Red Earth Automotive Pty Ltd v CEVA Logistics (Australia) Pty Ltd
[2018] VCC 2086
•13 December 2018
| THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-17-05531
| RED EARTH AUTOMOTIVE PTY LTD | Plaintiff |
| v | |
| CEVA LOGISTICS (AUSTRALIA) PTY LTD | Defendant |
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JUDGE:HIS HONOUR JUDGE COSGRAVE
WHERE HELD: Melbourne
DATE OF HEARING: 1 and 3 August 2018
DATE OF JUDGMENT: 13 December 2018
CASE MAY BE CITED AS: Red Earth Automotive Pty Ltd v CEVA Logistics (Australia) Pty Ltd
MEDIUM NEUTRAL CITATION: [2018] VCC 2086
REASONS FOR JUDGMENT
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Subject:CONTRACT – TRADE PRACTICES – EQUITY – PRACTICE AND PROCEDURE
Catchwords: CONTRACT – construction and interpretation – principles of construction – terms to be considered in context – meaning of “transport” – when surrounding circumstances may be considered – "ambiguity" and "plain meaning" – whether exemption clause applies to exclude defendant’s liability for plaintiff’s loss
TRADE PRACTICES – misleading and deceptive conduct – evidence – standard of proof – reliance on oral representation – whether defendant made representations to plaintiff regarding purpose and scope of exemption clause
EQUITY – equitable estoppel – conventional estoppel – relevance of pre-contractual negotiations – relevance of knowledge
PRACTICE AND PROCEDURE – amendment of statement of claim – claims in reply transposed to statement of claim
Legislation Cited: Competition and Consumer Act 2010 (Cth); County Court Civil Procedure Rules 2008 (Vic)
Cases Cited:Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99; BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; Cargill Australia Ltd v Viterra Malt Pty Ltd (No 10) [2018] VSC 439; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1; Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Grace v Peter Harrison Design & Signs Pty Ltd [1998] QSC 27; Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190; Liangis Investments Pty Ltd v Daplyn Pty Ltd (1994) 117 FLR 28; MA&J Tripodi Ltd v Swan Hill Chemicals Pty Ltd (No 2) [2018] VCC 526; MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152; Metropolitan Gas Co v Federated Gas Employees’ Industrial Union (1925) 35 CLR 449; Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475; Moratic Pty Ltd v Lawrence James Gordon and Anor [2007] NSWSC 5; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; OZ Minerals Holdings Pty Ltd v AIG Australia Ltd [2015] VSCA 346; Retirement Services Australia RSA Pty Ltd v 3143 Victoria Street Doncaster Pty Ltd (2012) 37 VR 486; Selected Seeds Pty Ltd v QBEMM Pty Ltd (2010) 242 CLR 336; State Rail Authority (NSW) v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Whittet v State Bank of New South Wales (1991) 24 NSWLR 146
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Ryan | Ryus Russell Kennedy |
| For the Defendant | Mr N Wallwork | Mills Oakley |
HIS HONOUR:
Summary
1 The plaintiff, Red Earth Automotive Pty Ltd (“Red Earth”), conducts business as a motor car trader. The defendant, CEVA Logistics (Australia) Pty Ltd (“CEVA”), is a global logistics supply company whose main business is the transport, storage and handling of motor vehicles. It provides its services pursuant to a set of standard terms and conditions (“the standard agreement”). In about early June 2017, Darren Jackson (“Jackson”) of Red Earth arranged with Alan Robbins (“Robbins”) of CEVA to transport a Porsche motor vehicle from Brighton in Victoria to Darwin in the Northern Territory. CEVA collected the vehicle from Brighton on 5 June and delivered it the same day to its storage facility in Truganina pending the availability of a truck suitable to carry the Porsche to Darwin. On 14 June 2017, thieves broke into CEVA’s storage facility and, using the car keys which were left in the vehicle, stole the Porsche by driving it away. The car has not been recovered. The main issue in the case is whether CEVA is liable to Red Earth for the theft of the Porsche which was valued at $121,000.
Background
2 The main actors in this story are Jackson, Robbins and Emma Wallace (“Wallace”). Jackson is a sales manager of Red Earth and has worked for the business in that role since July 2015. Robbins is a sales executive at CEVA. He has a business development role covering Queensland and the Northern Territory. His job entails developing relationships with potential clients including motor vehicle dealerships. For this purpose, he engages with stock controllers and fleet managers and organises both intra-state and interstate transport of vehicles. Wallace is the Racing and Prestige Transport (“RAPT”) coordinator at CEVA. She manages CEVA’s RAPT division which includes scheduling the transport of luxury vehicles around Australia. She deals mainly with commercial clients including motor vehicle dealerships.
3 In May 2017, Robbins undertook a business development trip around the Northern Territory. An objective of the trip was to build relationships and develop customer loyalty with key decision-makers at car dealerships and other potential clients.
4 On 31 May 2017, he visited the Stuart Motor Group dealership in Darwin. This is part of the Red Earth business. During the course of his visit, Robbins met Baron Ketterman, a senior sales consultant in the dealership. Ketterman advised Robbins that the sales manager for the plaintiff, Jackson, needed assistance with a particular vehicle. Robbins sought from Ketterman details of the vehicle including the make and model, where it was located and its commercial value. Ketterman informed him that the vehicle was a 2017 Porsche Cayenne GTS with a commercial value of $170,000. Robbins advised Ketterman that the Porsche would be transported to Darwin in “wrapped transport”. This is a premium service in a covered vehicle provided by CEVA’s RAPT division. After he received the information, Robbins emailed his colleague Wallace asking her to arrange transport for the Porsche.
5 After sending Wallace the email, Robbins and Wallace spoke. Wallace advised Robbins that, because the Porsche was a four wheel drive, it would not fit in the wrapped transport vehicle and would have to be taken in covered transport.
6 The following morning, Wallace sent an email to Ketterman and Robbins advising that she had booked the Porsche for transport at a cost of $6,517.16 (including GST) and that the vehicle was due to be collected the next day.
7 Soon after, Ketterman emailed Wallace and Robbins advising that the quote was too high in the circumstances and that the Porsche had to be delivered by regular transport. CEVA’s representatives understood this to mean that the Porsche should be sent on an uncovered truck.
8 Later that morning, Wallace emailed Robbins to advise him that, in her view, the vehicle, being valued at more than $100,000, should not be sent uncovered. She sought Robbins’ confirmation that he was happy to allow the vehicle to be transported in this way.
9 In his reply email, Robbins advised Wallace that Red Earth wanted the vehicle transported on a standard basis because it was a “skinny deal”. Robbins referred to his role in generating a “Fast Quote” under the software system used by CEVA to arrange bookings for their customers. Having inserted the relevant information, the quote generated by the system was $2,014.51.
10 Thereafter, there were discussions and/or emails between Wallace and Robbins and between Robbins and Jackson concerning the booking for the Porsche. Wallace had no direct conversations with any representatives of Red Earth. One particular conversation between Robbins and Jackson was important. I shall deal with that discussion in some detail later.
11 According to the affidavits of Robbins and Wallace, after Robbins informed Wallace that Red Earth wanted the vehicle to be sent to Darwin in an uncovered trailer, Wallace told Robbins she would be unwilling to accept the booking because the risk of loss and damage was too high. Wallace raised the matter of using a waiver to protect CEVA.
12 Later in the morning of 1 June 2017, after exchanging emails and discussing the situation with Wallace, Robbins returned to the plaintiff’s dealership and spoke to Ketterman about the quote. According to his affidavit, Robbins said words to the effect of, “because of the risks of loss and damage of having the Porsche on a particular part of the truck, CEVA would only transport the vehicle if you signed a waiver”.[1] The waiver varied or amended the standard terms and conditions (“the standard agreement”) under which CEVA provided its services to create an amended agreement (“the amended agreement”).
[1]Robbins agreed in cross-examination that he did not say this.
13 After Robbins left the dealership that day, Jackson emailed him asking him to arrange transport of the Porsche from Brighton to Darwin. Robbins contacted Wallace and asked her to forward a copy of the proposed waiver form which CEVA had apparently used previously.
