The Leasing Centre (Aust) Pty Ltd v Rollpress Proplate Group Pty Ltd - [2010] NSWSC 282

No judgment structure available for this case.

CITATION: The Leasing Centre (Aust) Pty Ltd v Rollpress Proplate Group Pty Ltd [2010] NSWSC 282

HEARING DATE(S): 22/03/10, 23/03/10

JUDGMENT DATE :
16 April 2010

JURISDICTION: Equity Division

JUDGMENT OF: Barrett J

DECISION: 1. Upon the further amended statement of claim, judgment for the first defendant and the second defendant.
2. Upon the amended cross-claim, judgment against the plaintiff/cross-defendant and in favour of the first defendant/cross-claimant in the sum of $52,768.20 together with interest at the rates specified in Schedule 5 to the Uniform Civil Procedure Rules 2005:
(a) on $10,766.64 from 12 June 2007 to the date of judgment;
(b) on $10,553.64 from 12 July 2007 to the date of judgment;
(c) on $10,553.64 from 13 August 2007 to the date of judgment;
(d) on $10,553.64 from 12 September 2007 to the date of judgment; and
(e) on $10,553.64 from 12 October 2007 to the date of judgment.
3. Order that the plaintiff pay the costs of the first defendant and the second defendant of the proceedings.

CATCHWORDS: CONTRACTS - general contractual principles - construction and interpretation of contracts - where operative words of contract contain no obligation on one party - where recital states that that party "has agreed" to "rent" chattel to the other party - where second party's obligations relate to "renting" of that chattel from first party - whether, as a matter of construction, the recital contains a contractual promise of the first party - BAILMENTS - particular bailments - hire of chattel - promise by one party to "rent" chattel to other party - meaning of "rent" - held promise to hire chattel - express content of promise requires giving of possession of chattel - CONTRACTS - implied terms - express term excludes all terms that would otherwise be implied - whether requirement under agreement for hire that possession be given is an express term or an implied term - held an express term - ESTOPPEL - estoppel by convention - written statement by party to whom possession to be given that it has received possession - whether parties therefore had and proceeded on shared assumption that possession had passed - where commercial and financial circumstances were such that neither party could possibly have believed that possession had been obtained - RESTITUTION - restitution resulting from unenforceable incomplete illegal or void contracts - recovery of money paid - where several monthly payments of "rent" made but possession never obtained

LEGISLATION CITED: Corporations Act 2001 (Cth), Part 5.3A
Registration of Interests in Goods Act 1986, s 3
Uniform Civil Procedure Rules 2005, Schedule 5

CATEGORY: Principal judgment

CASES CITED: Australian Guarantee Corporation Ltd v Ross [1983] 2 VR 319
Baltic Shipping Co v Dillon [1993] HCA 4: (1976) 176 CLR 344
Barber v NWS Bank plc [1996] 1 WLR 641
Budd-Scott v Daniell [1902] 2 KB 351
Chang Yuan Xu v Council of the Law Society of New South Wales [2009] NSWCA 430
Coggs v Bernard (1704) 2 Ld Raym 909; 92 ER 107
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353
Digby v General Accident Fire and Life Assurance Corporation Ltd [1943] AC 121
Farrall v Hilditch (1859) 5 CBNS 840; 141 ER 337
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407
Helby v Matthews [1895] AC 471
Karflex Ltd v Poole [1933] 2 KB 251
Mercantile Union Guarantee Corporation Ltd v Wheatley [1938] 1 KB 490
Microbeads AG v Vinhurst Road Markings Ltd [1975] 1 WLR 218
Moore v Magrath (1774) 1 Cowp 9; 98 ER 939
Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) NSW ConvR 56-172
On Demand Information plc v Michael Gerson Finance plc [2002] UKHL 13; [2003] 1 AC 368
Rover International Ltd v Cannon Film Ltd (No 3) [1989] 1 WLR 912
Rowland v Divall [1923] 2 KB 500
Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603
The Great Northern Railway Co v Harrison (1852) 12 CB 576; 138 ER 1032
Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd [1999] WASC 1046
TRM Copy Centres (UK) Ltd v Lanwall Services Ltd [2009] UKHL 35; [2009] 1 WLR 1375
Warman v Southern Counties Car Finance Corp Ltd [1949] 2 KB 576

