Spyrides v Marsh

[2019] NSWSC 1289

Supreme Court

New South Wales

Medium Neutral Citation:

Spyrides v Marsh [2019] NSWSC 1289

Hearing dates:

14 & 15 March 2019

Date of orders:

03 October 2019

Decision date:

03 October 2019

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Direction given for the parties to bring in short minutes of order to give effect to these reasons.

Catchwords:

CONTRACT – breach of contract – plaintiff desires to purchase a new motor vehicle – plaintiff pays the first defendant a deposit and leaves with the first defendant an older motor vehicle for sale to a third party – plaintiff claims that his arrangement with the first defendant was that the deposit and the proceeds of sale of the older vehicle were to be applied only to the purchase of the new vehicle – the first defendant disputes elements of this arrangement and says that these monies became part of the working capital of two companies that the first defendant controlled, namely the second and third defendants – the first defendant says that the plaintiff contracted with one of these companies, not with the first defendant – the deposit and the proceeds of sale of the older vehicle were not applied to the purchase of the new vehicle but were used to meet the cash flow requirements of the two companies, the second and third defendants – the defendants are unable to acquire the new vehicle for the plaintiff, who is now out of pocket and seeks to recover his loss – whether the plaintiff contracted with the first defendant or with the second and third defendants to procure the new vehicle – whether any defendant breached that contract by failing to procure the new vehicle – what are the damages for any breach of contract that is found .

 

TORT OF INDUCING BREACH OF CONTRACT – if a contract was made between the plaintiff and the second or third defendants, whether the first defendant directed or procured the second and third defendants to breach that contract in failing to procure the new vehicle for the plaintiff – whether the tort of inducing breach of contract is available where the first defendant is the sole director of the two companies, the second and third defendants, who are sued for breach of contract and not in tort – whether the plaintiff has otherwise made out the elements of the tort of inducing breach of contract.

 

TRUST – special-purpose trust – constitution of special-purpose trust – breach of trust – plaintiff contends the arrangements made with the first defendant included the constitution of a special-purpose trust between the plaintiff and the second defendant in which the second defendant was required to apply the deposit and sale proceeds of the older vehicle for the purchase of the new vehicle – whether such a special-purpose trust was constituted – whether there was a breach of such a special-purpose trust.

  AGENCY – plaintiff alleges the first defendant acted as the plaintiff’s agent in the transaction to acquire the new vehicle and breached a fiduciary duty that he owed as an agent to the plaintiff by causing or procuring the second defendant to disburse the deposit and the proceeds of sale of the older vehicle and not to acquire the new vehicle – whether the first defendant acted as the plaintiff’s agent and owed a fiduciary duty to the plaintiff or whether the parties were operating at arm’s length.

Legislation Cited:

Corporations Act 2001 (Cth)

Cases Cited:

Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337
Balmedie Pty Ltd v Russo [1998] FCA 980
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640
George v Webb & Ors [2011] NSWSC 1608
Legal Services Commissioner v Brereton (2011) 33 VR 126
Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231
Super 1000 Pty Ltd v Pacific General Securities Ltd (2008) 221 FLR 427
Tsaprazis v Goldcrest Properties Pty Ltd (2000) 18 ACLC 285

Category:

Principal judgment

Parties:

Plaintiff: Euripides Christou Spyrides
First Defendant: Timothy Elgan Marsh
Second Defendant: Used Cars Plus Pty Ltd (ACN 163 574 865)
Third Defendant: HB Motors Pty Ltd (ACN 610 787 865)

Representation:

Counsel:
Plaintiff: J. Halley SC; E. Bathurst
Defendants: B. Le Plastrier; D. Edney

  Solicitors:
Plaintiff: Nicholas Parsons, Nicholas George Lawyers
Defendants: Benjamin Hemsworth, Somerville Legal

File Number(s):

2018/78114

Publication restriction:

No

Judgment

1. The plaintiff, Mr Euripides Spyrides, claims in these proceedings that he has suffered loss as a result of an arrangement he made in March 2017 with the first defendant, Mr Timothy Marsh, to acquire a McLaren 720S Coupe motor vehicle (“the McLaren”). The arrangement also controversially involved two companies Mr Marsh controlled, Used Cars Plus Pty Ltd (“Used Cars Plus”) and HB Motors Pty Ltd (“HB Motors”), respectively the second and third defendants in these proceedings. HB Motors was formerly known as Prestige Preowned Pty Ltd (“Prestige Preowned”) and is often referred to by that name in this judgment. Mr Marsh was at all relevant times the sole director of Used Cars Plus and HB Motors.

2. In early 2017, Mr Spyrides wished to purchase the McLaren, which its manufacturer describes as “the most innovative supercar we’ve ever built.” Mr Spyrides made an arrangement with Mr Marsh, or one of Mr Marsh’s two companies, to acquire the McLaren. To procure the McLaren, Mr Spyrides paid a money deposit of $60,000 to Mr Marsh and also left with Mr Marsh a motor vehicle that Mr Spyrides then owned, a Ferrari. The arrangement was that Mr Spyrides’ Ferrari was to be sold to a third party.

3. Mr Spyrides claims, and Mr Marsh disputes, that both the money deposit and the proceeds of sale of the Ferrari were to be applied only to the purchase of the McLaren. They were not so applied. Mr Marsh says these monies became available to meet the ongoing cash flow requirements of his companies. In fact, they were so used.

4. Neither Mr Marsh nor his companies delivered the McLaren to Mr Spyrides. The vendor of the McLaren was not paid. So, Mr Spyrides had to use other funds to acquire the McLaren. Mr Spyrides is now out of pocket and seeks to recover his loss.

5. The issues in the proceedings may be briefly stated. Mr Spyrides claims he is entitled to relief at common law and in equity: (1) for breach of contract; (2) in tort for inducing breach of contract; (3) for breach of a special-purpose trust; and, (4) for breach of fiduciary duty. Mr Marsh contends he has no liability to Mr Spyrides on any of these claims.

6. First, Mr Spyrides brings a claim in contract. He contends that he contracted with Mr Marsh, on 17 March 2017, for Mr Marsh to procure the McLaren for him and that Mr Marsh breached that contract by failing to procure the McLaren. Mr Spyrides contends that he made this contract with Mr Marsh personally, or by his alter ego or agents, the companies Mr Marsh controlled, Used Cars Plus or HB Motors. Mr Marsh disputes that Mr Spyrides contracted with him personally. He says that any contract that Mr Spyrides made to acquire the McLaren was made either with Used Cars Plus or with HB Motors.

7. Secondly, and in the alternative to the contract claim, Mr Spyrides alleges that that if the Court were to find that Mr Spyrides did make a contract with Used Cars Plus, or with HB Motors, and not with Mr Marsh himself, then Mr Marsh directed or procured those companies to breach that contract in failing to procure the McLaren for Mr Spyrides. Mr Marsh says in answer to this claim that the tort of inducing breach of contract is not available in circumstances such as the present, where Mr Marsh is the sole director of the two companies, who are alleged to have breached the contract. And he says that the Court should not find that his conduct would have established the necessary elements of the tort, in any event.

8. Thirdly, Mr Spyrides contends that the arrangements he made with Mr Marsh included the constitution of a special-purpose trust between Used Cars Plus and himself. The special-purpose trust alleged is one in which Used Cars Plus was required to apply the $60,000 money deposit Mr Spyrides paid, as well as the proceeds of sale of the Ferrari in the sum of approximately $530,000, only towards the purchase of the McLaren for Mr Spyrides. Mr Marsh denies that a special-purpose trust was constituted out of the verbal and written arrangements made between Mr Spyrides and Mr Marsh for delivery of the McLaren.

9. Fourthly, Mr Spyrides alleges that Mr Marsh acted as his agent in these arrangements, and breached a fiduciary duty he owed to Mr Spyrides arising from his role as agent, when he caused or procured Used Cars Plus to disburse the deposit and the Ferrari proceeds, instead of using those funds to acquire the McLaren for Mr Spyrides. Mr Marsh says in answer to this claim that he and Mr Spyrides were operating at arm’s length. He denies that at any time he was Mr Spyrides’ agent in these transactions, or that he was under any fiduciary duty to Mr Spyrides.

10. The proceedings went to trial on the plaintiff’s Amended Statement of Claim filed on 25 February 2019 and the defendants’ Defence to the Amended Statement of Claim filed 4 March 2019.

11. On 15 July 2018, after the proceedings had commenced, ASIC deregistered HB Motors under Corporations Act 2001, s 601AB (Cth). Mr Spyrides did not attempt to reinstate HB Motors. He limited the relief he sought to Mr Marsh and Used Cars Plus.

12. These proceedings were heard on 14 and 15 March 2019. Mr J. Halley SC with Ms E Bathurst of counsel, instructed by Nicholas Parsons of Nicholas George Lawyers, appeared for the plaintiff. Mr B. Le Plastrier with D. Edney of counsel, instructed by Benjamin Hemsworth of Somerville Legal, appeared for the defendants.