14 On the morning of 2 June 2017, Robbins emailed Jackson to advise that Wallace was arranging the transport of the vehicle and said that because the Porsche was to be transported in an uncovered vehicle, it presented a risk for CEVA and CEVA asked that Red Earth sign the waiver form attached to the email. The form contained an exemption clause.
15 Jackson responded to Robbins shortly after by advising him through email that the Porsche was valued at $121,000, not $170,000, as set out in the waiver form. When advised of the change, Wallace accepted the new commercial value and responded by attaching an updated waiver form reflecting the reduction in value to $121,000 and quoting a new price of $1,743.51. She said in the email that the Porsche would not be collected until CEVA received a signed copy of the completed waiver form.
16 On 2 June 2017, Timothy Johnston, a director of Red Earth, signed the waiver document containing the quote and Red Earth returned the same to CEVA. Johnston said that initially, he did not wish to sign the waiver form because of the exemption clause. However, he said that Jackson informed him of a discussion which he had with Robbins about the quote. Johnston’s recollection of the conversation with Jackson[2] was that Robbins had explained to Jackson that the operation of the exemption clause was limited to exclude CEVA’s liability to Red Earth for stone chip damage which might occur during the transport of the Porsche in an open trailer from Brighton to Darwin. Johnston said that, if he had been told that the exemption clause was intended to have a broader effect than that explained by Jackson, he would not have signed the waiver form.
[2]CEVA objected to this evidence as hearsay. However, I allowed Johnston to give the evidence because it explained why he acted as he did. Johnston’s evidence about what Jackson told him was not admissible to prove that Robbins made the comments attributed to him.
17 On 4 June 2017, CEVA collected the vehicle from Brighton and took it to its facility at Truganina. On 14 June 2017, thieves stole the vehicle from the storage facility.
18 In November 2017, Red Earth issued proceedings against CEVA alleging breach of contract and negligence in relation to the theft of the Porsche motor vehicle. CEVA does not contest the negligence allegation. Rather, it relies upon the exemption clause signed by Red Earth which excludes liability for any loss and damage incurred in the course of transporting the vehicle where that loss resulted from the negligence of CEVA, its employees, or agents. CEVA contends that the court should give effect to what it says are the clear words of the clause because that reflects the terms of the bargain reached between two sophisticated commercial entities.
19 Red Earth contends that the exemption clause should be construed in such a way that the clause did not relieve CEVA from liability for the theft of the Porsche. Further, it contends that the amended agreement between the parties is ambiguous and that the surrounding circumstances support its construction of the contract.
20 Importantly, the parties agreed that if Red Earth were successful in establishing any of its claims, then the court should award it the sum of $121,000. This means that, if Red Earth succeeds on one of its arguments, the court does not need to consider arguments about the appropriate remedy. The parties’ agreement has resolved that issue.
Issues
21 The parties agreed that the court has to determine the following issues:
(a) Having admitted negligence, does the exemption clause apply to exclude the defendant’s liability for the plaintiff’s loss?
(b) If the defendant’s liability is excluded, did CEVA make representations to the plaintiff regarding the purpose and scope of the exemption clause – if so, what were the representations?
(c) Do the representations support the plaintiff’s claims of equitable estoppel, estoppel by convention, and misleading or deceptive conduct?
Having admitted negligence, does the exemption clause apply to exclude the defendant’s liability for the plaintiff’s loss?
22 The parties were in general agreement that the construction of the amended agreement between them was governed by the principles set out in cases such as Codelfa Construction Pty Ltd v State Rail Authority (NSW),[3] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd,[4] Selected Seeds Pty Ltd v QBEMM Pty Ltd,[5] OZ Minerals Holdings Pty Ltd v AIG Australia Ltd,[6] and Darlington Futures Ltd v Delco Australia Pty Ltd.[7]
[3](1982) 149 CLR 337.
[4](2015) 256 CLR 104.
[5](2010) 242 CLR 336.
[6][2015] VSCA 346.
[7](1986) 161 CLR 500.
23 The waiver which Johnston signed was in the following terms:
“Dear Darren
Your Empire has contracted with CEVA Logistics to transport the following
…
Quoted Rate: $1743.51
…
The parties have agreed CEVA Logistics will be excluded from any liabilities/warranties incurred to such vehicle(s), including but not limited to, any loss or damages to the vehicle(s), even if such loss or damage is a result of the negligence of CEVA™, its employees and agents.
Please advise the vehicles market value by return fax/email and signed acceptance of the above quotation and liabilities exclusion arrangement.
…
Market value: $121,000
…
We (The Company) confirm that we wish CEVA Logistics to transport our vehicle(s) in accordance to the above quotation and agree to the liabilities/warranties exclusion agreement” (sic).
Parties’ positions
24 CEVA says that Red Earth’s case must fail because CEVA is entitled to rely upon the exemption clause which Red Earth signed before CEVA collected the Porsche from Brighton.
25 CEVA contends that the court should give effect to the clear language of the provision which reflects the agreement made between the two commercial parties to the agreement. CEVA pointed to some principles of construction which it says the court should employ:
(a) the rights and liabilities of parties under a contractual provision are to be determined objectively by reference to its text, context and purpose.[8]
[8]Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46].
(b) the task of interpreting a contractual term, including an exemption clause, begins with the words of the contract:
“If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust”.[9]
[9]Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99, 109.
(c) the interpretation of an exemption clause is to be determined by construing the clause according to its natural and ordinary meaning, read in light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in the case of ambiguity.[10]
(d) the Court does not strain to find ambiguity in exemption clauses. It is only appropriate to apply the contra proferentem principle when ambiguity remains after applying accepted principles of contractual interpretation.[11]
[10]Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500.
[11]Selected Seeds Pty Ltd v QBEMM Pty Ltd (2010) 242 CLR 336 at [29].
26 CEVA submitted that:
· the words of the exemption clause were clear – in exchange for a lower rate for transport, Red Earth accepted that it could not hold CEVA liable for any loss or damage incurred during that transport.
· there was no ambiguity in the agreement and therefore the court could not have recourse to any of the surrounding circumstances or other matters extraneous to the document.
27 CEVA contended that the exemption document was to be read together with, and in light of, the standard terms and conditions of contract under which CEVA routinely provided services. CEVA contended that there was no ambiguity in the exemption clause and said the court should not strain to find ambiguity where none existed. It argued that the effect of the exemption clause was simple – in exchange for a lower rate for transport, Red Earth accepted that it could not hold CEVA liable in negligence for any loss or damage it incurred during the transport of the vehicle. This was said to be a calculated business decision by Red Earth which sought to maximise profit on an otherwise “skinny deal”. CEVA contended that Red Earth accepted this risk and now sought to resile from the bargain which it had made because the Porsche had been stolen.
28 CEVA submitted that the amended agreement was simply construed. The starting point was clause 10 which provided that CEVA was not liable for loss or damage to a vehicle transported except as covered by clause 9. Clause 9.1 provided that “all vehicles transported by us receive Automatic extended warranty as referred below unless specifically excluded”. The extended warranty provision expressly covered the event of theft. However, in this case, CEVA contended that, by operation of the exemption clause, the extended warranty provision was expressly excluded.
29 Clause 9.2 provided that “if you have elected Additional extended warranty as referred below, you must arrange at the time of booking and obtain approval before you give us custody of the vehicle. You are required to declare the approved value of the vehicle in the front of this contract” (sic). CEVA submitted that the evidence disclosed that the additional extended warranty was never arranged. It argued that, in the circumstances, clauses 9.1 and 10, when read in conjunction with the exemption clause, precluded CEVA having any liability for the stolen vehicle. The issue under clause 9.2 did not arise. The position taken by CEVA was that the correct construction of the exemption clause required the court to find that CEVA could not be liable for any loss in connection with all the services which it provided.
30 Red Earth took a different view. Its argument was to the following effect:
(a) as a matter of construction, the waiver document did not exclude CEVA’s liability for the theft;
(b) the standard agreement and exemption clause, when read together, were ambiguous and hence, the court was entitled to have regard to extraneous matters, including the surrounding circumstances in order to construe the contract between the parties. The surrounding circumstances and context supported Red Earth’s view that the exemption clause operated only to eliminate CEVA’s liability for stone chip, dust and dirt damage to the vehicle sustained in the course of moving it from Melbourne to Darwin.[12]
[12]CEVA objected to paragraph 15 of Jackson’s affidavit. I agree that the paragraphs is inadmissible for the purposes of construing the amended agreement because subjective belief or understanding are not relevant for that purpose.