TEXTS CITED: “Deeds and Other Instruments” in Halsbury’s Laws of England, paragraph 4.10(ii).250

PARTIES: The Leasing Centre (Aust) Pty Limited - Plaintiff
Rollpress Proplate Group Pty Limited - First Defendant
RPG Australia Pty Limited - Second Defendant

FILE NUMBER(S): SC 2008/00279009

COUNSEL: Mr P T Taylor SC/Mr D L Cook - Plaintiff
Mr J G Duncan - Defendants

SOLICITORS: Swaab Attorneys - Plaintiff
Middletons as agent for McCullough Robertson Lawyers - Defendants

-

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

FRIDAY 16 APRIL 2010

2008/00279009 THE LEASING CENTRE (AUST) PTY LIMITED v ROLLPRESS PROPLATE GROUP PTY LIMITED
& ANOR

JUDGMENT

The circumstances in brief

1 These proceedings arise from a commonplace commercial transaction.

2 A business operator required a forklift truck for use in its business. It arranged for a machinery merchant to supply the item. The merchant, in turn, arranged for a financier to make lease finance available to the business operator. The financier and the business operator entered into a rental agreement in relation to the truck. The merchant invoiced the financier for the price of the truck. The financier paid the invoiced price. But the truck was never delivered to the business operator. It was owned by a stranger.

3 The court is required to determine the rights and liabilities of the business operator and the financier. For the reasons that follow, the conclusion is that the business operator is entitled to relief on the basis of a total failure of consideration.

Summary of the facts

4 The basic facts are not controversial. The plaintiff (“TLC”) carries on a business of providing lease finance to purchasers of equipment, machinery and vehicles. The first defendant (“Rollpress”) carries on a business of metal rolling and forming in the course of which it manufactures steel plates, steel pipes and other heavy items.

5 Rollpress needed a particular forklift truck for use in its business. It ascertained that Independent Forklift Services (Qld) Pty Ltd (“Independent”), a heavy equipment dealer, was offering a suitable second-hand truck for sale.

6 Rollpress required lease finance. Independent sought such finance for Rollpress. Independent approached TLC and eventually expressed satisfaction with a lease finance quotation submitted by TLC.

7 On 1 June 2007, Independent sent to TLC an invoice in respect of the forklift truck indicating “Sold to” TLC (with its address stated) and “Delivery to” Rollpress (again with the address stated). The invoice was in a form prescribed in advance by TLC to Independent. The invoiced amount was $482,204.23, inclusive of GST.

8 On 4 June 2007, TLC sent to Independent, for on-forwarding to Rollpress (and also direct to Rollpress), a rental agreement and other documents. These were executed by Rollpress and also, as required, by the second defendant, a related company of Rollpress which guaranteed the obligations of Rollpress. The rental agreement was signed on behalf of Rollpress and of the guarantor on or before 7 June 2007 and accepted by TLC on 12 June 2007. When returned to TLC, the rental agreement signed by Rollpress and the guarantor was accompanied by payment of one month’s “rental” ($10,553.64), being part of a cheque for $10,766.64 that included incidental items. TLC paid (or arranged payment of) the Independent invoice for $482,204.23 on 12 June 2007 by electronic funds transfer.

9 These steps were taken in the period 1 to 12 June 2007 on an assumption, at least on the part of TLC, that the forklift truck was (or was to be) delivered by Independent to Rollpress at or about the time of the payment of Independent’s invoice. In fact, however, Independent, with the concurrence of Rollpress, retained the truck to complete the installation of certain additional components required by Rollpress and agreed by Independent to be supplied as part of the price. Each component was a particular kind of lifting device to be attached to the truck – one a frame, and the other a probe.

10 TLC admits on the pleadings that it was not at any time the owner of the truck. The evidence suggests that Independent was never the owner either and that ownership at all times resided in a stranger.