13. The following is a chronological narrative of the relevant history. This narrative represents the Court’s findings on the matters covered, except to the extent that the context indicates that only the parties’ allegations are being recorded. For reasons of economy, the narrative does not always include reference to versions of the facts that have been rejected. The Court has been much assisted in making these finding by the detailed submissions of counsel and solicitors for the parties.

14. Much of the narrative was uncontentious. All the known correspondence between the parties during the period was in evidence. Mr Spyrides was cross-examined briefly on one partly disputed conversation he had with Mr Marsh. In turn, Mr Marsh was cross-examined over several hours. The Court’s assessment of the credibility of these two main witnesses appears in the factual narrative.

Mr Marsh, Mr Spyrides and the McLaren – March 2016 to May 2017

15. Mr Marsh or his companies were ultimately unable to purchase the McLaren for Mr Spyrides, because of cash flow difficulties encountered in mid–2017. These difficulties had their origins in a series of transactions Mr Marsh had engaged in before arranging to purchase the McLaren for Mr Spyrides. The narrative of the Court’s findings therefore commences early in 2015 with Mr Marsh’s dealings with these other parties, the most prominent of whom was another trader in luxury and high end vehicles, Mr Fotis Zervas. The contractual discussions between Mr Spyrides and Mr Marsh do not get underway until March 2017.

Mr Marsh Begins Dealing with Mr Fotis Zervas – Mid-March 2015

16. In about mid-2015, Mr Marsh and Used Cars Plus commenced to deal with Mr Zervas, who traded through two companies, Ultimate Car Rentals Australia Pty Ltd (“Ultimate Car Rentals”) and Zervas Pty Ltd (“Zervas”). Zervas held the dealer license for Ultimate Car Rentals under the Motor Dealers and Repairers Act 2013.

17. Commencing in about mid-2015, Mr Zervas would enquire of Mr Marsh from time to time about the price of a car Mr Zervas might purchase through Used Cars Plus. If the price was satisfactory to Mr Zervas, he would place an order. Used Cars Plus would invoice one of Mr Zervas’ companies and would fill the order by sourcing a vehicle for Mr Zervas’ dealership.

18. Mr Marsh says, and the Court accepts, that when those dealings first commenced they appeared to Mr Marsh not to be very different from the commercial dealings he and Used Cars Plus had with other clients. Between mid-2015 and September 2016, Mr Zervas made between six and 12 purchases on behalf of Ultimate Rentals or Zervas and another company controlled by Mr Zervas, somewhat confusingly called, New Cars Plus Pty Ltd (“New Cars Plus”). Generally Mr Zervas’ purchased individual vehicles from Used Cars Plus each worth between about $95,000 and $160,000.

A Disputed Meeting between Mr Spyrides and Mr Marsh – Late 2015

19. Mr Spyrides says that he first met Mr Marsh in Brisbane in September 2015, in a context not related to the March 2017 transaction between them the subject of these proceedings. The Court accepts Mr Spyrides evidence that he met Mr Marsh in Brisbane in or around September 2015. He originally said they met in September 2016 but he then corrected himself by one year after seeing Mr Marsh’s evidence. Mr Spyrides had accompanied a friend of his, Mr Rafi Assouline, to purchase a Ferrari F12 through Mr Marsh from the Ferrari dealership in Brisbane. Mr Spyrides and Mr Assouline travelled to Brisbane together and met Mr Marsh. They visited the Brisbane Ferrari dealership and had lunch with Mr Marsh.

20. From this short meeting Mr Spyrides gained the impression that Mr Marsh conducted a private business, with an associate, a Mr George Seely, involving the trading of luxury and high end vehicles. This meeting enabled Mr Spyrides to recognise Mr Marsh when he met him again in March 2017 at the office of Mr Arthur Kekatos, a sales representative of the McLaren dealership in Sydney, Trivetts.

21. Mr Marsh does not recall this meeting. But that is not surprising. It was a more important meeting to Mr Spyrides, who was helping out his friend. For Mr Marsh it was a routine sales occasion. The Court accepts Mr Spyrides’ evidence that it was due to this meeting that he recognised Mr Marsh when he next met him. Mr Spyrides’ initial recollection was initially a year too late but he was correct about the fundamentals of the meeting.

Mr Zervas Orders Six Luxury Cars – September 2016

22. In about September 2016, Mr Marsh says, and the Court accepts, that he began negotiating with Mr Zervas for the purchase by Ultimate Rentals, or by Zervas, of a package of six individually priced luxury vehicles worth approximately $2 million. Mr Marsh agreed to acquire the vehicles for Mr Zervas and Used Cars Plus issued an invoice for the vehicles in early October 2016. The invoice was not for the full $2 million purchase price. For three of the vehicles in the package the amount invoiced was only the price of a deposit on sale, not the full sale price.

23. Used Cars Plus invoiced Mr Zervas’ companies for the following vehicles in the package: a Lamborghini Hurracan for $420,000; a Maserati Quattroporte S for $241,500; a Ferrari for $30,000 (deposit only); B&W M4 for $10,000 (deposit only); a BMW M3 for $35,000 (deposit only); and a Mercedes AMG GTS for $285,000. The total of the invoice was $1,021,500. This invoice structure reflected the fact that the Lamborghini, the Maserati and the Mercedes-Benz were already in stock with Used Cars Plus and so their full price was invoiced, rather than just a deposit for vehicles still to be procured.

24. Mr Zervas explained to Mr Marsh that the package of vehicles would be paid for by a third party. Mr Marsh says, and the Court accepts, that Mr Zervas said to him, “I have this investor, Fabio Alvez, who is trying to get his visa approved to invest money in my business. We should be able to pay you in a couple of weeks.”

25. But problems soon emerged with Mr Zervas or Mr Alvez paying the $1,021,500 invoice for these six vehicles. Indeed, it was ultimately never paid.

Mr Marsh Begins to Ask for Payment from Mr Zervas – December 2016 to March 2017

26. Mr Marsh met Mr Zervas and Mr Fabio Alvez at Mr Zervas’ office in December 2016. Mr Marsh asked for payment of his October 2016 invoice. Mr Alvez told him that the invoiced vehicles would be paid for “before Christmas.”

27. Between mid-December 2016 and the beginning of February 2017 Mr Marsh exchanged text messages with Mr Zervas seeking payment. He did not receive a satisfactory answer. The text messages begin by seeking updates about when payment would occur. Mr Zervas variously replies indicating he has no updates “from Fabio”.

28. Mr Marsh reiterates he wants it “resolved before Christmas”. Payment for the invoiced vehicles was not made “before Christmas”. On 19 January Mr Marsh follows up an unreturned phone call from Mr Zervas pointing out that “the Ferrari and BMW [are] sitting there waiting to go – any news.” But Mr Zervas did not engage with him. On 24 January, Mr Marsh followed up again explaining “I had to pay for the M3 yesterday, so I really need a resolution this month”. Mr Zervas predicted that payment transfers would be made the following week, when “Fabio’s new Visa kicks in”. Mr Marsh followed up again on 1 February and was told there were delays with Mr Alvez’s Visa. None of these responses from Mr Zervas objectively appear particularly reassuring. But until early February the Court accepts that Mr Marsh believed that Mr Alvez just needed more time to pay.

29. By 3 March 2017, Mr Marsh was becoming sufficiently concerned about non-payment of the October 2016 invoice for the six vehicles that he contacted his brother, Mr Craig Marsh, who is an investment banker living in the Philippines. Mr Marsh made enquiries of his brother to see if Mr Alvez might be able to overcome some of the payment difficulties that were being experienced.

30. Mr Marsh raised with his brother whether he could receive the money due on the invoice in Australian dollars into one of his brother’s accounts in the Philippines, or elsewhere. Mr Craig Marsh volunteered that he had a Citibank multicurrency account, which could receive money in Australian dollars from anywhere in the world. The account details were passed on to Mr Alvez and it was arranged for him to make the payment there.

31. On 7 March 2017, Mr Marsh enquired of Mr Zervas about the remittance for the October 2016 invoice from Mr Alvez and was promised by Mr Zervas that it would be received “late tonight, or tomorrow”. On 8 March, Mr Marsh received a text message from Mr Zervas enclosing an electronic copy of a form of remittance document from Mr Alvez’s Portuguese bank account to Mr Craig Marsh’s overseas account in an amount of AU$900,000. The remittance record sent with the text message had all the correct account numbers and Swift codes for Mr Craig Marsh’s account; Mr Marsh checked them.