31 Red Earth accepted that cases such as Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[13] and Darlington Futures Ltd v Delco Australia Pty Ltd[14] set out the relevant principles, but submitted that their application in the context of the agreement gave rise to a different outcome. While CEVA argued that the correct construction of the exemption clause was that it operated to protect CEVA from liability in negligence in relation to all the services it rendered, Red Earth argued that the clause was more limited in its scope. It submitted that because the services provided by CEVA included handling, transporting, and storing vehicles, and the exemption clause referred only to transporting, it did not cover the theft from the storage facility. This interpretation was said to result from a proper reading of the document in the context of the standard terms and conditions of the contract which CEVA used.
[13](2015) 256 CLR 104.
[14](1986) 161 CLR 500.
32 Red Earth’s argument had two limbs. The first argument relied upon the terms of the standard agreement as amended by the exemption clause (“the amended agreement”). Red Earth contended that the standard agreement referred in multiple places to the services which CEVA provided. They were identified as handling, transport, and storage.
33 Red Earth referred to relevant provisions of the standard agreement as follows:
“1.1This Contract states the terms on which we will supply services to you. In this Contract, you are our customer, ie the person engaging our services. Usually (but not always) you are the person specified as the sender on the front of this Contract.
1.2We are not a common carrier. We may refuse to handle, transport or store vehicles for you for any reason whatsoever.
…
1.5By services we mean all services supplied to you in any capacity, including as forwarding agent, shipping agent, forwarder, storer, carrier, or bailee.
…
3.3In addition to freight, we will charge you for:
·any additional expenses we incur as a result of any incorrect declaration by you of the size, quantity, description or modifications to the standard of the vehicles, eg roof racks, bull bars, lowered suspensions etc;
·any storage charges or other charges or expenses we incur in relation to the vehicles.
…
4.2You promise us and the persons referred to in paragraph 1.7 that:
·…
·you will indemnify us as soon as we receive any written notice of claim in connection with this Contract or the handling, transport or storage of the vehicles from any person other than you (including the sender where you are not also the sender);
·…
·the vehicles are presented to withstand handling, transport and storage;
·you have complied with all laws in connection with the vehicles to ensure that they can be lawfully handled, transported and stored;
·you have not asked us to handle, transport or store the vehicles in any way that could be unlawful;
·you will not sue any persons referred to in paragraph 1.7 for anything arising in connection with this Contract or the handling, transport or storage of the vehicles …
…
6You give us authority to:
·use any method for handling, transporting or storing the vehicles …
·deviate from any usual route of transport or place of storage;
·claim a general or particular lien over the vehicles and any documents relating to them, for outstanding payments relating to those vehicles which are to be handled, transport or stored on your behalf …
…
7.3If the address of delivery is unattended and we elect to re-deliver vehicles to you, we will charge you for the costs of the re-delivery including any storage costs we may incur.”
From these terms it is clear that CEVA commonly refers in its standard agreement to the services provided as handling, transport, and storage.
34 I accept the submission made by Red Earth that CEVA offered all three services in connection with motor vehicles and that CEVA chose to separate out the different services which it provided to car dealers and others engaged in working with motor vehicles. Each term must be taken to be distinct. Otherwise, there is no point in separately itemising them.
35 The essence of the Red Earth argument, as I understood it, was that while CEVA’s standard agreement provided three different services, the exemption clause document referred explicitly only to the transport of the vehicle. The exemption of liability appeared in a document which made no reference to handling or storing the vehicle. Thus, to the extent that the exemption clause took effect, it applied only when the vehicle was being moved on the trailer and not when it was being handled – moved on or off the trailer – or being stored. The loss by theft took place while the Porsche was stored in CEVA’s premises at Truganina. The loss did not occur on the road while the vehicle was in transit.
36 Further, Red Earth argued that, to the extent that the exemption clause referred only to “transport” of the vehicle, the clause and its scope was ambiguous. It said that when due account was taken of the surrounding circumstances, the better view was that the exemption from, or exclusion of, liability was limited to physical damage sustained due to stone chips (and possibly debris and dust) during the transportation of the Porsche on the trailer between Melbourne and Darwin.
37 Red Earth contended that this gave proper commercial sense to the agreement in circumstances where:
· CEVA identified the specific risk against which it sought protection as the risk of stone chip damage to the Porsche from being carried on an open trailer along a route which CEVA believed to be notorious for stone chip damage;
· Wallace communicated to Robbins the specific nature of the risk which concerned her and prompted the use of the exemption statement. In turn, Robbins communicated the same concerns and rationale to Jackson;
· Red Earth provided to CEVA the value of the vehicle in the sum of $121,000 in order to obtain the additional extended warranty;
· Red Earth agreed to sign the exemption document on the basis that its application was limited to stone chip damage suffered by the Porsche;
· CEVA charged Red Earth for the additional extended warranty.
Analysis
38 Taken at face value, CEVA’s argument is simple and has some prima facie force. It means that where a vehicle sustains loss or damage due to the negligence of CEVA’s employees or agents when transporting it, CEVA is not liable for such loss because the liability assumed through the terms of the agreement with the client, including the warranties given, is excluded.
39 Clauses 9 and 10 of the standard agreement set out the details of the warranties proffered by CEVA to its clients and the extent of its exposure under the standard agreement.
40 Clause 10.1 states that CEVA’s services are provided at the client’s risk. So the client bears the risk of loss unless CEVA has agreed to the extended warranty for the vehicle, in which case it will pay to the limit of that warranty.
41 Clauses 10.2 and 10.3 of the standard agreement purport to exclude liability for loss or damage arising from breach of contract, negligence, breach of duty as bailee or wilful act or default. I note that CEVA did not place heavy reliance upon this clause in its argument but rather, focused attention on the exemption in the waiver document.
42 Clause 9.1 stated that all vehicles which CEVA transported received the automatic extended warranty unless specifically excluded. Under clause 9.2, if a party elected to obtain the additional extended warranty, the party had to declare the approved value of the vehicle on the front of the contract with CEVA, arrange the warranty and obtain approval for it before giving CEVA custody of the vehicle.
43 Pursuant to clause 9.3, where CEVA agreed to the extended warranty for the vehicle, CEVA’s liability was limited to the amount of the warranty on the face of the contract between CEVA and the client. The terms of the warranty were as follows:
CEVA warrants:
(a)to deliver the vehicle to the location identified in this consignment note in the same condition that the vehicle was delivered to CEVA…
(b)that if the vehicle were stolen and not recovered within a reasonable time or totally written off CEVA will pay the market value of the vehicle or if the vehicle is damaged, the cost of repairs of the vehicle, up to the chosen limit of liability. If the vehicle has been stolen or deemed to be totally written off and payment is made, you agree that CEVA shall have the full salvage rights to that vehicle...
There were some exclusions on this warranty, none of which were material for present purposes.
44 Under the terms of the standard agreement, CEVA was entitled to charge $77 for the automatic extended warranty up to the vehicle’s current market value or $60,000, whichever was the lesser. CEVA could also charge $3.30 per additional $1,000 value above $60,000 for the additional extended warranty.
45 The upshot of these provisions of the standard agreement is that there is an extended warranty, an automatic extended warranty and an additional extended warranty. The terms of the standard agreement are unclear but quite possibly the “extended warranty “is the blanket term used to describe both the automatic warranty and the additional warranty. Clause 9.3 of the standard agreement talks of CEVA agreeing to the extended warranty. Perhaps the intent was to differentiate that situation from one in which CEVA excluded liability under the extended warranty. Alternatively, in circumstances where all vehicles transported by CEVA receive the automatic extended warranty, but the additional extended warranty must be specifically arranged and agreed to, clause 9.3 possibly refers to the additional extended warranty rather than the automatic extended warranty.