11 The rental agreement between TLC and Rollpress provided for monthly payments. Rollpress made the payments to TLC for the first five months of an agreed sixty month term (as I have said, the first payment accompanied the signed rental agreement and other documents proffered by Rollpress to TLC through Independent soon after execution by Rollpress and the guarantor on 7 June 2007). The payments made amounted to $52,768.20. An arrangement had been made between Rollpress and Independent under which, pending delivery of the truck with the additional components installed, Rollpress was to receive from Independent the equivalent of one-half of each monthly payment made by Rollpress to TLC.

12 Independent became subject to voluntary administration under Part 5.3A of the Corporations Act 2001 (Cth) in September 2007. It later passed into creditors voluntary winding up. The forklift truck was never delivered to Rollpress.

The parties’ claims

13 In these proceedings, TLC alleges breach of the rental agreement by Rollpress and says that it relied upon that breach to terminate the contract; alternatively that Rollpress repudiated the contract and TLC accepted the repudiation. The delinquency of Rollpress upon which TLC relies to support the allegations of breach and repudiation is failure to make any monthly payments beyond the first five. TLC considers itself entitled to “loss of bargain damages” as agreed in the agreement.

14 Rollpress claims, as against TLC, judgment for $52,768.20 plus interest. Its case, briefly stated, is that TLC never acquired rights in the truck such as to liable it to give possession to Rollpress and therefore could not confer on Rollpress a right of possession, with the result that the consideration to be provided by TLC under the rental agreement failed totally and Rollpress is entitled to recover the five monthly payments (and incidental payments) made by it. These total the amount claimed as just mentioned.

Competing views about the nature of the contract

15 In advancing their respective cases, Rollpress and TLC agree that there was a contract between them but adopt radically different views about the true nature of the contract.

16 Rollpress contends that the contract was a contract of hire – that TLC agreed to allow Rollpress to have possession for the truck in return for the periodic payments of what the contract described as “rental” and on the footing that, subject to the provisions of the agreement itself, Rollpress’s possession would continue while it continued to keep up the payments. Implicit in Rollpress’s characterization is the proposition that TLC had at the outset and would maintain, if not ownership of the truck, then at least such a right in relation to it as would enable TLC to confer possession on Rollpress.

17 TLC’s quite different characterization concentrates on its initial outlay by way of the payment of $482,204.23 to Independent. That, TLC says, was really in the nature of financial accommodation afforded by TLC to Rollpress. By reason of the outlay, TLC says, Rollpress was put into the position it wished to occupy as against Independent, that is, the position where Independent had been paid what Rollpress understood was necessary to cause Independent, first, to regard itself as no longer the owner of the truck and, second and as a matter of immediate importance, to deliver possession of the truck to Rollpress. Furthermore, TLC contends, the obligation of Rollpress to make “rental” payments over the term was really the means by which TLC derived repayment of, and a return on, the accommodation initially furnished by TLC to Rollpress by means of the payment to Independent. According to the view taken by TLC, it was not necessary that it have ownership or possession of the truck: if the truck did come to it at the end of the specified period, it would have something then to realise; but if that did not happen, its position would be the same as that of an unsecured lender.

The steps in the transaction

18 Of central importance, of course, are the terms of the written contract between TLC and Rollpress. Before examining those, I should say more about the events that led up to the creation of the parties’ contract.

19 Once Rollpress had decided to acquire the particular truck that Independent had indicated it could provide, it left it to Independent to seek out the lease finance it required. Independent obtained from TLC a quotation for the provision of such finance. In fact, there were two such quotations. The second became necessary when the price increased because of the inclusion of additional components in the vehicle to be supplied.

20 The quotations were requested by Independent and provided by TLC in April and May 2007. Each quotation was addressed to Independent. There was no reference in either quotation to Rollpress.

21 On 11 May 2007, Independent notified TLC that Rollpress had accepted “our quotation for 36C Clark forklift”. It may, I think, be inferred that Independent’s reference to “our” quotation was a reference to the quotation provided (and addressed) by TLC to Independent and that Independent had given a copy of that quotation to Rollpress. The communication of 11 May 2007 by Independent to TLC seems to be the first occasion on which TLC was informed that it was Rollpress that was the prospective acquirer of the truck. Independent gave TLC contact details for Mr Kearns of Rollpress at that point.