32. On 9 March 2017, Mr Marsh exchanged text messages with Mr Zervas. He reported to Mr Zervas that the money had still not arrived in Craig Marsh’s account and that Mr Marsh was “getting nervous about it”. In response Mr Zervas exhorted “patience” and assured Mr Marsh that “even Fabio doubts it would hit the account this week from Europe”, allegedly because of some problem with Deutsche Bank funds transmission process.

33. Mr Marsh was indeed getting nervous about payment at that stage, as he admitted. The invoice had been issued in October and was now about 5 months old. It was still unpaid after several promises of payment and the effort on Mr Marsh’s part to make payment as easy as possible.

34. In this context, Mr Marsh and Mr Spyrides met the following day, 10 March 2017, in Sydney to discuss the acquisition of the McLaren. But that conversation is best examined with the background of Mr Marsh’s normal business practice in acquiring luxury vehicles.

The Used Cars Plus Business Model – A Short Explanation

35. Mr Marsh has explained in his evidence an outline of the usual steps he takes in what he calls his “business model” in acquiring luxury and high end motor vehicles for customers. The explanation below assumes, for illustration purposes only, that the transaction is being conducted by Used Cars Plus. The Court accepts it as an accurate account of his usual business practice.

35. Typically, as Mr Marsh explains, potential purchasers will approach Used Cars Plus wanting to purchase a vehicle; and sometimes also to trade-in an existing vehicle. In broad terms, Used Cars Plus procures the vehicle for the purchase (“the Purchase Vehicle”), and finds a purchaser for the trade-in vehicle, if there is one.

36. If the transaction occurs with a trade-in, Used Cars Plus will usually send the details of the trade-in to wholesale vehicle appraisers, to value the trade-in. After receiving the best price from the wholesale vehicle appraisers, Used Cars Plus notifies the wholesale vehicle appraiser of the timeframe for the availability of the trade-in. Used Cars Plus then orders the Purchase Vehicle and usually, at that time, will pay a deposit to the dealer, which is charged to the client. Upon arrival of the Purchase Vehicle at the vendor dealership, the dealer will render an invoice to Used Cars Plus and Used Cars Plus will invoice the client for the changeover figure (being the difference between the price of the purchase vehicle and the appraisal value of the trade-in). Used Cars Plus will then pay the full purchase price for the Purchase Vehicle from funds advanced by the client for the changeover figure, plus some of Used Cars Plus's own funds. When the trade-in is available, the wholesaler will collect the vehicle. The wholesaler will then typically make payment for the trade-in to Used Card Plus about 7-10 days after collection.

37. In the typical sale, the time between the payment by Used Cars Plus of the full purchase price for the Purchase Vehicle and the payment received by Used Cars Plus from the wholesaler of the trade-in usually works out in Mr Marsh’s experience to be an overall period of between one and three weeks. During that period Used Cars Plus is effectively funding from its own resources the amount due from the wholesaler, which is the difference between the full purchase price and the changeover figure.

38. Mr Marsh says that typically he pays over to the vendor dealer less than the amount of the deposit for which he charges the client. He says that in his experience, in some luxury and high-end vehicle purchases, the purchaser is unable to complete. He says if he retains some of the deposit, he can make a sale more attractive to a new substitute purchaser by reducing the purchase price by the amount of the retained deposit.

39. Clients are sometimes not content with the price for the trade-in offered by the wholesaler. When that occurs, Mr Marsh explains, Used Cars Plus tries to obtain a retail price for the trade-in vehicle. In those circumstances, Mr Marsh will have the client pay the entire purchase price and the client is then reimbursed the value of the trade-in, when the money is received from a retail sale, which is typically higher than the proceeds from a wholesale sale.

40. In the end, the purchase of the McLaren for Mr Spyrides and the trade-in of the Ferrari F12 had features that did not entirely fit the typical patterns of Mr Marsh’s business model.

The Purchase of the McLaren – Early March 2017

42. On 10 March 2017, Mr Spyrides and Mr Marsh met again, this time at the McLaren Sydney dealership, operated by Bespoke Automotive Australia Pty Ltd trading as Trivett Bespoke (“Trivett”). At the time, Mr Spyrides was meeting Trivett’s brand manager there, Mr Arthur Kekatos. He wanted to discuss with Mr Kekatos the purchase of a McLaren 720S, a new vehicle being launched by McLaren later that year. Mr Spyrides’ intention was to partially fund the purchase by trading in the Ferrari F12 that he owned.

43. An affidavit of Mr Kekatos was read in Mr Spyrides’ case. Mr Kekatos was not cross-examined and his evidence is accepted. Some of the Court’s findings in this section are based upon Mr Kekatos’s evidence. His evidence is a basis to infer that Mr Marsh and Mr Spyrides had met previously, as Mr Spyrides said they had. They appeared to Mr Kekatos to be quite familiar with one another. But Mr Marsh did not stay at Trivetts very long that day. After the greeting, Mr Marsh left the office and Mr Kekatos and Mr Spyrides continued their conversation together.

44. Mr Spyrides and Mr Kekatos discussed in detail the specifications for the McLaren that Mr Spyrides wanted. They then moved to discuss price. But their price discussion was unsatisfactory. Mr Kekatos indicated that Trivett’s sale price for the McLaren would be $704,000, and that the best price he thought he would be able to obtain for the Ferrari was in the "high 400's, low 500's."

45. Mr Kekatos cannot be exact about the price he quoted to Mr Spyrides. But he recalls Mr Spyrides “wanted a discount, which I could not give him. I also recall he wanted a lot of money for his Ferrari; more than I was able to offer him.”

46. Mr Kekatos suggested that Mr Spyrides might enquire with Mr Marsh, to see if Mr Marsh could obtain a better price for the Ferrari. Mr Kekatos was aware that Mr Marsh purchased luxury and high end vehicles on behalf of private clients and may be able to help Mr Spyrides get the best trade-in price.

47. Mr Spyrides took Mr Kekatos’ advice. After he left Mr Kekatos, he telephoned Mr Marsh to discuss whether Mr Marsh might be able to improve on the deal Mr Kekatos had offered. Mr Spyrides recounts this first conversation about this acquisition as occurring in the following way. The substance of the conversation is mostly not in contest.

Mr Spyrides: “Hi Tim, I’ve just finished with Arthur. We spec’d a 2017 720S. Arthur said his best price was $704,000. Can you do anything better if I buy it through you?”

Mr Marsh: “I can do it for $660,000.”

Mr Spyrides: “What could I get for the F12? Look, I’ve got an indication of $530,000 from Ferrari. I need you to commit to a number because I need to know my worst case scenario.”

Mr Marsh: “I would be happy to take the F12 for $530,000.”

Mr Spyrides: “Alright, let me think about it. Give me a couple of days, as I am going to see what price I can get from Ferrari, and could you think about whether you could do any better than $530,000.”

48. Mr Marsh concedes that Mr Spyrides said to him: “Arthur said his best price was $704,000. Can you do anything better, if I buy it through you?” But Mr Marsh disagrees that he said to Mr Spyrides, “I can do it for $660,000.”

49. Pressed under cross-examination on this issue, Mr Marsh gave a persuasive reason why he would not have said to Mr Spyrides on this first occasion, “I can do it for $660,000.” He pushed back strongly against the idea that he would have agreed to $660,000 on the spot. He says he would have needed to verify that he could indeed source the car from McLaren at that price. Relevant parts of this cross-examination on this telephone conversation follow:

“Q.  And you said, ‘I could do it for 660,000.’  Didn't you?

A.  No.

Q.  What I want to suggest to you is that the 660,000 was the basis upon which you came up with the deposit of $60,000, wasn't it?

A.  What ‑ what you're saying to me, Mr Halley, is that ‑ like, in one phone call someone rang ‑ Mr Spyrides rang me, asked to buy a car that Trivett's had said to him was 700,000, and then in that same phone call, without speaking to someone, I've said I can do 660,000.

Q.  Exactly.

A.  No.

Q.  Where do you say you agree the figure of 660,000 with Mr Spyrides?

A.  I would say over the ‑ over subsequent phone calls.  The timeframe I'm not sure of, but subsequent phone calls.

Q.  Well, which conversation?

A.  We definitely had more than one conversation.

Q.  Where do you refer in your affidavit, either of your affidavits, to a conversation with Mr Spyrides in which you agreed to a price of $660,000?

A.  I'm pretty sure I read in one of my affidavits that in rejection of his assertion that it was agreed in one phone call because I ‑ I don't ‑ I don't know how someone who doesn't work for Trivett's is able to give you a price from a car from Trivett's when I don't even know what the specification is.”

50. Mr Marsh had explained his reasoning for being firm on this issue in his affidavit of 18 June 2018, paragraph [52]. But he remained vague about exactly when he had a subsequent conversation with Mr Spyrides in which the $660,000 was agreed. But he firmly denied that he was speculating about a subsequent conversation with Mr Spyrides on this subject and the Court accepts his denial. The cross- examination continued:

“Q. Now, you'll see in paragraph 52 you say, ‘Although the price of 660 was later agreed to, it was not agreed to during the telephone call referred to in paragraph 51 of this affidavit.’ And then you go on to say, ‘as I would not have known what price Used Cars would be able to source the car for.’ Do you see that?