46 What emerges plainly from the evidence is that Red Earth nominated a specific value for the Porsche vehicle and CEVA charged Red Earth for both the automatic extended warranty and additional extended warranty. The amount charged reflected the value given to the vehicle by Red Earth of $121,000. This means that if CEVA’s construction or contractual argument is correct, then CEVA is entitled to:
· charge Red Earth $1,743.51 to transport its vehicle;
· charge as part of that fee an amount for the automatic extended warranty and the additional extended warranty;
· act in a manner which CEVA agreed was negligent with the result that thieves stole Red Earth’s vehicle; and
· avoid any liability for the theft notwithstanding the extended warranties.
47 CEVA sought to minimise the impact of this aspect of its conduct by having Robbins and Wallace deny that they ever revealed to any representative of Red Earth the detailed breakdown of the cost to transport the vehicle from Brighton to Darwin. Thus, it was said that Red Earth did not know it had the extended or additional warranties or that it had been charged for them. In effect, the argument CEVA put was that, because Red Earth was unaware that it had been charged and paid for the automatic extended warranty and the additional extended warranty, it was as if they did not exist.
48 However, the evidence demonstrated both that CEVA charged for the automatic extended warranty and additional extended warranty and that CEVA did not attempt to have the cost of the services better reflect the extent of its liability by omitting the cost of these extended warranties from the bill which it required Red Earth to pay. In other words, on the case which CEVA ran at trial, CEVA charged Red Earth for the cost of an automatic extended warranty and an additional extended warranty when, due to the exemption clause CEVA relies upon, CEVA could not be liable under either.
49 Normally, the word “transport” means moving or conveying someone or something from one place to another. This is the meaning given in the New Shorter Oxford English Dictionary and the Merriam-Webster Collegiate Dictionary. This process might well include not just that part of the process when the person or goods were in transit on the road or the high seas or in the air. Jackson accepted that the Porsche would not travel directly from Melbourne to Darwin non-stop. He was not surprised that the vehicle spent some time at the facility in Melbourne en route to Darwin. It was expected that the time needed to move the vehicle to Darwin was greater than the 3-4 days of driving on the road with the trailer. On this view, the process of transportation included a component of handling and storing the vehicle even though these services were not explicitly sought by Red Earth.
50 The purpose of contractual interpretation is to determine not what the parties subjectively intended, but what the contractual language signified to an informed ordinary speaker of English. This means that the court should focus on the text of the amended agreement. The text should be understood in context. This means that the terms of the written agreement are to be read as a whole and against the background surrounding circumstances known to the parties, together with the purpose and object of the transaction. As the High Court said in Metropolitan Gas Co v Federated Gas Employees’ Industrial Union:[15]
“It is a received canon of interpretation that every passage in a document must be read, not as if it were entirely divorced from its context, but as part of the whole instrument.”
[15](1925) 35 CLR 449, 455.
51 When one considers the language of the amended agreement in its context, it is in my view legitimate to ask why CEVA, as the party that was seeking to limit its potential liability and drafted the exemption clause with this objective, referred in the amending document only to “transport” and not in addition to “handling” and “storage”. When considering the contract between the parties, it is appropriate to attribute meaning to words used in the agreement like handling and storage and not to treat them as mere surplusage.
52 Reading the standard agreement and amending waiver document, CEVA should have been aware that while the former made reference in various places to three services which CEVA provided, the latter referred to only one of those services. Especially should CEVA have been so aware when CEVA drafted both documents.
53 In the circumstances, I consider that a reasonable businessperson would have understood that CEVA was limiting the exemption of liability to liability for loss and damage to Red Earth’s vehicle incurred by CEVA when actually transporting the vehicle from Melbourne to Darwin. In the context, transporting meant the time during which the trailer was actually in transit with the Porsche on the road between Melbourne and Darwin. If transporting were construed as meaning at any time in the process between making the Porsche available for collection by CEVA in Melbourne to its delivery by CEVA in Darwin, including the handling process and when the vehicle was stored awaiting transport, there would be no meaning readily attributable to the words handling and storage. Ultimately, if CEVA had intended to eliminate all liability for negligence for the whole process of transportation from Melbourne to Darwin, then it could have easily inserted the cognate words covering handling and storage as it had done in various places elsewhere within the amended agreement.
54 In dealing with this argument, CEVA took a different approach from Red Earth. First, it focused purely on the exemption clause and argued that, viewed in isolation, the words used in the waiver form were clear and admitted of only one meaning.
55 Secondly, it looked at the logistics of moving a vehicle and commented that it was a usual part of the process for a vehicle going from Melbourne to Darwin to spend some time at a CEVA depot or facility waiting for a trailer. Because no car went directly non-stop to Darwin, the normal duration of such a journey was about 15 working days – of which around three or four were actually spent on the road. Hence, CEVA argued that the word “transport” included the waiting time at the depot. “Storage” was said to be a separate and distinct business.
56 The first approach is unsatisfactory as it pays insufficient attention to the rest of the amended agreement. No one clause can be read in isolation from the balance of the written agreement. In particular, CEVA did not address satisfactorily the existence of the words “handling” and “storage” in the amended agreement (either in that form or in a cognate form) and why the exemption was limited to just “transport”. The words in the amended agreement need to be read consistently.
57 The second approach goes well beyond the terms of the agreement to include factual matters not directly referable to the interpretation of the standard agreement as amended by the waiver form.
58 Having regard to the wording of the exemption clause, I find that CEVA cannot rely upon the exemption clause to exclude liability for the theft of the plaintiff’s vehicle while that vehicle was stored on the defendant’s premises.
59 The plaintiff’s alternate argument regarding interpretation was that the amended agreement was ambiguous because the reference to CEVA “transporting” the vehicle could have implicitly included the handling of the vehicle on and off the trailers needed to get the vehicle from Brighton to Darwin and the storing of the vehicle at a CEVA facility pending the availability of a suitable trailer. If that were correct, then the court could look at the surrounding circumstances and broader context to interpret the amended agreement.
60 When one takes account of the surrounding circumstances, several matters clearly emerge. When Red Earth first sought a quote for moving the Porsche to Darwin, there was no reference by any representative of CEVA for the need to sign a waiver form. It was only after Red Earth complained about the quoted price and asked for a standard or open trailer that Wallace raised the issue of the waiver with Robbins. Then Wallace insisted on having a signed waiver form from Red Earth before she would agree to move the vehicle. Robbins sent Jackson an email early on 2 June 2017 asking him to sign and return the form as soon as possible because the standard booking for the Porsche “does present risk for CEVA”. Robbins suggested that Red Earth take out insurance cover on the vehicle while it was “in transit”.
61 From the dealings between Robbins and Jackson which are considered at some length later in the judgment, I consider the purpose of the waiver form was to protect CEVA from liability arising from stone chip damage suffered by the vehicle while driving the trailer from Brighton to Darwin. That was CEVA’s guiding rationale. There was no reference to any form of significant damage other than stone chip damage. Theft was never mentioned as a risk for which CEVA sought to avoid responsibility.
62 Accordingly, whether interpreting the text of the amended agreement only, or, due to ambiguity in the amended agreement, considering the surrounding circumstances, in my opinion, the exemption clause does not exclude CEVA’s liability for the theft of the vehicle.
If the defendant’s liability is excluded, did CEVA make representations to the plaintiff regarding the purpose and scope of the exemption clause – if so, what were the representations?
The alleged representations
63 Red Earth seeks to establish a misleading and deceptive conduct claim based upon what it alleges was a misrepresentation by CEVA about the purpose and scope of the exemption clause. Red Earth says that it relied upon the representation such that, but for CEVA (through Robbins) representing that the exemption clause was only to absolve CEVA from liability for stone chip damage to the vehicle when moving it to Darwin, its managing director would not have signed the waiver form. Having induced Red Earth to sign the form to limit CEVA’s exposure for stone chip damage, CEVA now seeks to rely upon the waiver in accordance with its terms (which are significantly broader) to avoid liability for the theft of the vehicle. Red Earth complains that if this is permitted, it will suffer loss and damage.
64 The misrepresentation case which Red Earth seeks to raise relies in substance upon the same facts as it pleaded in part of the amended reply dated 25 July 2018. This was a pleading to which the defendant made no objection. Paragraph 4.5 of the amended reply referred in the particulars to the phone conversation between Jackson and Robbins at the start of June 2017 and the confirmatory email from Robbins the following day. This conversation and email was an important part of the plaintiff’s case regarding the claim for misleading and deceptive conduct and equitable estoppel. Indeed, it was because of the plaintiff’s reliance on the conversation and email to raise these claims that I directed the plaintiff to file an amended statement of claim which removed the allegations from the reply.
