National Australia Bank Limited v McGill
[2010] QCAT 478
•28 September 2010
CITATION:National Australia Bank Limited v McGill [2010] QCAT 478
| PARTIES: | National Australia Bank Limited |
| v | |
| FIRST RESPONDENT: | Mr Leslie McGill |
| And | |
| SECOND RESPONDENT: | The trustee of Mr Leslie Gill’s bankrupt estate |
| APPLICATION NUMBER: | PC035-09 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | Decision on the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Peta Stilgoe |
| DELIVERED ON: | 28 September 2010 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | The applicant’s claim is allowed in the sum of $157176.72. |
| CATCHWORDS : | CLAIM AGAINST THE FUND – whether representation to a third party entitles a claim – whether claimant’s own actions severed nexus between representation and loss – where claimant financed purchase of non-existent vehicles – where respondent issued invoices for sale without verifying existence of vehicles - where claimant did not perform independent checks Suncorp Metway Ltd –v- McGill [2007] QCCTPAMD 29 BMW Australian Finance Ltd, The Chief Executive, Office of Fair Trading –v- VRUS Holdings Pty Ltd [2009] QCCTPAMD 31 |
APPEARANCES and REPRESENTATION (if any):
This matter was heard on the papers in accordance with section 32 of the
Queensland Civil and Administrative Tribunal Act 2009
REASONS FOR DECISION
Introduction
In September 2005, Mr McGill issued invoices to W Lanham Marketing Pty Limited (“Lanham”) for the sale of a prime mover and 45 foot trailer (“the vehicles”). The total of the invoices was $170,500. The Bank lent Lanham $150,040 to enable it to purchase the vehicles. They did not exist. The Bank has not recovered any money from Lanham and now seeks recovery from the fund.
Matters not in dispute
Mr McGill concedes:
a)He was a licensed dealer and a relevant person for the purposes of section 469 of Property Agents and Motor Dealers Act2000 (“PAMDA”)
b)He issued the tax invoices.
c)He did not sight the vehicles before issuing the invoices.
d)The vehicles did not exist.
e)These transactions were part of a course of fraudulent transactions perpetrated by Brett Tony Best for which Mr Best was convicted on 16 October 2009.
f)The Bank has not been paid any of the money it lent to Lanham.
Submissions
The Bank says that it is entitled to claim on the fund because:
a)Mr McGill did not ensure that the vehicles existed before issuing the invoices.
b)Mr McGill knew, or ought reasonably to have known, that a third party would believe the invoices represented a record of sale.
c)Had it not been for the invoices, the Bank would not have lent the money to Lanham.
d)Mr McGill’s false representation caused the Bank loss.
Mr McGill argues that the Bank is not entitled to claim on the fund because:
a)He did not make a representation to the Bank.
b)The Bank is responsible for its own loss.
c)He had reasonable grounds for issuing the invoices.
Mr McGill did not make a representation to The Bank
Section 470 of PAMDA provides that a person may make a claim on the fund if the person suffers financial loss because of the happening of a [an event]. A breach of section 574 is an event within the meaning of section 470.
Section 574(1) states that a licensee …must not represent in any way to someone else anything that is false or misleading in relation to the … property (my emphasis).
Section 488 of PAMDA provides that the tribunal may allow a claim against the fund if satisfied on the balance of probabilities that:
a)An event mentioned in section 470(1) happened;
b)The claimant suffered financial loss because of the happening of the event.
The question is whether the “person” in section 470 must be the “someone else” in section 574 to whom the representation was made and the “claimant” in section 488 in order to have a successful claim against the fund.
Mr McGill’s argument, that he did not make a representation to the Bank because it was a third party not involved in the transaction, is an attractive one. Unfortunately, based on decisions of the Commercial and Consumer Tribunal, it is bound to fail. Although the issue has not been considered directly by any tribunal it is clear that the Commercial and Consumer Tribunal has operated on the assumption that the claimant under the fund need not be a person to whom the representation was made directly:
a)In Suncorp Metway Ltd –v- McGill[1] Mr Hanson did not expressly consider the issue but ordered compensation to be paid to the financier in similar circumstances.
b)In BMW Australian Finance Ltd, The Chief Executive, Office of Fair Trading –v- VRUS Holdings Pty Ltd[2], the tribunal assumed that the financier was entitled to claim on the fund, even though its claim was dismissed on other grounds.