A. Yes.

Q. Now, what I want to suggest to you is that you are not able to identify any subsequent conversation in which there was any agreement that there amount was to be 660,000, can you?

A. I'm sorry, can you repeat that for me?

Q. What I want to put to you is that you are speculating that there may have been a subsequent telephone conversation in which the price of $660,000 was agreed, but you can't remember having such a conversation, can you?

A. No. I'm not speculating. There was definitely a conversation.

Q. Well, where

A. Well, it's not possible for me to be able to quote a price of a car on a brand from new that I don't even know the specification of. I don't know how you contend that.

Q. Is this the reasoning process that you've adopted? That because you think it's us impossible to, notwithstanding your experience to determine a price, you must not have agreed 660, or mentioned that, in your first conversation with Mr Marsh(as said) on 10 March?

A. This has not nothing to do with experience or otherwise. This is a brand new car from a branded motor vehicle dealership in McLaren. They sell the cars at a certain price. To be able to work out what price I could possibly buy it off Trivett's for, Mr Spyrides, through Used Cars Plus, I would have to speak to Trivett's on the specification and come up with a negotiation as to what price they would discount the car to, so I could not possibly have done that in one conversation.”

51. Mr Spyrides was not cross-examined about any differences between his version of this conversation and Mr Marsh’s. This makes fact-finding on the conversation more difficult. But despite that, the Court accepts as reliable Mr Marsh’s evidence that he could not have committed to $660,000 on the spot in that telephone call without first checking with Trivett’s, which he had not yet done. In this situation he was far more cognisant than Mr Spyrides of the difficulties in making that price commitment without prior verification from Trivett’s.

52. The Court accepts, as Mr Marsh says, that there must have been another later conversation in which a price was agreed, even though Mr Marsh cannot be specific as to when that took place. A price of $660,000 was agreed with Trivett soon afterwards. A puzzling aspect of this is that Mr Kekatos does not expressly state that he remembers a particular later conversation in which this price was agreed but there must have been one.

53. This evidence and the Court’s findings about this contest in relation to it exposes a gap at the centre of this case. Neither side gives evidence of a conversation about a critical contractual element: the price agreed for Mr Marsh to procure the McLaren for Mr Spyrides. The Court does not accept Mr Spyrides’ account that a final price was agreed on the telephone with Mr Marsh on 10 March. But neither Mr Marsh nor Mr Spyrides offer any other account of a conversation that on any view must have happened within another three to four days.

54. On 13 March 2017, Mr Spyrides progressed negotiations by sending a text message to Mr Marsh:

“Hi Tim, it’s Avi Spyrides, just wondered how you were progressing with the F12 trade in and potential purchase of the 720S?”

55. This text message, sent so soon after 10 March, does not refer back to the parties having already reached a definite price for the McLaren. Mr Spyrides’ reference to a “potential” purchase is more consistent with Mr Marsh’s version of the telephone conversation on 10 March.

56. Mr Marsh did not respond to this text message. But the pair had a telephone conversation the same day, in which Mr Spyrides confirmed to Mr Marsh that he wished to proceed with the purchase. This is a significant conversation. Mr Spyrides’ account of it is set out here in full. Mr Marsh goes not dispute that this conversation took place in those terms:

Mr Spyrides:    “Let's go ahead with the 720, but for now I'll try and sell the F12 through Ferrari. I think they can get me a better price. But if I can't sell it through Ferrari I'll come back to you.”

Mr Marsh:    “Okay, I'll need a deposit of $60,000 to place the order with McLaren.”

Mr Spyrides:   “No worries. I will also get Arthur to send you through the spec sheet for the 720S.”

Mr Marsh:   “No problems.”

57. The Court infers from Mr Marsh’s first request for a deposit of $60,000 during this conversation that agreement had by then been reached between Mr Spyrides and Mr Marsh on a price of $660,000 for the McLaren. The price may well have been agreed in that conversation but it has been left out of the recollected account.

58. The conversation signalled that in the short term at least Mr Spyrides was not going to trade in his F12 Ferrari through Mr Marsh, who thought the F12 would be difficult to value above $530,000. Mr Marsh had asked Mr Spyrides for the specification for the F12 but was not committing any further to a trade-in price at that stage.

59. Mr Spyrides says, and the Court accepts, that Mr Marsh did not mention in this 13 March conversation that the arrangement to purchase the McLaren or trade-in the Ferrari would be facilitated through companies such as Used Car Plus or Prestige Pre-Owned. Nor did Mr Kekatos say this to Mr Spyrdies.

60. The same day, 13 March, Mr Spyrides confirmed by telephone back with Mr Kekatos that he had decided to go ahead with the deal through Mr Marsh and that “Jim will be putting the order for the 720S through on my behalf”. Mr Spyrides requested in this call that the order be placed exactly in line with the specifications already agreed with Mr Kekatos. That accords with Mr Kekatos’ recollection. Mr Kekatos did not need to ask Mr Marsh for any further information about the specifications for the McLaren. Mr Kekatos knew what Mr Spyrides wanted and prepared the order for the McLaren on the basis of his discussions with him.

61. Mr Kekatos regarded Mr Marsh as well experienced in transactions of this kind. He expected that Mr Marsh would shortly pay a deposit and he, Mr Kekatos, would then prepare a contract for sale on behalf of Trivett for signature.

The Vehicle Purchase Agreement – 16 March 2017

62. On 16 March 2017, Mr Marsh sent the Vehicle Purchase Agreement to Mr Spyrides, attached to an email. The email shows the sender as “Tim Marsh [notpublished]@newcarsplus.com.au” and the subject is “McLaren Order.” It is signed “Best regards, Tim Marsh” with a mobile telephone number. The email stated as follows:

“Hi Avi, please see attached paperwork. The $130 changeover is if the F12 is traded in at $530k.”

63. This email does not explain to Mr Spyrides the need for this paperwork. It assumes that Mr Spyrides was expecting some papers to be sent to him. Although neither party gives an account of Mr Marsh foreshadowing in a conversation the future arrival of documents to be signed, the Court infers that something such as this was probably said during their exchange on 13 March. An alternative but slight less probable inference is that the need for further paperwork was so obvious that it did not need stating.

64. The first sheet of the Vehicle Purchase Agreement is formally entitled “Vehicle Purchase Agreement for Avi Spyrides Regarding the Purchase of a McLaren 720S Ordered on the 13/03/17.” It concludes in italics with the words “Please read through all the paperwork thoroughly.”

65. The second sheet of the Vehicle Purchase Agreement gives what it describes as “The final details of the vehicle which has been ordered with the dealer are below:” The second sheet then sets out under the bold heading “Vehicle Details” a specification for the McLaren including accessories. Then the second sheet sets out three more bold headings with the following information:

“Purchase Price

$130,000 changeover

Estimated delivery date

15/7/2017

Deposit Payable

$60,000.00

Used Cars Plus

NAB Chatswood

[bank account details not published but throughout these reasons the identified bank account is referred to as “A/c758”]

Ref 17Mclaren720ASDep”

66. The third and fourth sheets of the Vehicle Purchase Agreement are headed “Terms and Conditions” and contain detailed general conditions, in small font type. The parties’ submissions did not closely analyse these Terms and Conditions. But some of them have relevance in seeking to characterize the contractual effect of the parties’ dealings. They are set out below.

“Terms & Conditions

You are receiving this contract based on a telephone order you have given to Prestige Preowned. Please be advised this is a legally binding contract and the following terms and conditions apply:

At or before taking delivery of the motor vehicle the customer shall pay to the dealer the balance of the purchase price being the total on-road cost less the deposit. This must be paid by bank cheque, cash, or cleared telegraphic transfer funds.

If the motor vehicle is being leased, the amount being financed will be paid to the dealer from the finance company and if applicable any deposit will be refunded to the customer.

Until the dealer has received full payment of the purchase price, title in the motor vehicle shall not pass to the customer and the customer shall hold possession of it as bailee only.

The customer shall be deemed not to have paid the purchase price until the dealer received cleared and unencumbered title to any vehicle and all other payments are credited to the dealers account.

While the customer holds possession of the motor vehicle as bailee, he /she:

•   Is responsible for its proper care and maintenance

•   Is liable for any loss or damage occasioned to it, and

•   Will indemnify the dealer against any claim for its use

Where the dealer is entitled to reclaim possession of the motor vehicle, the customer authorises the dealer, its servants and its agents to lawfully enter the customer’s property for the purposes of retaking possession.

The Purchase Price of the vehicle is the amount shown on the client agreement form noted as 'Prestige Preowned Members Price' or 'Changeover'.