65 In his affidavit, Jackson said that he spoke to Robbins on the phone to discuss the exemption of liability clause in the quote. Jackson said he recalled the following:
· Robbins said words to the effect that CEVA needed to include the exclusion of liability clause in the quote because the decision by Red Earth to arrange for transport of the vehicle in an open trailer, rather than covered transport, exposed the vehicle to stone chip damage during transport;
· Jackson said to Robbins words to the effect that he doubted that the vehicle would be damaged by stone chips while on the transport;[16]
[16]See paragraph 14.2 of Jackson’s affidavit. In his oral evidence, Jackson also referred to his experience with Subaru vehicles.
· Jackson suggested that the vehicle be transported in the truck's middle trailer to avoid the risk of stone chip damage;
· Robbins said something to the effect that CEVA would not transport the vehicle in an open trailer without Red Earth signing the exclusion of liability clause;
· Robbins said something to the effect that “Don’t worry, Darren. The exclusion of liability clause is only in case you get stone chips on the vehicle because if a car gets a stone chip, it’s only because it is in an open trailer. You should get Tim to sign this quote.”
66 As a result of his conversation with Robbins, Jackson said that he understood the exemption clause related to excluding CEVA’s liability to Red Earth only with respect to stone chip damage sustained by the Porsche on the trip from Brighton to Darwin.
67 In his affidavit, Robbins did not seem to give a version of the discussion with Jackson. Robbins said that he would not have accepted Red Earth’s booking without Red Earth providing the waiver which CEVA required. He also said that at no stage in any of his conversations with Jackson or Ketterman did he say that the waiver would apply only to loss or damage incurred while the Porsche was on a truck.
68 When Red Earth opened its case, counsel relied upon the Jackson evidence to say that Red Earth signed the waiver on the basis of the representation that its effect was limited to stone chip damage suffered in transit.
69 Counsel for CEVA said in his opening that Robbins’ evidence would be that the express term of the conversation alleged by Jackson, which I took to be a reference to paragraph 14.4 of his affidavit,[17] “did not happen”.[18]
[17]The gist of this paragraph is set out in the last bullet point of paragraph 65 above.
[18]See page 18 of the transcript. He repeated the comment at page 53 of the transcript.
70 Because the conversation between Jackson and Robbins seemed to me to be important, I said that notwithstanding the filing of the affidavits, I wanted evidence about the conversation to be given orally in court. To that extent, the affidavit evidence about the conversation could not be relied upon to stand as the evidence-in-chief of the parties on the matter.
71 In his oral evidence, Jackson said that Robbins told him that CEVA required Red Earth to sign the waiver form because stone chip damage could occur during transportation. The only reason given for the waiver requirement was because of the risk of stone chip damage during transportation. Until Red Earth told CEVA that it wanted regular transport for the Porsche rather than a covered trailer, there was no requirement by CEVA that Red Earth sign a waiver form. Before then, CEVA was content to transport the vehicle under its standard agreement. Jackson said that Red Earth signed the contractual document containing the waiver because Robbins said, “…it is only about the stone chips”. Jackson accepted as true what Robbins said to him. Jackson referred in his oral evidence to Robbins saying to him words to the effect that he should not worry about the waiver form; it was to protect CEVA from liability for stone chip damage suffered on the trip to Darwin. He said that the only reason given by Robbins for the waiver was stone chip damage.[19]
[19]I note that this was consistent with the concern which Emma Wallace had about the vehicle and CEVA’s risk exposure for damage. She was concerned about damage suffered by the vehicle in transit to Darwin because the Porsche was in an open trailer.
72 In cross-examination, counsel for CEVA put to Jackson that:
· Robbins’ evidence would be that he never said anything to the effect that the exemption clause applied only in respect of stone chipping; and
· Jackson reconstructed this version of the conversation after the Porsche was stolen
73 Jackson rejected the foreshadowed Robbins denial and denied reconstructing his account after the event. Beyond this, I do not consider that CEVA put to Jackson a different version of the conversation.
74 In his evidence-in-chief, Robbins said that the contents of his affidavit sworn on 27 July 2018 were true. Robbins did not expressly refer to any phone call with Jackson on 1 June 2017. He gave evidence of discussing a quote with Ketterman at the dealership on the morning of 1 June. He also said that he spoke to Ketterman and Jackson using words to the effect set out in paragraph 31 of his affidavit, quoted below in paragraph 77. While he did not state that this exchange took place on the same morning, namely 1 June 2017, I infer that it did because the following paragraphs of his affidavit deal with what happened later that day and then the next day.
75 In his cross-examination, Robbins agreed that there were two thefts from CEVA’s premises in the six weeks before the theft of the Porsche. Robbins also acknowledged that, when discussing the waiver with Jackson, he spoke of the concern which Emma Wallace expressed to him that the vehicle might get stone chips while in transit to Darwin and said that, by reason of that concern, CEVA required Red Earth to sign the waiver. Robbins said (and repeated) that that was the extent of the conversation with Jackson about the purpose of the waiver.
76 Robbins agreed that, when he sent the waiver form to Red Earth, the intent was to avoid CEVA being at risk for any damage to the Porsche caused by stone chips, debris, or dust on the drive to Darwin.
77 Mr Ryan, counsel on behalf of Red Earth, drew Robbins’ attention to paragraph 31 of his affidavit where he said:
“I said to Ketterman and Jackson words to the effect of “because of the risks of loss or damage of having the Porsche on a particular part of the truck, CEVA would only transport the vehicle if you signed a waiver”. Jackson insisted the Porsche be transported uncovered. Neither Ketterman, nor Jackson, objected to the Porsche being transported without any coverage.”
78 Mr Ryan then put to Robbins that he did not use those words when he spoke to Jackson and Ketterman. Even though he confirmed the truth of his affidavit at the commencement of his evidence, Robbins agreed that he did not say to Jackson and Ketterman the quoted words. Robbins agreed with Jackson’s evidence to the effect that the conversation about waiver was limited to concerns about damage caused by stone chips.
79 When Mr Ryan asked whether Robbins spoke words to the effect of:
“Don’t worry, Darren. It’s only in case you get stone chips on the vehicle because if a car gets stone chips, it’s because it’s in an open trailer”,
Robbins said that he could not recall those particular words in the conversation. Significantly, he did not deny saying them. Further, he agreed that the words represented the essence of what he said to Jackson about the purpose of the waiver.
80 Robbins also accepted that he did not say something to the effect that Red Earth were excluded from claiming for any loss and damage suffered during the journey from Brighton to Darwin.
81 Robbins was in some ways an unimpressive witness. He presented as uncomfortable in the witness box and obviously concerned about the evidence he was giving. He seemed on occasion to stop and collect his thoughts before answering and tried to present his evidence in the best light for his employer. He said that he had worked in various sales jobs for about ten years, the last two and a half years for CEVA. He was aware that Red Earth, although it had an account with CEVA, was not an active customer at the time.
82 There were certain aspects of Robbins’ evidence which merit comment.
83 First, he corroborated in material respects evidence given by Jackson. Both agreed that:
· the only reason given by CEVA to Red Earth for the requirement to sign the waiver form was the risk of stone chip damage arising from the Porsche travelling in an open trailer;
· there was no mention of a waiver form before Red Earth asked for the standard, as opposed to a covered, trailer; and
· the conversation about the waiver form was limited to concerns about stone chip damage.
84 Secondly, CEVA’s case was opened on the basis that Robbins did not say anything to Jackson to the effect of, “Don’t worry, Darren. It [the exemption clause] is only in case you get stone chips on it [the Porsche] because if a car gets stone chips, it’s because it’s in an open trailer”. However, Robbins did not deny making a statement to that effect. Rather, he said that he could not recall those particular words in the conversation. Further, and significantly, Robbins agreed that the quoted words represented the essence of what he said to Jackson. This change in the defendant’s position was striking.