[1] [2007] QCCTPAMD 29
[2] [2009] QCCTPAMD 31
10. The Chief Executive was a party to BMW Australian Finance. PAMDA has been subject to regular and significant reform, the most recent of which will come into effect on 1 October 2010. Presumably, if the Chief Executive had an issue with the approach in Suncorp Metway or BMW Australian Finance, it would have been an easy matter to fix. The fact that there has been no legislative change indicates that the approach taken in those cases is acceptable.
The Bank is responsible for its own loss
11. Mr McGill says that, if there was a misrepresentation, the nexus between the misrepresentation and the loss is severed by the Bank’s own actions in failing to do its own due diligence. The Bank did not conduct its own searches, speak to Mr McGill, ask for proof of the existence of the vehicles or seek to verify their existence independently.
12. The Bank levels a similar criticism against Mr McGill, saying that he didn’t verify the existence of the vehicles either and he was the person purporting to sell them. It also points to the fact that the tax invoices record a deposit paid on each vehicle. It says that it does require proof of the existence of a vehicle if the sale is by a private individual but that it is entitled to rely on an invoice from a registered motor dealer as proof of the existence of the vehicle the subject of the transaction.
13. The difficulty with Mr McGill’s assertions is that the invoices make no reference to a seller or any other third party involved in this transaction. The clear inference is that Mr McGill, despite being a wholesaler, either owned the vehicles or had possession of them. The representation, then, is not only that the vehicles existed, but that Mr McGill had effective control of them. While members of the public may think it imprudent for a bank to lend a large sum of money without independently ascertaining whether the security existed, there was nothing in the transaction that should have put the Bank on notice.
Mr McGill had reasonable grounds for issuing the invoices
14. Mr McGill says he had reasonable grounds for representing that the vehicles existed because he used his best endeavours to ensure that Mr Best, the person responsible for sourcing the vehicles, was “legitimate and solvent”. However, there is no evidence that Mr McGill made any attempt to verify the existence of the vehicles through the searches or precautions which he says the Bank should have undertaken. In view of the fact that it was his licence and reputation at risk, I am not persuaded that his actions in taking the word of Mr Best were reasonable.
15. Putting that aside, Mr McGill had no reasonable grounds for representing that he had received a deposit for the vehicles as, clearly, he did not. I find that Mr McGill did not have reasonable grounds for issuing the invoices.
Legal costs
16. The Bank says that this is an appropriate case to order that its legal costs be paid because:
a)The loss exceeds $150,000 and this amount, in itself, justifies the need for legal representation.
b)The issues involved include elements of misrepresentation and/or falsity which are complex issue requiring legal assistance 9to the tribunal).
c)Mr McGill already has a finding against him in relation to a similar fact matter.
17. Section 100 of the Queensland Civil and Administrative Tribunal Act 2009 (“the QCAT Act”) provides that, other than as provided under the Act or an enabling Act, each party to a proceeding must bear the party’s own costs. Section 102(1) of the QCAT Act enables the tribunal to make an order for costs if it considers the interests of justice require it.
18. Section 102(3) of the QCAT Act sets out the matters to which the tribunal may have regard when deciding whether to award costs. The only matter on which the tribunal has been addressed is the nature and complexity of the dispute. There is no doubt that the Bank’s submissions have assisted the tribunal in its deliberations but the facts were simple and the issues discrete. Considering that this is a claim by an astute experienced operator in the finance industry against a statutory fund designed to protect consumers, I do not consider the interests of justice require that it also recover its legal costs.
Conclusion
19. The Bank is a party that has suffered financial loss because of a misrepresentation by Mr McGill.
20. I allow the claim in the sum of $157176.72
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