The purchase price may vary if, before the delivery of the motor vehicle, there is a change in the manufacturers recommended retail price, statutory charges or applicable taxes or duties. If the applied vehicle, cannot be delivered within a manufacturer's bonus schedule, the dealer shall give the customer written notice of any variation in the purchase price. If the purchase price is varied due to an increase of recommended retail, the customer may rescind this contract anytime within three days after receipt of the written notice of variation.

The dealer shall use its best endeavors to acquire the vehicle by the estimated delivery date, but should not be liable to the customer for any damage or loss whatsoever arising either directly or indirectly from any such delay of failure of delivery.

If the dealer has not delivered the motor vehicle to the customer, within thirty days of the estimated delivery date, the customer by notice in writing may rescind this contract.

…

Where the customer refuses or fails to take delivery of the motor vehicle, or is otherwise in breach of his obligations under this contract, the dealer may terminate this contract by written notice to the customer.; thereafter any deposit paid or payable by the customer to an amount not exceeding 5% of the total purchase price of the vehicle shall be forfeited to the dealer. Both parties acknowledge that the dealer shall be entitled to claim by way of pre estimated liquidated damaged from the customer an amount equal to 5% of the total on road cost. Less any deposit forfeited.

The provisions of any federal or state law apply to this contact, these provisions are deemed to be incorporated into this contract and the customer shall have the full benefit thereof, but only to the extent to which these warranties are applicable to the contract and may not be excluded there from and all other warranties are expressly excluded.

Any addition/or variation to these terms and conditions will have no effect unless made in writing and signed by the parties to this contract.

Important Please read these conditions carefully. These conditions accompany your phone order. Please contact Prestige Preowned immediately upon receipt of this paperwork if these conditions are outside your expectations and/or requirements.”

[In the Vehicle Purchase Agreement, the final words shown here in italics were presented in bold type].

67. Noteworthy among those terms is the declaration that it is a “legally binding contract” based on an order given to “Prestige Preowned.” Although Prestige Preowned is not expressly defined as “the dealer” anywhere in these terms and conditions, it is difficult to make sense of them unless the terms and conditions are read in that way. If “the dealer” is posited to be some other dealership, then these terms and conditions have virtually no work to do with respect to Prestige Preowned. These reasons have omitted some terms governing the trade-in of vehicles.

68. After the final request to “Please read these conditions carefully”, the Vehicle Purchase Agreement’s Terms and Conditions invite contact with Prestige Preowned. Mr Spyrides did not communicate to Mr Marsh that those conditions were outside “his expectations and/or requirements”.

69. Mr Spyrides replied to Mr Marsh’s 16 March email the following day. Mr Spyrides was checking whether the specifications he received from Mr Marsh fully aligned with the ones he had agreed with Mr Kekatos and that he had with him. He asked for the following:

“Thanks Tim,

Please confirm the car is as per the attached spec sheet I received from Arthur at McLaren.”

70. Mr Spyrides’ 17 March reply email attached a far more detailed specification sheet describing a McLaren 720S coupe vehicle, than was attached to the Vehicle Purchase Agreement.

71. Despite the difference in details between the Vehicle Purchase Agreement and the “spec sheet” Mr Spyrides had received from Mr Kekatos, Mr Marsh confirmed they were for the same vehicle. Mr Marsh replied to this effect on 17 March 2017, by email to Mr Spyrides stating:

“Yes exactly as spec’d with Arthur.”

Mr Spyrides Pays the Deposit – 17 March 2018

72. Mr Spyrides decided to proceed. At 4.35pm on 17 March, Mr Spyrides responded to Mr Marsh that he would pay the $60,000 deposit, discussed and recorded in the Vehicle Purchase Agreement. He also signalled that he was having second thoughts about having the Ferrari dealership sell his Ferrari F12. He wrote:

“…Will make the transfer online but will have to be done in 2 tranches as limited to $50k at a time.

Will do $30k today and a further $30k tomorrow.

Please confirm receipt of funds.

On another note, am continuing to push Ferrari to move the F12 ... at what stage would you like to take delivery if they can't move it?”

73. Mr Marsh responded, by email at 5.03pm, as follows:

“I’m happy to give them another 10 days to make it happen.”

74. All of this email correspondence continued using the email addresses identified earlier for each correspondent, with Mr Marsh still using the address “@newcarsplus.com.au.” At 5.58pm, Mr Spyrides responded to Mr Marsh, by email again, to deal with the mechanics of paying the deposit in two tranches, as follows:

“…Have made a payment of $30k today and a second payment of $30k will be transferred tomorrow.

Please confirm receipt of funds.”

75. Mr Spyrides transferred the deposit in two tranches, on 17 and 18 March respectively, to comply with his own bank’s daily funds transfer limits. His affidavit says it was transferred “to account number [A/c758] as Mr Marsh had requested.” But the only evidence of a request by Mr Marsh for payment is in the Vehicle Purchase Agreement, which nominates A/c758 as the payee account, and nominates the account name as “Used Cars Plus.” The Court inferred that to pay this deposit Mr Spyrides used the account number information, being A/c758, recorded under “Deposit Payable” on the second page of the Vehicle Purchase Agreement.

76. Mr Spyrides wanted evidence of receipt of his deposit payment. But Mr Marsh did not respond to Mr Spyrides’ prompting email. So Mr Spyrides sent a follow up text message to Mr Marsh on 20 March 2017:

“Hi Tim, just wanted to make sure that you’ve received the 2nd $30k payment. If so, please could you email me a receipt for the $60K deposit. Thanks.”

77. Mr Marsh replied, the same day:

“Yes just come through will send you a receipt in morning”

78. But the deposit receipt was still late. The following evening, on 21 March 2017, at 6:52 pm, Mr Spyrides sent this text message to Mr Marsh:

“Hi Tim, no receipt? Avi”

79. Mr Marsh responded, as follows:

“Sorry will do tonight hectic day.”

80. Mr Marsh emailed Mr Spyrides the deposit receipt on 22 March 2017. The deposit receipt was on letterhead that had the name “Used Cars Plus” in artistically presented script. Immediately below the artistic script words “Used Cars Plus,” the letterhead also set out the full name of the company Used Cars Plus Pty Ltd with its ABN, telephone number and addresses. The deposit receipt recorded that the deposit had been paid into account A/c758. But this time the bank account owner of A/c758 was described by its full corporate name “Used Cars Plus Pty Ltd”, not just “Used Cars Plus”, as A/c758 had been described in the Vehicle Purchase Agreement. The deposit receipt also recorded that the deposit that was payable corresponded with the amount received, and totalled $60,000, inclusive of GST.

Mr Marsh Secures the McLaren from Trivett – 1 April 2017

81. Mr Marsh made a separate agreement with Trivett through Mr Kekatos for the supply of the McLaren. This agreement was made on Mr Marsh’s side in the name of one of his companies, SME Fleet Pty Ltd. After discussions with Mr Marsh, Mr Kekatos prepared and issued an invoice dated 1 April 2017 to SME Fleet Pty Ltd in the amount of $660,000. The invoice contained the specification for the McLaren 720S Coupe – Performance – GW Glacier White that conformed with the description of the McLaren Mr Spyrides wanted. The invoice specifies an “Estimated Delivery Date” of 20 September 2017, a few months after the date that had appeared in the Vehicle Purchase Agreement that Mr Marsh had sent to Mr Spyrides. Trivett’s 1 April 2017 invoice represented a binding contract for the delivery of the McLaren to the company nominated by Mr Marsh, SME Fleet Pty Ltd.

82. Mr Marsh is not mentioned personally in the 1 April 2017 Trivett invoice, nor is Mr Spyrides. Mr Kekatos says that SME Fleet was often on the paperwork in his transactions with Mr Marsh but sometimes it was Used Cars Plus or New Cars Plus. But Mr Kekatos did not take much notice of this.

83. Mr Marsh also paid a $10,000 deposit to Trivett’s to order the McLaren. Mr Kekatos recalls that Mr Marsh paid this with a personal credit card. Mr Kekatos practice was not to issue a contract until the deposited been paid. The Court infers that this is what happened: Mr Marsh paid the deposit and the contract was issued on the same day.

A Disputed Conversation and the Ferrari Handover – Early April 2017

84. By early April, the 10 day grace Mr Marsh had suggested be given to Ferrari to sell the F12 had expired. Mr Spyrides changed his mind about how he wanted to dispose of the F12. At some stage between 3 and 6 April 2017, Mr Spyrides telephoned Mr Marsh and they had this conversation.

Mr Spyrides: "Ferrari are dragging their feet with the Fl2, so I'd rather let you take it".

Mr Marsh: "Okay, great, I can pick it up from you on Friday, 7 April. Once I sell it I'll forward the money to McLaren."