85 Thirdly, Robbins’ evidence is inconsistent and internally contradictory in an important respect. At one point, Robbins says that he told Jackson that Red Earth would have no warranty or cover with CEVA while the vehicle was being transported. This evidence was inconsistent with another part of his evidence to the effect that he did not say that if Red Earth signed the waiver form CEVA was excluded from liability for all loss and damage. This was also inconsistent with his evidence, which was repeated more than once, that the extent of the conversation about the exemption was limited to the talk about stone chip damage.[20]
[20]I note that it was not put to Jackson that Robbins told him that once Red Earth signed the waiver form, CEVA would be exempt from all loss and damage for the Porsche’s trip from Brighton to Darwin.
86 Fourthly, Robbins asserted several times in his evidence that the exemption clause was never limited just to damage caused by stone chips. Yet, he agreed with Jackson’s evidence that the conversation about the waiver was limited to concerns about stone chips. The fact that Robbins gave evidence which was internally contradictory confirms my concerns about the reliability of his evidence.
87 Overall, I have doubts about the credibility of material parts of Robbins’ evidence. To the extent that it conflicts with Jackson’s evidence, I prefer the latter to the former.
88 By comparison, Jackson was a credible witness whose evidence I would readily accept. He presented as a straightforward person who tried to answer questions directly. I can well imagine that he takes people at their word and would expect them to honour what they say.
89 In making this assessment of Jackson, I do not overlook the defendant’s criticism that his evidence about tracking the Porsche’s progress to Darwin was inaccurate. I accept Jackson’s evidence that he had no specific role in trying to track the car from Brighton to Darwin. In circumstances where Red Earth moves about 1000 cars per year, I believe Jackson when he says that, as the sales manager, he had the attitude that the transport was booked and he expected the car to arrive in due course.
90 In summary, I find that CEVA did represent to Red Earth that, because the Porsche would be more exposed in an open trailer and liable to suffer stone chip damage in transit, then Red Earth had to sign a waiver so that CEVA was not liable for any such damage which occurred. This was the purpose and scope of the exemption clause, namely, to prevent CEVA from assuming liability for stone chip damage.
Do the representations support the plaintiff’s claims of equitable estoppel, estoppel by convention, and misleading or deceptive conduct?
Equitable estoppel
91 As noted above, Red Earth’s equitable estoppel claim arises from the same factual context as the misleading and deceptive conduct claim. Both claims stem from conversations and email correspondence between Robbins and Jackson regarding the purpose and extent of the exemption clause which CEVA wanted Red Earth to execute.
92 Promissory estoppel is a form of estoppel in equity. It is typically focused on the conscience of the defendant. It comes into play when a defendant has induced or acquiesced in the adoption by the plaintiff of an assumption that the defendant will not assert its strict legal rights. The doctrine operates to prevent unconscionable insistence by the defendant upon its strict legal entitlements.
93 Both parties relied upon the statement of Brennan J in Waltons Stores (Interstate) Ltd v Maher, in which his Honour set out the elements needed to establish an equitable estoppel:[21]
[21](1988) 164 CLR 387, 428-9.
“In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that
(1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship;
(2) the defendant has induced the plaintiff to adopt that assumption or expectation;
(3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation;
(4) the defendant knew or intended him to do so;
(5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and
(6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.”
94 Red Earth submitted that each of the elements set out by Brennan J in Waltons Stores was satisfied in circumstances where:
(a) Red Earth assumed that the exemption clause only applied to any liability that CEVA might have for damage caused to the vehicle by stone chips whilst it was being transported on the open trailer.
(b) Red Earth was induced to assume the exemption clause was limited to stone chip damage during transit as a result of:
(i) Robbins’ conversation with Jackson, in which the former said that the exemption clause was necessary due to the risk of damage to the vehicle on the open trailer resulting from stone chips; and
(ii) Robbins’ 2 June 2017 email where he referred to the risk which CEVA faced from damage which could result from moving the Porsche on a standard open trailer.
(c) Red Earth acted in reliance on Robbins’ words and email in signing the exemption clause.
(d) CEVA intended that Red Earth would rely upon what Robbins said because the purpose of his conversation with Jackson (and later email) was to allay concerns Red Earth had about the exemption clause.
(e) Red Earth will suffer detriment if CEVA fails to fulfil the assumption it created about the limited application of the exemption clause.
95 In its opening submissions, CEVA contended that the conversation, as described by Jackson, never occurred and that CEVA did not have any knowledge, nor did it intend, that Red Earth would rely on Robbins’ representation. It also argued that the alleged representation was too vague or lacking in specificity to give rise to an estoppel.
96 I have found that Robbins did make a representation to Jackson which Red Earth relied upon for the purposes of signing the exemption document. The conversation described by Jackson, and not denied by Robbins, did occur in the terms broadly alleged by Jackson.
97 In paragraph 65 of its final submissions, CEVA stated that it was never put to Robbins that he knew that Red Earth relied upon the representation (which CEVA denied), or that he intended Red Earth to rely upon it. Thus, it was said that the claim in equitable estoppel must fail.
98 While I accept that the proposition might not have been explicitly put to Robbins, in my view, the only reasonable reading of the evidence is that CEVA knew Red Earth would rely upon the representation which Robbins made and it intended that Red Earth should do so. If Robbins had sought to deny these propositions, I think it most unlikely that I would have believed him. The role of Robbins at CEVA was business development in Queensland and the Northern Territory. His aim was to attract more clients, build relationships and develop customer loyalty. He wanted to build confidence in CEVA’s business and strengthen the relationship with Red Earth. In my view, the main purpose of Robbins speaking to Jackson in the terms he did was to encourage him to place the order with CEVA. Robbins very likely intended that Jackson should rely upon his comments that the purpose of the waiver form was to exempt CEVA from liability for stone chip damage. Robbins knew that it was rare to use the waiver form – he had never used it before. Emma Wallace, whose idea it was to employ the waiver form, said she had used it only once during her twelve years working at CEVA. I consider it highly likely that Robbins understood the width of the exemption in the waiver form and he wanted to allay Jackson’s fears on this point.
99 Wallace would not agree to move the Porsche from Brighton unless Red Earth signed the waiver form. She made this clear to Robbins. By narrowing the scope of the exemption available to CEVA, Robbins sought to have Red Earth engage CEVA to move the Porsche. Robbins sought to allay any concerns which Red Earth might have about the scope of the waiver form. He was successful in that it was clear from Johnston’s evidence that he signed the waiver form because he believed the exemption of liability was limited to stone chip damage.
100 I accept the submissions of Red Earth on the issue of equitable estoppel. The various criteria laid down by Brennan J on Waltons Stores were satisfied. In short, CEVA created a situation in which, having induced Red Earth to sign the waiver form on the basis that it exempted CEVA only from liability for stone chip damage suffered on the trip between Brighton and Darwin, it later sought to rely upon the wording of the waiver form (which on its face was not limited or confined) to avoid liability for the theft of the vehicle.
101 CEVA relied on decisions of the High Court of Australia in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd[22] and the Federal Court of Australia in Mobil Oil Australia Ltd v Wellcome International Pty Ltd[23] to contend that the Robbins representation was not “sufficiently unqualified, firm, and specific” so as to give rise to an estoppel.
[22](2016) 260 CLR 1.
[23](1998) 81 FCR 475.
102 The representations in Mobil Oil were made in a different context and were the subject of certain qualifications. The representations in that case took place in a social setting and were centred upon a proposal by Mobil that it would grant franchise extensions to franchisees who met certain targets. Importantly, the representations were qualified by statements such as “we’re working on a way”, “still a lot of work to do on this idea”, “we’re going to have to talk with your dealer council representatives” and “we haven’t finished how it is going to work”.[24]
[24]Ibid, 513.
103 The representations in Mobil Oil were therefore made under very different circumstances. The statements by Robbins and their context were sufficiently specific to qualify as a proper basis for an estoppel. I have referred earlier to the circumstances in which Robbins conveyed to Jackson the need for Red Earth to sign the exemption document, but not to be alarmed because it was to protect CEVA in the event of damage by stone chips (and possibly debris or dirt) on the trip to Darwin. There was no mention made of any other loss or damage against which CEVA sought protection. Robbins was keen to obtain the order from Red Earth and Wallace wanted the signed exemption document. Thus, Robbins obtained the signed document but, consistently with his dealings with Wallace and the concerns she expressed, Robbins confined his comments about the liability exemption to the particular form of damage.
