Re Harris, Graeme John
[1997] FCA 628
•6 JUNE 1997
CATCHWORDS
BANKRUPTCY - restitution - unjust enrichment - mistaken belief - recovery from trustee of monies paid by third party pursuant to hire purchase agreement - asset vested in trustee - whether payments made in mistaken belief that asset vested in applicant - burden on applicant to prove mistaken belief - absence of evidence
Pavey & Mathews Pty Limited -v- Paul [1987] 162 CLR 221
Australia and New Zealand Banking Group Limited -v- Westpac Banking Corp [1988] 164 CLR 662
David Securities Pty Limited & Ors -v- Commonwealth Bank of Australia [1992] 109 ALR 57
Re GRAEME JOHN HARRIS; Ex parte ALPHEGA FRENCHS FOREST PTY LTD and OFFICIAL TRUSTEE IN BANKRUPTCY
No. NB 429 of 1993
EINFELD J
SYDNEY
6 JUNE 1997
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No.NB429 of 1993
BANKRUPTCY DIVISION )
Re:GRAEME JOHN HARRIS
Bankrupt
Ex parte:ALPHEGA FRENCHS FOREST PTY LTD
Applicant
And:OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
MINUTE OF ORDERS
The Court orders that:
The application be dismissed.
The costs of the trustee, including any reserved costs, be paid by the applicant.
Note: Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.
EINFELD J
SYDNEY
6 JUNE 1997
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No.NB429 of 1993
BANKRUPTCY DIVISION )
Re:GRAEME JOHN HARRIS
Bankrupt
Ex parte:ALPHEGA FRENCHS FOREST PTY LTD
Applicant
And:OFFICIAL TRUSTEE IN BANKRUPTCY
Respondent
REASONS FOR JUDGMENT
EINFELD J SYDNEY 6 JUNE 1997
Introduction
This application is one of a number that have arisen out of the bankruptcy of Dr Graeme John Harris (the bankrupt). In this particular matter Alphega Frenchs Forest Pty Limited (Alphega) seeks an order that the Official Trustee in Bankruptcy as trustee of the bankrupt’s estate (the trustee), pay Alphega the sum of $20,881.21. Alphega’s claim arises out of a dispute over a Porsche motor vehicle (the car).
This is the second application I have heard concerning this particular car. In the judgment given in the first case on 24 June 1996 (the earlier proceedings), I set out the relevant parties, relationships and facts which remain relevant for the present proceedings. All that is necessary to say here is that Harris was the original owner of the car when it was purchased at some time prior to April 1992. At the time of the purchase he entered into an asset purchase agreement with Australian Guarantee Corporation Limited (AGC) and made the initial payments under that agreement. On 24 February 1993 he was made bankrupt, after which he made 15 further payments to AGC, each of $1870.55. Commencing on 7 July 1994 and finishing on 24 May 1995, Alphega made payments under the AGC agreement totalling $20,881.21. The agreement was paid out with that final payment and on 21 June 1995 AGC acknowledged that it had no further interest in the car.
In the earlier proceedings the trustee applied for and obtained an order that the car vested in the trustee but no finding was sought or made as to Alphega’s entitlement to recover the monies paid by it to AGC. This application seeks a determination of that question in that Alphega has now claimed an entitlement to recover as restitution the money it paid to AGC on the basis that the bankrupt’s estate has been unjustly enriched.
The legal position
The legal basis for Alphega’s claim is put in a single sentence in its written submissions which refers to the principles set down by the High Court in Pavey & Mathews Pty Limited v Paul [1987] 162 CLR 221. The remainder of its submissions concerned evidence which it claimed supported the central tenet of its argument, namely that the payments to AGC were made in the mistaken belief that the car had been transferred to Alphega by the bankrupt.
Pavey & Mathews was certainly a watershed in the High Court’s approach to unjust enrichment in Australia. Deane J stated:
It constitutes a unifying legal concept which explains why the law recognises, in a variety of distinct categories of case, an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff and which assists in the determination, by the ordinary processes of legal reasoning, of the question whether the law should, in justice, recognise such an obligation in a new or developing category of case.
In David Securities Pty Limited & Ors v Commonwealth Bank of Australia [1992] 109 ALR 57, after quoting this passage from Pavey & Mathews, the High Court went on to state at 75:
Accordingly, it is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable. Instead, recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality.
In Australia and New Zealand Banking Group Limited v Westpac Banking Corp [1988] 164 CLR 662 at 673, the High Court further delineated the position in relation to unjust enrichment on the basis of mistake:
In other words, receipt of a payment which has been made under a fundamental mistake is one of the categories of case in which the facts give rise to a prima facie obligation to make restitution, in the sense of compensation for the benefit of unjust enrichment, to the person who has sustained the countervailing detriment.
Alphega’s submissions proceeded on the assumption that if it could prove that the payments were made under a mistaken belief as to the ownership of the car, then it would be entitled to restitution on the basis of unjust enrichment. Although this submission reflects, in my opinion, a somewhat simplistic approach to the question of restitution, given that it is the essence of the claim in this case, I am prepared to proceed, as has been requested, on the basis that if Alphega has failed to establish its mistaken belief as to the ownership of the car at the time it made the payments, then its claim must fail.
Mistaken belief
As with the earlier proceedings, the evidence adduced in this matter was certainly not comprehensive. Again key participants failed to give evidence on important matters so as to enable the truth to emerge, thus reinforcing the views I formed then about the bona fides and honest intentions of the the bankrupt and the people behind and associated with Alphega.