85. Mr Marsh disputes that the italicised words were said in this conversation. But Mr Spyrides was quite firm under cross-examination that they were spoken. The Court regards him as an honest and a reliable witness. But notwithstanding Mr Spyrides’ conviction, the Court is not persuaded that these words were said on this occasion.

86. The words are an implausible component of this conversation for several reasons. First, Mr Marsh did not strike the Court as the kind of person who would spontaneously volunteer to account for how he would deal with any money under his control.

87. Secondly, he had no intention of forwarding the money straight to McLaren as soon as the F12 was sold. He was going to get Used Cars Plus to pay Trivett when the McLaren was ready for delivery. And as the Vehicle Purchase Agreement recorded, delivery was not anticipated until July that year. Mr Marsh anticipated that in the short term the money was an essential component of his cashflow. Mr Marsh, as the Court assesses him below, had closed his eyes to consequences of the risk of non-payment by Mr Zervas of the October 2016 invoice. But Mr Marsh was not so dishonest as to volunteer a representation to Mr Spyrides that he must have known by then (as the Court’s other findings below show) was highly likely to be false or misleading.

88. Moreover, the words are not consistent with Mr Marsh’s business model, which did not normally require the trade in proceeds to be directly forwarded to the dealer before delivery of the car.

89. On 7 April 2017, Mr Marsh came to Mr Spyrides’ home in Sydney and collected the Ferrari. A notice of disposal for the Roads and Maritime Services Authority (“RMS”) was given to Mr Spyrides recording the buyer of the F12 as “Used Cars Plus”, the seller as Mr Spyrides, and, the sale price (as by then was agreed) as $530,000. Mr Spyrides says he did not notice that “Used Cars Plus” was recorded as the buyer on the notice of disposal. But he signed it.

90. This time, Mr Marsh anticipated Mr Spyrides would want a receipt again. On 10 April 2017, Mr Marsh emailed Mr Spyrides, stating:

“Hi Avi, the Ferrari is transferred into our stock at the RMS. I have attached the receipt and will try to collect the cover from you when convenient this week. You can cancel the insurance from this evening.”

91. This email attached the deposit receipt for the Ferrari, dated 8 April 2017. The Ferrari deposit receipt recorded exactly the same letterhead and bank account details as the deposit receipt had done. It recorded the ‘Cash Deposit Received” of $60,000, and the “Trade In” as the “2014 Ferrari F12 8382klms 8/4/17,” against which was the figure “$530,000.” The total amount received was recorded as $590,000.

The Early April Withdrawals from the Used Cars Plus Account

92. In the period between the deposit being paid on 17 and 18 March and 13 April 2017, Mr Marsh withdrew substantial sums of money from Used Cars Plus A/c758. These withdrawals emptied the account. They reduced the credit balance in the account from $227,478.70 (at the time the first instalment of the deposit was paid) down to $18.28 as at 13 April 2017. Mr Marsh initiated a subsequent group of withdrawals from A/c758 after the proceeds of sale of the Ferrari F12 were paid into the account later in April. So these withdrawals are for convenience called the “Early April Withdrawals.”

93. Mr Marsh did not seek to explain any of the Early April Withdrawals in his original affidavit evidence. He put on an affidavit just before the trial that attempted to do so. Detailed findings do not need to be made about these withdrawals in light of the Court’s conclusions. But in the background, Mr Marsh’s problems with Mr Zervas were worsening.

Mr Zervas and Mr Alvez Fail to Pay – March to May 2017

94. The October 2016 Invoice to Zervas was still unpaid in early March 2017. The commercial situation in which Mr Marsh found himself with Mr Spyrides during this period caused him genuine anguish, which came across. At one point under cross-examination he expressed genuine remorse about the situation, saying: “I hate the fact that Mr Spyrides is out of pocket.”

95. But Mr Marsh was not a reliable witness. His affidavit evidence was rather selective and based on reconstruction on critical issues. His cross-examination was attended with long pauses when he was faced with difficult questions.

96. Some of what Mr Marsh said was plainly improbable. Mr Halley SC’s cross-examination of him effectively and methodically went through the growing insolvency of his companies in March to May 2017. As the period under examination advanced further into the period of default on the October 2016 invoice, Mr Marsh’s answers became less and less reliable. The Court does not accept his statement that he only realized the October invoice would not be paid in June 2017. In my view, he knew that by the beginning of April 2017. The fact that Mr Marsh maintained such an untenable position does him little credit. But in light of the Court’s findings, the Court does not have to examine the detail of the Zervas/Alvez defaults during this period any further. The non-payment of the October 2016 invoice caused Used Cars Plus and Mr Marsh not to be able to meet their financial obligations to Mr Spyrides.

The Ferrari is Sold – Late April 2017

97. About 12 April 2017, Used Cars Plus sold the Ferrari to Mr Nico Wijarto Tjen for $545,000. On 28 April 2017, Mr Tjen made several deposits to Used Cars Plus A/c758, for this purchase.

98. Later on 28 April, Mr Marsh withdrew all the Ferrari sale proceeds rom the Used Cars Plus A/c758. The withdrawals of $5000.00, $20,030.00, $64,900.00 and $520,009.84, once again, emptied the account. The account was reduced to a debit balance of $27.04. These withdrawals are referred to in these reasons as “the Late April Withdrawals.”

Mr Spyrides Follows Up on Delivery – August 2017

99. Between April and August 2017, Mr Spyrides kept in touch with Mr Kekatos about the expected delivery schedule for the McLaren. Mr Kekatos had originally predicted a July delivery and that estimate was recorded in the Vehicle Purchase Agreement. But there were production issues with the vehicle. Mr Kekatos postponed the estimated delivery date until later in the year.

100. In mid-August, in the course of one of these communications with Mr Kekatos, Mr Spyrides found out that Mr Marsh had only forwarded on to Trivett a $10,000 deposit from the full amount of $590,000, being the $60,000 deposit and the $530,000 Ferrari sale proceeds that he had received.

101. Mr Spyrides immediately became concerned about what had happened to the deposit and the Ferrari sale proceeds. He rang Mr Marsh on 16 August, could not get through, and left a message. On 17 August 2017, Mr Spyrides started sending Mr Marsh text messages of increasing urgency and frequency seeking a reply from Mr Marsh.

102. Mr Marsh finally responded by text and then called Mr Spyrides. But the call was unanswered and Mr Marsh did not leave a message.

103. The following day, Mr Spyrides sent Mr Marsh multiple text messages asking Mr Marsh to call him urgently. When there was no response from Mr Marsh, Mr Spyrides at 3.25pm on 18 August 2017, sent Mr Marsh this email:

“Tim,

I’ve tried calling you several times this week, but have yet to hear back from you.

I cannot have this continue where I leave messages for you which simply go unanswered.

The McLaren I bought through your company will be delivered in September and hence I want you to transfer my $590k, which you have received by way of cash and the trade in of my Ferrari, immediately to McLaren.

I have made Arthur aware to expect the payment.

Please do NOT delay this payment to McLaren.

I await your confirmation of payment and return call as a matter of urgency.”

104. Mr Spyrides sent this email in the midst of anxiety about what had happened to the deposit and the Ferrari sale proceeds. He was also frustrated and concerned that it appeared Mr Marsh was avoiding him, heightening his anxiety about the money. But even allowing latitude for Mr Spyrides’ state of mind, the 18 August 2017 email embeds two notable features that do not assist Mr Spyrides’ case.

105. The first notable feature is the words, “The McLaren I bought through your company”. This shows clear contemporaneous recognition on his part that he thought he was dealing through Mr Marsh’s “company.” This was an acutely difficult moment for Mr Spyrides, when he clearly sensed the possibility of suffering future financial loss if Trivett did not get the deposit and Ferrari sale proceeds. But his first thought was not to hold Mr Marsh personally to account as the counterparty with whom he believed he was contracting. But the document cannot be readily be treated as an admission. On the objective theory of contract, who Mr Spyrides thought he was contracting with matters little. The objective construction of the written and oral contractual statements of the parties are what matters.

106. The second notable feature of the 18 August 2017 email is the absence of any reference to the alleged statement of Mr Marsh on the telephone in the first week of April that he would “forward the money to McLaren.” Had Mr Marsh actually promised that to Mr Spyrides it could have been expected to feature prominently in this correspondence. In the limited encounter the Court had with Mr Spyrides, he appeared like a person who followed up details when required, and would have then remembered this statement if it had been made.

Mr Marsh Engages Somerville Legal – August to September 2017

107. Later on 18 August, Mr Spyrides reached Mr Marsh by telephone. Mr Marsh confirmed that the payment had not been made to McLaren but he told Mr Spyrides “don’t worry, there’s no problem. There is no need to pay the money to McLaren immediately as the car is delayed anyway.” Mr Marsh did not tell Mr Spyrides anything about his dealings with Mr Zervas or the parlous financial position into which Used Cars Plus had fallen. Mr Spyrides was temporarily reassured until mid-September.