104 In the circumstances, I regard the equitable estoppel as made out. The various elements are satisfied, as set out by Red Earth in paragraph 94 above. Plainly, if the assumption or expectation is not fulfilled and CEVA is allowed to rely upon the exemption clause in broad terms in respect of the theft of the vehicle, then Red Earth would suffer substantial detriment. My view is that, having created the situation in which Red Earth was led to believe the exemption of liability was limited in scope, it would not be consistent with principle to allow CEVA to renege on the representation and cause detriment to Red Earth.
105 Often, when considering the remedy to grant as a result of accepting an estoppel argument, the court needs to reflect upon how best to do justice taking account of equitable principles. However, this is not necessary in this case because the parties agreed upon the remedy in the event that Red Earth was successful.
Misleading and deceptive conduct
106 I have set out in detail above the factual underpinning of the misleading and deceptive conduct claim and the parties’ positions in respect of the claim. As the factual and legal context of the estoppel and misleading claims are similar, I intend only to highlight the main components and findings.
107 Before addressing this issue, it is first necessary to deal with an application made by Red Earth to amend its statement of claim.
The amended statement of claim
108 On the first day of trial, after both parties had completed their opening submissions and prior to the commencement of oral evidence, I indicated to Red Earth that its claims for misleading and deceptive conduct and estoppel ought properly be raised in the statement of claim, rather than in its reply as it had done.
109 Red Earth agreed to file an amended statement of claim to properly incorporate those claims and no objection was made by CEVA to this course of action.
110 On 3 August 2018, after the first day of trial, Red Earth filed an amended statement of claim. This pleading transposed the misleading and deceptive conduct and estoppel claims from the reply to the statement of claim.
111 Shortly thereafter, the court received email correspondence from Red Earth that the amended statement of claim it filed contained an error. Red Earth stated that it sought CEVA’s consent to file a “corrected” version of the amended statement of claim. CEVA opposed any such filing.
112 The relevant paragraph of the amended statement of claim filed dealing with misleading conduct read as follows:[25]
“Alternatively, by reason of the matters set out in paragraphs 15.1 to 15.2 above, the Defendant's reliance upon the Exclusion Clause is conduct in trade or commerce which is misleading or deceptive or likely to mislead or deceive and contrary to section 18 of The Australian Consumer Law”.[26]
[25]Paragraph 18 of plaintiff’s amended statement of claim dated 3 August 2018.
[26]The Australian Consumer Law is set out in Schedule 2 of the Competition and Consumer Act 2010 (Cth).
113 The “corrected” version of the amended statement of claim Red Earth sought to file said:[27]
[27]There was another version of the amended statement of claim exchanged prior to the “corrected” amended statement of claim referred to above. However, the Court noted that the relevant paragraph in that version was incoherent. Accordingly, Red Earth provided a “corrected” amended statement of claim on 14 August 2018.
“Alternatively, the representations pleaded in paragraphs 15.1 to 15.2 above constitute:
18.1conduct in trade or commerce;
18.2 which the Plaintiff relied upon;
18.3 and which was misleading and deceptive or likely to mislead or deceive;
18.4 and thereby contrary to section 18 of the Australian Consumer Law”.[28]
[28]Paragraph 18 of plaintiff’s amended statement of claim dated 14 August 2018.
114 On the final day of trial, CEVA argued that the corrected version of the statement of claim changed the emphasis of the conduct complained of in the misleading and deceptive conduct claim from the defendant’s reliance on the exemption clause to the representations made regarding the purpose and extent of the exemption clause.[29]
[29]CEVA also argued that the corrected amended statement of claim introduced a cause of action for conventional estoppel. Based upon the evidence and for the reasons set forth at paragraph 130, I do not consider this claim could succeed. As a result, I do not intend to consider whether it’s inclusion in the corrected amended statement of claim is permissible.
115 CEVA contended that it would be prejudiced by this change as that was not the case it met at trial and it would be deprived of the opportunity to properly defend what it argued were new claims.
116 CEVA said that, based upon the original pleading, the case it had to meet was whether its reliance on a clause in a contract, regardless of whether that clause was disputed, was misleading or deceptive. When asked what further evidence would have been led had Red Earth relied upon the corrected pleading originally, CEVA stated that it would have been entitled to have the alleged representations specifically set out and it would have put those representations to each of its witnesses to give them the opportunity to deny what was said.
117 CEVA also argued that as the specific representations were not particularised, there remained uncertainty as to whether it was alleged that the representations were made about a present fact or a future matter. CEVA said that if it were the former, it would have asked its witness questions to the effect of whether the witness was a lawyer and if the witness provided legal advice about the content of the exemption clause. Alternatively, if it were alleged the representations were made about a future matter, then CEVA said it would have questioned Robbins about whether he had a reasonable basis for believing CEVA would not rely upon its strict contractual rights.
118 In response, Red Earth submitted that the corrected version of its amended statement of claim was more in line with the arguments set forth in the submissions exchanged prior to trial, together with the way in which the plaintiff conducted its case at trial. Further, it said that the factual matrix underpinning the equitable estoppel claim was no different to those facts constituting the misleading and deceptive conduct claim.
119 Red Earth submitted that CEVA had notice of the case it had to defend and that it could not establish it was prejudiced in any way by the changes incorporated in the corrected amended statement of claim.
Analysis
120 The applicable principles relating to the amendment of pleadings are well established. Rule 36.01 of the County Court Civil Procedure Rules 2008 (Vic) provides:
“(1) For the purpose of—
(a)determining the real question in controversy between the parties to any proceeding; or
(b)correcting any defect or error in any proceeding; or
(c)avoiding multiplicity of proceedings—
the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.”
121 In Cargill Australia Ltd v Viterra Malt Pty Ltd (No 10), Elliott J noted that the court’s power to grant leave to amend is a discretionary power and summarised the relevant factors for consideration as follows:[30]
“There is no right or entitlement for a party to amend its pleading subject to the payment of costs referable to the amendment. The nature and importance of the proposed amendments must be considered. This factor must be weighed against case management considerations such as cost, delay and the potential for unfair prejudice to other parties to the proceeding, the court and other litigants.”
[30][2018] VSC 439 at [18].
122 As regards the misleading and deceptive conduct claim, Red Earth is not attempting to introduce a new cause of action, but rather, to change the effect of an existing one. To determine whether such change is permissible, consideration must be given to how the interests of justice are best served and the potential prejudice that would ensue to either party by the acceptance or rejection of the corrected amended statement of claim.
123 In my opinion, CEVA’s arguments with respect to this aspect of the case are unpersuasive. While I acknowledge the shift in emphasis in Red Earth’s misleading and deceptive conduct claim, I do not find the practical implications as significant or consequential as CEVA contends.
124 When one considers the evidence as a whole, it is clear that the conversations between Robbins and Jackson, the alleged representations therein, and Red Earth’s reliance on said representations, were a key component of Red Earth’s case.
125 The conversations and Red Earth’s alleged reliance upon the representations made were set out in varying degrees of detail in Red Earth’s pleadings, written and oral opening submissions, and the affidavit of Darren Jackson. The plaintiff’s written opening, which was provided to CEVA before the trial, was illuminating. It said that, as an alternative to its construction argument, “it was induced to sign the exclusion clause by reason of the representations made by Robbins to Jackson. The representations are contained in the affidavit of Darren Jackson at paragraph 14”. CEVA already had the affidavit which Red Earth relied upon. At trial, Red Earth conducted its case on the basis that the representations made by Robbins were what constituted the misleading and deceptive conduct.