22 On 15 May 2007, TLC sent to Independent a blank form of “finance application”. This document was also emailed by TLC to Rollpress. The form was later completed by Rollpress which sent it, together with a copy of audited financial statements, direct to TLC on 25 May 2007. The “finance application” does not, in terms, convey an “application” for anything. It contains information about Rollpress and its business, the name of its accountants and bankers and the names of two trade referees. Spaces for “finance commitments”, “personal details of director/partner”, “equipment supplier” and assets and liabilities are all blank (the last, one assumes, because audited financial statements were provided). There is then a closely printed section headed “Privacy Act Authorisation/Agreements” containing a statement of awareness of certain statutory matters and conveying consent to the seeking of information from credit reporting agencies and other sources. Finally, there is a statement that the information included in the form is correct and consenting to the accountant being approached for further information.

23 On 31 May 2007, TLC sent to Independent an “invoice request”. This began with the words:

“Your client has been approved for finance. Settlement will take place subject to satisfactory completion of all documentation.”

24 Then followed:

“Please prepare a tax invoice for our client EXACTLY as described below:

PLEASE ADDRESS YOUR INVOICE TO:	The Leasing Centre (Aust) Pty Limited Level 6, 74-76 Burwood Road BURWOOD NSW 2134
DELIVERY OF THE GOODS TO:	Rollpress Proplate Group Pty Limited 36 Industrial Avenue WACOL QLD 4076

1. A full description of the goods must be provided – this includes all serial numbers, VIN, rego and engine numbers (where applicable).

2. Invoice must note if the goods are new or used (if used, the year model is required).

3. Purchase Price inclusive of GST – if GST is not 10% of the invoice total – the break up must be indicated.

4. You must provide a copy of your Bank Deposit Slip – this will ensure prompt payment of your invoice.

5. Please fax a copy of your invoice marked to my attention on (02) 9747 4407 (or) e-mail a copy (on letterhead ) to: [email protected].

25 Forwarded with the “invoice request” was a form of invoice containing instructions as to how it was to be completed.

26 On 1 June 2007, Independent sent TLC an invoice in the requested form. As I have said, the section “Sold To” referred to TLC and its address and the section “Delivery To” referred to Rollpress and its address.

27 On 4 June 2007, TLC sent to Independent a number of documents referring to Rollpress. These were

(a) a blank form of trade reference confirmation;

(b) a blank form of bank direct debit request;

(c) a tax invoice addressed by TLC to Rollpress for $10,766.64 made up of

(i) “First Repayment” - $10,553.64 including GST;

(ii) “TLC Document & Establishment Fee” - $198.00 including GST;

(iii) “REVS” - $15.00.

(d) a Rental Agreement with blanks completed;

(e) a blank form headed “Authority to Settle Finance Agreement”;

(f) a blank form headed “Certificate of Currency Confirming Insurance Required”;

(g) a covering letter addressed to Rollpress.

28 On the same day, TLC sent the covering letter and documents to Rollpress. The letter referred to the enclosed documents and asked that they be executed and returned “for settlement”. There was then reference to “what you will need to provide for settlement to take place”. Four items over and above the enclosed documents were mentioned, including “Total First Payment cheque of $10,766.64 made payable to The Leasing Centre”.

29 The requirements outlined in TLC’s letter of 4 June 2007 were in due course met and the various documents were executed by Rollpress. I should set out in full the completed “Authority to Settle Finance Agreement”:

AUTHORITY TO SETTLE FINANCE AGREEMENT

I/We hereby acknowledge completion of documentation for Rental Agreement P004642412.

I/We hereby confirm that we have read and understood the terms and conditions of this Rental Agreement and acknowledge that this agreement is completely independent of any undertakings, warranties or arrangements made with the equipment supplier.

I/We hereby authorise The Leasing Centre (Aust) Pty Limited to complete settlement of this transaction and forward proceeds to the supplier of the equipment described in the schedule of the equipment described in the schedule of the abovementioned agreement.

AUTHORISED BY: Rollpress Proplate Group Pty Limited

Signature: (sgd) Barry Cox (sgd) M McSweeney

Name: BARRY COX MARK McSWEENEY

Date: 6/6/07 7/6/07”

30 As this document makes clear, signing by Rollpress officers took place on 6 and 7 June 2007. The Rental Agreement itself carries the date 7 June 2007 in connection with execution by Rollpress.