108. But by September 2017, the financial position of Used Cars Plus was irretrievable. Mr Marsh had engaged lawyers to commence proceedings against the interests associated with Mr Zervas and Mr Alvez. On 14 September 2017, Mr Marsh’s solicitors, Somerville Legal, sent the following letter to Mr Spyrides by email:

“We act for Used Cars Plus Pty Limited. We are instructed as follows.

Our client entered into a series of transactions involving supplying motor vehicles to another motor vehicle dealer. That dealer has failed to honour its financial obligations to our client, as a result of which our client has suffered losses calculated at $1,136,000. We have been instructed to commence proceedings to recover our client's losses. However, those proceedings will take time to conclude, especially if the proceedings are defended.

Accordingly, our client will not be able to meet its commitment to you for some time. Of course, as soon as our client is able to recover its losses, it will meet its commitments to you. We are instructed to provide to you or your solicitors whatever information may be requested relating to the proceedings we are undertaking.

The principal of our client, Tim Marsh, feels a strong personal moral obligation to you, in that you are an innocent party and you have dealt with our client in good faith. As a result of the events referred to above, Tim Marsh has lost his business, and is now working as an employee. However, he will take all steps reasonably possible to ensure that you are paid the money you are owed.”

109. Mr Spyrides was alarmed at this correspondence, which he forwarded to Mr Kekatos, who knew little of Mr Marsh’s financial position.

110. Mr Spyrides retained solicitors on 15 September 2017. He went on to purchase the McLaren directly from the Trivett dealership with the assistance of Mr Kekatos. He signed a contract to purchase the McLaren on 22 November 2017 for $699,007.01. Less the $10,000 deposit Trivett still held, he was obliged to pay $689,007.01 by bank cheque to acquire the McLaren. He took delivery on 24 November 2017.

109. Mr Spyrides claims that on his various claims against Mr Marsh that he should be put back in the position he would have been if the contract had not been breached, or he had not been wronged by the defendants.

110. Mr Spyrides calculated his loss and damage the following way:

Amount Mr Spyrides paid for the McLaren	$689,007.01
Less the amount he would have paid for the McLaren pursuant to the contract with Mr Spyrides	$660,000.00
Plus the $60,000 Deposit	$60,000
Plus the value of the Ferrari as at April 2017 (equal to the Ferrari sale proceeds)	$530,000.00
Total	$619,007.01

113. Mr Spyrides claims pre and post-judgment interest and costs.

Analysis of Mr Spyrides’ Causes of Action.

114. This section of these reasons now considers each of the causes of action that Mr Spyrides maintains in these proceedings and the defences that Mr Marsh raises.

Breach of Contract

115. The Court concludes Mr Spyrides contracted with Used Cars Plus, not Mr Marsh. In my view, the proper inference from the words and written materials exchanged between Mr Marsh and Mr Spyrides in March 2017 is that a person in the position of Mr Spyrides must have appreciated they were contracting with Mr Marsh’s company, Used Cars Plus. Although some of the early communications between these two men are ambiguous, or point in other directions, and these were well emphasized on Mr Spyrides behalf, in the end the correct inference is that the contract was made with Used Cars Plus. The Court analyses those communications objectively: Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; (2014) 88 ALJR 447; [2014] HCA 7.

116. Analysis of who was contracting begins with the initial conversations between the pair on 10 and 13 March 2017. There are no indications either way in these two conversations whether Mr Marsh was contracting personally or through a company. No compelling inference should be drawn either for or against the making of a contract with Mr Marsh, rather than one of his companies, on the strength of what was said on these occasions. It was quite clear by what was said or assumed that there was documentation to come which both sides expected would become the contract between them.

117. The parties did not expect to be bound until after a deposit was paid. Even if these conversations allow an inference to be drawn that Mr Marsh was speaking on his own behalf it is a weak inference, because the parties also expected the contract to be further documented in more detail.

118. The Vehicle Purchase Agreement fulfilled the role of the initial contractual documentation that was expected to be sent after the conversations. It was sent in circumstances that indicated it was likely to contain contractual terms. Several notices were contained within it directing the recipient to read the proposed contract carefully, because it would have legally binding effect.

119. The Vehicle Purchase Agreement is an offer. It offers terms that, subject to one matter, could readily have been accepted by Mr Spyrides by words or conduct. The terms and conditions within the Vehicle Purchase Agreement cover price, vehicle specification, delivery time, the passing of property and the kind of matters and risk allocations that one would expect an agreement between a vendor and purchaser of a vehicle such as this.

120. The matter in doubt is that the Vehicle Purchase Agreement refers in the body of the terms and conditions to Prestige Preowned, rather than to Used Cars Plus. But Used Cars Plus is referred to as the entity to which the deposit should be paid. And the deposit information in the Vehicle Purchase Agreement does not clearly indicate whether “Used Cars Plus” is a business name or a company; it could be either. If it is a company, this could be a notification that the sender of the Vehicle Purchase Agreement is expecting the recipient to understand that the recipient is contracting with a company of that name. But because of the reference to Prestige Preowned in the terms and conditions, and because Used Car Plus is not identified specifically as a company, that inference cannot really be drawn from this document. Another possible construction in reading the Vehicle Purchase Agreement, for example, is that “Used Cars Plus” may have been a business name used by Prestige Preowned, and that is the name that is used on Prestige Preowned’s bank account.

121. The Vehicle Purchase Agreement does not state that Mr Marsh is the contracting party and does not found such an inference. The first two sheets of the document are peculiar in a potential contractual document, in not stating who the vendor of the vehicle is proposed to be with any clarity. But the only places where the vendor can really be identified, is through the terms and conditions and the deposit information. And neither of those identifies Mr Marsh personally as the vendor.

122. But the ambiguities in the Vehicle Purchase Agreement as to which entity was the vendor was cleared up shortly afterwards, in subsequent communications issuing from Mr Marsh’s side and acknowledged by Mr Spyrides. Mr Spyrides followed the information on the Vehicle Purchase Agreement for the payment of the deposit on 17 and 18 March. He paid it into account A/c 758, recorded on the Vehicle Purchase Agreement in the name “Used Cars Plus”. The objective reader should by then have inferred that this was either a corporate entity, or a business name probably associated with a corporate entity, that Mr Marsh was using to effect this transaction on the vendor side.

123. But ambiguity about which company was the vendor was clarified with sufficient certainly in my view on 22 March 2017, when Mr Marsh confirmed that the deposit monies had been received to the right account. Upon confirmation of the receipt of the deposit by sending back to Mr Spyrides the deposit receipt, ambiguities about which corporate entity was involved on the vendor’s side were resolved in favour of Used Cars Plus. The deposit receipt was on the Used Cars Plus letterhead, clearly indicating Used Cars Plus with its full corporate title and ABN was the entity taking responsibility, and representing to the reader of the deposit receipt that this was the same $60,000 deposit referred to under the Vehicle Purchase Agreement.

124. The deposit receipt attached itself by reference to the Vehicle Purchase Agreement and the subsequent communications which had established conformity between the specification in the Vehicle Purchase Agreement and what had been discussed with Mr Kekatos: "spec as agreed with A Kekatos”.

125. Moreover, the deposit receipt republished the banking details for A/c 758 that had appeared on the Vehicle Purchase Agreement and notified the reader of the deposit receipt that they were the banking details of Used Cars Plus, the corporate entity, and not a business name.

126. In my view, looking at these communications objectively, at the same time that an person in the position of Mr Spyrides found out that his acceptance by conduct of the terms offered to him in the Vehicle Purchase Agreement had been received, that person also understood that Used Cars Plus, the corporate entity, was putting itself forward as the particular corporate vendor of the McLaren. The contract was made with Used Cars Plus by this time in my view. The reference to Prestige Preowned in the terms and conditions would be construed in the circumstances as an inconsistent error not uncommon in such standard terms.

127. To the extent that they are important, subsequent events confirm this construction. On 10 April 2017, the plaintiff was advised by email by the second defendant that “the Ferrari is transferred into our stock at the RMS” (emphasis added). The same 10 April 2017 email attached the Ferrari deposit receipt from Used Cars Plus, which again was on Used Cars Plus letterhead, identified the Used Cars Plus banking details, acknowledged receipt by Used Cars Plus, linked itself again to the McLaren in the Vehicle Purchase Agreement, and acknowledged that the Ferrari F12 had been traded with Used Cars Plus. This picture was then completed by the RMS Notice of Disposal, signed by Mr Spyrides, and recording Used Cars Plus as the buyer. The effect of the 18 August 2017 email from Mr Spyrides has been mentioned earlier in these reasons.