The bulk of Alphega’s evidence was adduced to prove that the payments made to AGC were not made on behalf of the bankrupt, either as part of his employment or otherwise. Presumably the Court was intended to infer from this situation that the payments must have been made by Alphega for its own benefit pursuant to its mistaken belief. In view of the facts found on 24 June 1996, I adhere to my conclusion then that Alphega’s payments to AGC were not an assertion of ownership of the vehicle but were made for its own purposes which the company and its principals have declined to reveal but which are not difficult to surmise.
The evidence of Nicole Blakeman, a director and the central figure of Alphega, essentially related to the remuneration package of the bankrupt. Mrs Blakeman’s evidence was to the effect that Alphega paid a fortnightly salary to the bankrupt, provided him with a car and paid the expenses associated with its running. The car supplied was at first a Nissan Patrol and later a Daihatsu Charade, and the running expenses for these cars were met by Alphega paying those parts of the bankrupt’s credit card transactions as related to them.
Alphega asked that the inference be drawn from this evidence, and from the fact that the company provided him with a car other than the car in question, that the payments by Alphega to AGC were not made on behalf of the bankrupt as part of his remuneration package. Alphega claimed that further weight was added to this inference from the absence of evidence that Alphega had paid any fringe benefits tax in respect of the payments to AGC. Presumably, had the payments been part of the bankrupt’s salary emoluments, Alphega would have been liable under the fringe benefits tax regime.
In my opinion all this evidence has very little weight. It certainly does not prove that there was no understanding or arrangement between Alphega and the bankrupt, outside the scope of the bankrupt’s negotiated salary, with respect to the car instalments. If any of it does go to the alleged inference at all, at best it only proves the negative proposition that the payments were not part of the bankrupt’s emoluments of office. There was in fact no evidence of Alphega paying fringe benefits tax on any benefits paid to the bankrupt as part of his employment. Alphega’s payments of the bankrupt’s credit card accounts as involved the car he was then using certainly establishes that there were fringe benefits paid to the bankrupt, yet there was no evidence of any fringe benefits tax being paid nor was there any explanation as to why such tax was not payable. As such, none of this evidence advances Alphega’s substantive case.
As an applicant, the burden lies squarely on Alphega to prove, if only as a starting point, that it was under a mistaken belief as to the ownership of the vehicle when it made the payments to AGC. It has not laid before the Court any substantive evidence to prove that that is the case. In fact, like in the earlier proceedings, the most definitive evidence in this matter seems to be that which was not adduced. Alphega has not produced any evidence to show how the company dealt with the payments to AGC, either in terms of its financial accounts or in terms of its business records. No minutes or other records were produced of any decision by the company’s directors to make these payments, or relating to the terms and conditions on which these payments to AGC were supposedly made, nor was there evidenced any entry in a cash book, creditor’s ledger, asset register, depreciation schedule or income tax return of Alphega which reflect the payments in any way. There was no evidence that Alphega ever dealt with the car as an asset belonging to it. As Alphega’s director and principal figure, Mrs Blakeman would have been able to give evidence in relation to these matters but she did not do so.
Needless to say, there was no attempt by Alphega to lead evidence of any discussions or negotiations with Dr Harris about the car. Any admissibility problems that might have arisen if such an attempt had been made, either from Alphega’s principals or Dr Harris himself, would have been insignificant in comparison with the gaping hole in the case left by the absence of anything on the subject at all.
The same criticism concerning the absence of evidence was levelled against Alphega in the earlier proceedings and the findings I made then are equally relevant to the lack of evidence adduced on this occasion:
Alphega’s financial records show that it has never included the vehicle in its assets or contingent assets. It has not depreciated the vehicle in its tax returns or company returns. It has obviously not paid the registration fee because the vehicle has remained unregistered for some time. In other words, Alphega has done nothing other than to pay the instalments under the asset purchase agreement for the nine months to which I have referred.
It is argued on Alphega’s behalf that none of these things have appeared on the records because in fact the ownership of the vehicle did not become crystallised in the company until all the payments were made to AGC in May 1995, and that the returns of the company for 1996 have not yet been done, and that absence of reference to them in the 1995 returns does not mean anything. On the other hand, there was at least a month in which, according to the evidence, it would have owned this vehicle in the year ending June 1995 but it has not placed before the Court any evidence to suggest that the vehicle is being treated in its books subsequently as in its possession or ownership.
There is still no evidence before the Court that reflects a belief held by Alphega that it owned the vehicle in question. Many of the questions that remained unanswered could have been addressed if those with the requisite knowledge had determined that it be so. Most significantly, there was no evidence adduced from those people who are alleged to have negotiated the arrangement under which the car was transferred to Alphega. Thus, as in the earlier proceedings, Alphega’s conduct of this litigation, where it is seeking the Court’s affirmative response to its claim to recover a substantial sum of money, has resulted in a manifest inadequacy of evidence to excite the response sought.
Conclusion
If Alphega’s application for restitution on the basis of unjust enrichment was to have any chance of succeeding, it was required to prove, at least prima facie, that the payments to AGC were made in the mistaken belief that the car had been transferred to it. As Alphega was unable to produce any evidence to that effect, either positively or by available inference, it has not succeeded in doing so. Consequently I dismiss the application. The costs of the trustee, including any reserved costs, will be paid by Alphega.
For the applicant:
Mr J. Ryckmans instructed by P.A. Somerset & Co. For the respondent: Mr J. Johnson instructed by Sally Nash & Co. Date of Hearing: 19 November 1996 Written submissions completed: 29 November 1996
Date of judgment: 6 June 1997
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