31 On 12 June 2007 – the day on which the Rental Agreement was executed by TLC – TLC sent a written communication to Independent. TLC informed Independent as follows:

“Settlement for the above mentioned client has effectively taken place today via Electronic Funds Transfer into your nominated account. These funds will be cleared for use on the next day. Please inform us immediately if the details shown are incorrect.

Should you have any queries, please do not hesitate to contact me on telephone (02) 9745 9251.”

32 Also apparently on 12 July 2007, TLC sent a letter to Rollpress confirming “that the abovementioned finance agreement settled on 12 June 2007” and attaching a copy of the agreement “for your records”. It is curious that the letter is dated 11 July 2007, a day before the settlement date. A stamp on the letter suggests that it was received by Rollpress on 16 July 2007.

33 TLC did not itself provide the $482,204.24 paid to Independent. The funds were provided by an associated company, Classic Finance Ltd (“Classic”). A letter dated 4 June 2007 from TLC to Classic referred to an agency agreement between TLC as agent and Classic as principal. The letter conveyed TLC’s request that Classic “authorise it to purchase the equipment detailed in the attached invoices [sic] … on behalf of Classic and then entered [sic] into transactions [sic] … which are authorised under the agreement on behalf of Classic in respect of that Equipment”. The letter continued:

“In consideration of CFL [ie, Classic] authorising TLC to purchase the Equipment, TLC acknowledges that:

1) TLC acquires in [sic] right, title or interest (whether legal or equitable) in the Equipment, the Transactions or the documents relating to the Equipment or the Transaction including, but not limited to, the documents of title, the purchase agreements and all warranties and guarantees; and CFL is the sole owner of the Equipment, the Transaction and all documents relating to the Equipment and the Transactions.

2) TLC undertakes to comply with all of its obligations under the Agreement in respect of the Equipment and the Transactions.”

34 The invoice enclosed with TLC’s letter to Classic was Independent’s invoice in the form required by TLC (see paragraphs [24] and [25] above). Payment of the invoice was made by Classic to Independent.

35 On 12 June 2007, Classic sent to TLC a copy of a remittance advice “confirming that settlement for the above client [i.e, Rollpress] has effectively taken place today via Electronic Funds Transfer into the nominated account”. The message continued:

“These funds will be cleared for use on the next day.”

36 The remittance advice showed a payment of $482,204.24 to Independent. It may be inferred that it was on the strength of what Classic said to TLC about this payment having been made that TLC, in turn, sent the confirmations mentioned at paragraphs [31] and [32] above to Independent and Rollpress.

37 The agency agreement between TLC (“Agent”) and Classic (“Principal”) is in evidence. It is dated 18 May 2005. Clause 2.1 reads:

“With effect from the date of this Agreement, the Principal appoints the Agent its non-exclusive nominee and agent:

(a) to purchase Equipment;

(b) to enter into Hiring Agreements in respect of Equipment so purchased with Hirers approved by the Principal throughout Australia; and

(c) for all other purposes specified in this Agreement.”

38 It is necessary to refer to one definition, that of “Hiring Agreement”:

’Hiring Agreement’

39 TLC’s authority as agent of Classic – which authority was supposedly being exercised by TLC in this case – is confined to the purchase of equipment and the making of Hiring Agreements in respect of equipment “so purchased”. The ordinary course of TLC’s activities as agent may therefore be taken to entail TLC’s acquiring ownership of equipment by purchase and, having done so, entering into one of several kinds of transactions “in respect of” it, the emphasis in the descriptions of the permitted transactions being upon “hiring” and “lease”.

The rental agreement

40 It is necessary now to refer to the content of the rental agreement executed by Rollpress on 7 July 2007 and by TLC on 12 July 2007. The agreement is a printed document which is obviously a standard form used by TLC. Each party relied on selected parts of the agreement to support its contentions as to the true meaning and effect. It is desirable that the content be considered as a whole.