128. Incidental matters support the same conclusion. Some financial disincentives would probably deter an individual such as Mr Marsh contracting personally in this market. A stamp duty transfer fee of $30 was imposed on Used Cars Plus but duty of $30,000 would have been imposed on Mr Marsh had he transacted personally. And Mr Kekatos said on the supply side of the transaction that Mr Marsh would always purchase vehicles from Trivett through one of his companies.

129. Mr Marsh submits that Mr Spyrides meeting in Brisbane 18 months earlier, where they had lunch with Mr Assouline, and “discussed at length” Mr Marsh’s “company and business”, supports the conclusion that Mr Spyrides must have known he was dealing with one of Mr Marsh’s companies as well. But in my view, the evidence of this meeting is so vague that it provides little support for Mr Marsh’s case.

130. And Mr Marsh always used the Used Cars Plus email address. This slightly assists the Court’s inference that any reference to Prestige Preowned in the Vehicle Purchase Agreement terms and conditions should be treated as having been replaced by the dominant corporate vehicle that the correspondence from Mr Marsh identifies, namely Used Cars Plus.

131. This analysis allows the Court to deal concisely with parties’ submissions in support of and against the various causes of action pleaded and prayers for relief relied upon.

132. Counsel for Mr Spyrides also pointed to inconsistencies in the documentation. There are some, and the Court has addressed many of them already in these reasons. The fact that the vehicle was purchased from Trivetts by SME Fleet Pty Ltd is no doubt explained by two companies controlled by Mr Marsh acting in coordination, probably with SME Fleet Pty Ltd acting as the agent for Used Cars Plus to acquire the McLaren.

133. By careful reference to authority, Mr Halley SC and Ms Bathurst submitted on behalf of Mr Spyrides that Used Car Plus or Prestige Preowned were acting as Mr Marsh’s “alter ego” in this transaction. This kind of analysis, in my view, is ultimately not consistent with the way the Court has construed the dealings between these two parties, finding on the basis of their early communications that Used Car Plus was the vendor.

134. Their submission is that in some circumstances as “alter ego”, the sole director of a company may be fixed with personal liability for a company’s debts. Cases were cited where this doctrine has been applied relating claims in contract: Balmedie Pty Ltd v Russo [1998] FCA 980. Other situations were examined in the submissions: Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337; (1981) 33 ALR 631; [1981] HCA 1. But this case must be analysed by reference to the actual communications between these parties.

135. And the observations of White J (as his Honour then was) in Super 1000 Pty Ltd v Pacific General Securities Ltd (2008) 221 FLR 427; [2008] NSWSC 1222, (at [197]), are apposite here:

“The fact that [the company] was controlled by [its sole director] and may be regarded as his “alter ego” does not in itself justify a conclusion that [the company] was his agent.”

136. The plaintiff fails on this cause of action against Mr Marsh. But it may have judgment against Used Cars Plus. The amount of the judgment, if sought, can be reflected in short minutes of order. Mr Spyrides has clearly suffered the loss claimed from Used Cars Plus’ breach of contract. It was obliged to deliver the McLaren and failed to do so.

Inducing Breach of Contract

137. Submissions were also advanced on behalf of Mr Spyrides upon the assumption that either Used Car Plus or Prestige Preowned were found to be the parties who contracted with Mr Spyrides. The submission was that a company director may in certain circumstances be made liable for procuring or directing company’s wrong under the tort of inducing breach of contract. That submission certainly has a basis in fact in this case, in that Mr Marsh was the one who directed the payment of money in all situations to and from the accounts of Used Cars Plus.

138. But the cases put forward by Mr Spyrides do not address the present situation, in which the company is relevantly sued in contract. All the cases cited relate to intellectual property, passing off and misleading and deceptive conduct. They discuss the various circumstances in which a company director may become liable when causing a company to engage in conduct of that character.

139. As the defendants pointed out in submissions, those cases can be explained on the basis that a person who causes an infringement of intellectual property, or passing off, or engages in misleading and deceptive conduct will usually themselves commit an actionable wrong. Breaches of a contract by a company are to be categorised differently. Lindgren J observed in Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231, at 242; (1996) 142 ALR 111:

“In contractual cases, the non-liability of the director has nothing to do with the limited liability of members of the company … A director is not liable for the company's breach of contract because the company, rather than the director, is the contracting party.”

140. When discussing the liability of directors of the company in a contractual context, Hodgson CJ in Eq said the following in Tsaprazis v Goldcrest Properties Pty Ltd (2000) 18 ACLC 285, (at [11]); [2000] NSWSC 206:

“In general, only the company is liable under such a contract, not its shareholders or directors, unless they guarantee the company's performance. Directors may become indirectly liable to other contracting parties through breach of their director's duties to the company, or through breach of the Corporations Law relating to such matters as insolvent trading.”

141. In my view, for these reasons the cause of action against Mr Marsh for procuring breach of contract by New Cars Plus or Prestige Preowned also fails.

Breach of Trust

142. Mr Spyrides’ pleaded case is that the deposit and the proceeds of the sale of the Ferrari were each held on a specific purpose trust to purchase the McLaren, or in the event that purpose failed on a resulting trust.

143. Three certainties must be clear before such a trust will be established; certainty of intention, subject-matter and objects: George v Webb & Ors [2011] NSWSC 1608 (“George”), (at [202]). The potential subject matter of the trust is clearly identified here. But the intention to create a trust and the object of the posited trust in my view are not established.

144. In Legal Services Commissioner v Brereton (2011) 33 VR 126; [2011] VSCA 241, Tate JA (with whom Nettle JA, as his Honour then was, and Ashley JA agreed) observed, (at [96]):

“A Court will not readily infer that funds provided to a company are to be impressed with a primary express trust for use exclusively for a specific purpose, the failure of which creates a secondary resulting trust for the benefit of those who provided the funds. It is not sufficient that funds are provided with an expectation that they will be used for a specific purpose. An expectation or general understanding falls short of the necessary mutual intention that funds have been provided on the express condition that they will be earmarked for use exclusively in accordance with an agreed purpose.”

145. As to the nature of that mutual intention required, it was said in George (at [211]):

“The question in every case is whether the parties intended the money to be at the free disposal of the recipient … His freedom to dispose of the money is necessarily excluded by an arrangement that the money shall be used exclusively for the stated purpose…”

146. Significant matters in determining intention are usually whether the funds are kept separate, whether the parties expressly deal with the matter, and how the funds are to be dealt with, or whether it just appears to be a routine commercial transaction.

147. In my view, this is not a case where the Court should find that the deposit monies in the proceeds of the Ferrari sale should be treated as trust monies. This is so for several clear reasons. This was a routine commercial transaction, where on the Court’s findings no specific statement was made about what should happen to the funds in question. Despite the submissions put on behalf Mr Spyrides about what appears in the written documentation, none of it is an instruction for dealing with this money. Mr Spyrides did not ask for the money he was advancing to be dealt with in a particular way.

148. Moreover, no separate account for the receipt of the deposit for the McLaren or the Ferrari sale proceeds was opened by Used Cars Plus. The deposit and the Ferrari sale proceeds were paid into the Used Cars Plus A/c 758, its normal operating account from which it met its day-to-day cashflow requirements.

149. In light of these findings, it is not necessary for the Court to consider and make findings in relation to the contentions that Mr Marsh dishonestly participated in a breach of this trust. The trust has not been established, and Mr Marsh therefore cannot suffer any derivative liability on that account.

Breach of Fiduciary Duty.

150. Mr Spyrides alleges that Marsh agreed to act as his agent to sell the Ferrari and use the proceeds from that sale to apply them to the McLaren. But in my view, the contractual documentation as construed by the Court is inconsistent with a contract of agency, or a relationship of agency.

151. The parties were dealing at arm’s length; Mr Marsh’s company “Used Cars Plus” as vendor and Mr Spyrides as purchaser. Used Cars Plus presumably would have obtained the vehicle to sell to Mr Spyrides by taking a transfer from SME Fleet Pty Ltd, or SME Fleet Pty Ltd was acting as its agent in dealing with Trivett.

152. There is no agency relationship, and no question of breach of fiduciary duty.

Conclusion and Orders

153. For these reasons, the Court rejects each of the plaintiff’s causes of action, in contract against Mr Marsh, for inducing breach of a contract with the corporate defendants, for breach of trust and for breach of fiduciary duty.

154. As the Court has indicated above, the plaintiff is entitled to judgment against Used Cars Plus, if it wishes to seek the entry of such a judgment. Prestige Preowned is deregistered. If the plaintiff wishes to take this course, they should approach the Court by submitting appropriate short minutes of order with their damages and interest calculation.

155. When those short minutes of order are considered, costs can be dealt with. Costs would normally follow the event but some special costs orders may be sought.

156. Accordingly, the Court makes the following orders and directions:

1. Direct the parties to bring in short minutes of order to give effect to these reasons.

2. Grant liberty to apply.

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Decision last updated: 03 October 2019