed. Costs ordinarily follow the event. I have given consideration as to whether there were separable issues such that a differential award of costs should be made: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296.

199. Although MYSA failed to recover a substantial part of the damages it claimed, this case was made much more complicated than it needed to be by the conduct of Ms Cheng. MYSA was forced to defend a multitude of issues raised about liability. The central issue raised on liability was based on evidence from Ms Cheng and Mr Cheng Shu which I have concluded cannot be accepted. This is not a case that lends itself to treating the issues as separable such that a set-off in relation to costs would be appropriate. Much less do I conclude that the outcome of any such set-off would be that there be no order as to costs. MYSA is entitled to its costs of the claim.

Conclusion and orders

200. For the foregoing reasons I make the following orders:   

Amended statement of claim

1. Defendant to pay the plaintiff damages in the sum of $62,720;

2. Defendant to pay the plaintiff’s costs of the proceedings;

3. Pursuant to s 100 of the Civil Procedure Act 2005 (NSW), defendant to pay pre-judgment interest on the principal sum of $62,720 for the period from 10 January 2017 to 10 September 2021 at the rate identified by Practice Note SC Gen 16.

Amended statement of cross-claim

1. Cross-claim dismissed with costs.

**********

Endnotes

Amendments

08 October 2021 - Order 2 in the Amended statement of claim varied to substitute the word “proceedings” for “trial” pursuant to Uniform Civil Procedure Rules 2005 (NSW), r 36.17: Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company v Cheng (No 2) [2021] NSWSC 1281.

Decision last updated: 08 October 2021