126 In my view, Robbins had the chance to address his conversations with Jackson. The plaintiff’s counsel put Jackson’s version of events to him and cross-examined him about his discussions and emails with Red Earth. As the evidence unfolded, there was no issue about Robbins or Wallace purporting to be a lawyer or giving legal advice. But it was clear that:
· Wallace wanted to protect CEVA from the risk of liability for stone chip, dust, or dirt damage when moving the vehicle on the open trailer to Darwin;
· Wallace considered the purpose of the waiver document was to protect CEVA from that risk “and nothing more”;
· Wallace regarded the road to Darwin as notoriously bad for stone chip damage;
· Wallace discussed the road and the risk of stone chip damage with Robbins before recommending the waiver document be signed and sending it to him;
· Robbins confirmed several times that, in his dealings with Jackson, he noted CEVA’s concern about possible stone chip damage due to being in the open trailer and, hence, the need for Red Earth to sign the waiver document. Robbins did not say to Jackson that CEVA was seeking to avoid liability for all loss and damage which Red Earth might suffer;
· Although Robbins could not recall saying words to the effect of, “Don’t worry, Darren. It’s only in case you get stone chips on the vehicle because if a car gets stone chips, it’s because it’s in an open trailer”, he agreed that those words were the essence of what he said to Jackson.
Hence, Robbins advised Jackson that CEVA treated the waiver form as effective only to exclude CEVA’s liability for stone chip damage.
127 Accordingly, I grant leave to Red Earth to rely upon paragraphs 15, 16, 18 and 19 of the amended statement of claim filed 14 August 2018. Paragraphs 15 and 16 were in the same terms as the earlier version of the amended statement of claim dated 3 August 2018.
128 Paragraph 18 contained the major change regarding the misleading and deceptive conduct allegation because it made clear that the conduct complained of was relying upon the terms of the exemption clause in circumstances where CEVA had earlier informed Red Earth that it applied to exempt CEVA from only one form of loss. CEVA argued that the misleading and deceptive conduct case which it met at trial was one in which the contravening conduct was the reliance on the exemption clause in the agreement between the parties. CEVA argued it could not be misleading or deceptive for a party to rely upon a clause in a contract. CEVA contended the proposed change was unfair and prejudicial.
129 I consider that in taking this approach, CEVA was somewhat ingenuous. It was apparent what claim Red Earth was advancing from the other material referred to. It should have been sufficiently clear to CEVA that Red Earth’s complaint was CEVA seeking to rely on the exemption clause for the theft of the Porsche after it had told Red Earth the exemption was limited to stone chip damage.
130 Paragraph 17.1 of the amended statement of claim filed 14 August 2018 is permitted, but paragraph 17.2 is not. As I understood Red Earth’s submissions, the reference to rectification of the agreement related to the conventional estoppel claim which Red Earth sought to raise. Until Red Earth raised the issue of the amendment sought on 14 August 2018, there was no detailed discussion of rectification or conventional estoppel. Especially when Red Earth made no mention of conventional estoppel and rectification in the opening and evidence, it is not appropriate to amend the pleading at this late stage to raise these new issues.
131 CEVA represented that the purpose and effect of the exemption clause was to exclude CEVA from liability for any stone chip damage suffered by the Porsche which occurred when the vehicle was in transit from Brighton to Darwin.
132 Red Earth relied upon the representation when signing the waiver form because Johnston, on the basis of what Jackson told him, believed the waiver was limited to excluding CEVA’s liability for stone chip damage. CEVA misled and deceived Red Earth because it later sought to rely upon the standard agreement as amended by the waiver form to avoid liability for the theft of the vehicle.
133 The question of loss and damage in cases involving misleading and deceptive conduct is often complicated and plaintiffs not uncommonly focus most of their attention on the issue of liability and insufficient attention on matters of damage.[31] Because I find in Red Earth’s favour on the equitable estoppel argument, it is not necessary that I examine the detail of this aspect of the claim. On the one hand, the evidence about what Red Earth’s position would have been but for signing the waiver form is not particularly clear. On the other hand, there is the agreement between the parties about the relief to be given if Red Earth established any of its claims.
Conventional estoppel
[31]See, for example, BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338; and MA&J Tripodi Ltd v Swan Hill Chemicals Pty Ltd (No 2) [2018] VCC 526.
134 In final address, Red Earth sought to raise a claim based on conventional estoppel. This was a new development because Red Earth opened its case on the basis of an equitable estoppel and referred to the leading case of Waltons Stores (Interstate) Ltd v Maher.[32] As noted earlier, I have refused the application by Red Earth to amend its statement of claim to include a claim based upon conventional estoppel. Although it is strictly unnecessary, I make the following additional comments on the assumption that the amendment had been allowed.
[32](1988) 164 CLR 387.
135 A preliminary issue with conventional estoppel is whether this estoppel can arise from pre-contractual negotiations. In Johnson Matthey Ltd v AC Rochester Overseas Corp,[33] McLelland J found that the parol evidence rule operates to exclude evidence of an estoppel by convention alleged to have arisen from pre-contractual negotiations. His Honour considered that reasons of principle and policy combined to exclude evidence of alleged estoppels by convention or any other agreements or understandings arising in the course of pre-contract negotiations which culminated in a written contract. An exception to this general principle was a proceeding for the rectification of the written contract when the established requirement, as a condition of obtaining relief, of clear and convincing proof of a common intention of the parties not reflected in the written document, provided the necessary degree of security of the written contract.
[33](1990) 23 NSWLR 190.
136 His Honour also found that, in general, except in the case of fraud, and subject to any statutory provision, an entire contract clause would bind the parties to the agreement in accordance with its terms. Such an estoppel gives rise to an estoppel by convention which excludes any antecedent estoppel which might otherwise have had effect.[34]
[34]Ibid, 196.
137 Some judges have adopted a different view from McLelland J, most notably McHugh JA in State Rail Authority (NSW) v Heath Outdoor Pty Ltd.[35] McHugh JA rejected the proposed limitation upon doctrines based on unconscionability. The views of McHugh JA were adopted tentatively by Higgins J in Liangis Investments Pty Ltd v Daplyn Pty Ltd.[36] Thomas J in Grace v Peter Harrison Design & Signs Pty Ltd was inclined to follow the views of McHugh JA but did not decide the issue.[37]
[35](1986) 7 NSWLR 170, 193.
[36](1994) 117 FLR 28, 33-5.
[37][1998] QSC 27. It should perhaps also be noted that, to the extent that McHugh JA relied upon an equitable concept such as unconscionability to avoid the parol evidence rule and McPherson JA in MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152 considered the parol evidence rule and an entire agreement clause would not prevent a court granting a remedy for rectification, it might be important whether conventional estoppel is a common law or equitable doctrine. In Moratic Pty Ltd v Lawrence James Gordon and Anor [2007] NSWSC 5, Brereton J opines that it is based in common law.
138 However, the approach adopted in Matthey in denying the capacity of estoppel to outflank contractual rules has been followed or adopted in a greater number of authorities.[38] For present purposes, the most important of those authorities is Retirement Services Australia RSA Pty Ltd v 3143 Victoria Street Doncaster Pty Ltd,[39] where Warren CJ, Harper JA and Robson AJA agreed with McLelland J that the parol evidence rule operates to exclude evidence of an estoppel by convention alleged to arise from pre-contract negotiations. The Court referred to another New South Wales Supreme Court case, Whittet v State Bank of New South Wales,[40] where Rolfe J did not follow Matthey. The Court of Appeal distinguished Whittet on the basis that it was essentially about unconscionability. The Court of Appeal said that the claim relating to unconscionability was not made at trial and, so far as relevant, was made for the first time on appeal. If the two authorities could not be distinguished (and the court thought they could be), it preferred Matthey. The Court concluded that no estoppel by convention arose on the facts of the case before it and said that even if it did, it was superseded by later written agreements.
[38]See Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [444] per Allsop J with whom Drummond and Mansfield JJ agreed.
[39](2012) 37 VR 486.
[40](1991) 24 NSWLR 146, 153.
139 In circumstances where the Court of Appeal has adopted the Matthey approach, I consider I am bound to find that Red Earth cannot raise a conventional estoppel based upon pre-contractual negotiations, namely the discussion with Robbins and the email of 2 June 2017, when the parties later executed the waiver form which amended the standard agreement.
Conclusion
140 In summary, I am satisfied that Red Earth should succeed in its claim against CEVA. I consider that Red Earth’s construction argument is correct and I also accept its case regarding equitable estoppel. Subject to hearing from the parties about the form of final order and costs, I propose to order that there be judgment for the plaintiff against the defendant in the sum of $121,000 together with interest and costs.
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