41 The agreement starts in the conventional way:

“THIS AGREEMENT, which includes the Terms and Conditions of Rental, is made BETWEEN”

42 References to TLC “(hereinafter called ‘the Owner’)” and Rollpress “(hereinafter called the ‘Renter’)” follow.

43 Then comes a single recital:

“WHEREAS the Renter has offered to rent from the Owner the equipment described in the Schedule (hereinafter called ‘the equipment’) and thereupon the Owner has agreed to rent to the Renter the equipment at the rent and for the period described in the Schedule and subject to the terms and conditions hereinafter set out, including those in the Terms and Conditions of Rental.”

44 The schedule is then set out. It refers to the particular forklift truck, including its serial number. There is reference to “$10,553.64 per Monthly [sic] in advance inclusive of Stamp Duty & GST” (this, although not explicitly identified as such, is the “rent” or “rental” mentioned in many places). The schedule also specifies, as the “Period of Agreement”, “60 months from the date of acceptance by the Owner” (the concept of offer and acceptance appears elsewhere).

45 After the schedule appears this heading:

“RENTER’S SIGNATURE AND ACKNOWLEDGEMENT OF DELIVERY OF EQUIPMENT AND RECEIPT OF TERMS AND CONDITIONS OF RENTAL”

46 Under that heading are the following words:

“The Renter acknowledges and agrees that the owner has provided to the Renter a complete copy of the Terms and Conditions of Rental. The Renter agrees to all of the terms of this Agreement, including the Terms and Conditions of Rental. The person signing this Agreement on behalf of the Renter represents and warrants, for the benefit of the owner, that the signatory is duly authorised by the Renter to sign this Agreement, to agree to all of the terms and to bind the Renter, in this Rental Agreement if there is more than one Renter and/or more than one Guarantor those persons are bound jointly and severally.”

47 Although the heading speaks of “acknowledgement of delivery of equipment”, nothing in the words just quoted that appear under the heading amounts to any such acknowledgement.

48 Next comes execution by Rollpress and the date 7 June 2007, followed by the guarantee executed by Rollpress’s related company (also dated 7 June 2007), TLC’s “acceptance” and the “Commencement Date” of 12 June 2007.

49 The whole of the content described to this point appears on the first page of the document. Three further pages follow, of which the first is headed “TERMS AND CONDITIONS OF RENTAL”. There are then 29 numbered clauses.

50 Nowhere on the first page do general words of agreement appear. Although the document starts in what I have termed the conventional way by stating that it is an agreement made between the named parties and then setting out what is, by the word “WHEREAS”, identified as a recital, there is no conventional form of words following such as, “NOW THIS AGREEMENT WITNESSES” or “NOW IT IS AGREED AND DECLARED”.

51 Each of the 29 numbered clauses starting on the second page is introduced by a sub-heading. Clause 1 reads:

delivery and possession

52 Clause 3 is headed, “payments to the owner”. It begins with the words, “The Renter must”. One of the paragraphs following (which, one assumes, ought to have the word “pay” at the start) is:

“any expenses which the Owner may incur by reason of the Owner retaking or attempting to retake possession of the Equipment;”

53 Clause 4 starts, “The renter must”. Numerous paragraphs follow, including:

“(b) indemnify the Owner against loss or damage to the Equipment (including lawful confiscation thereof)”;

“(d) keep the Equipment in the control of the Renter and not to attempt or purport to sell, dispose of or encumber the Equipment in any way”;

“(h) produce the Equipment for inspection from time to time at the request of the Owner”;

“(i) notify the Owner immediately following any loss of or damage to the Equipment”;

“(j) not use or install the Equipment in any manner that would lead to the Equipment to become a fixture”;

“(o) irrevocably authorise the Owner to use the name of the Renter and on behalf of the Renter, in executing any rights or instituting carrying on or enforcing any legal proceeding the Owner thinks desirable to protect the rights of the Owner in the Equipment.”

54 Clause 5 deals with insurance. It requires the renter to insure the equipment “in the name of the Owner as the Owner and the name of the Renter as the Renter for their respective interests”.

55 Clause 10 is headed “Renter’s obligations after default”. It is as follows:

“Following acceptance of repudiation or other termination of this Agreement the Renter must do everything necessary to ensure the Owner immediately regains possession of the Equipment. If this does not occur the owner may retake possession of the Equipment and is authorised by the Renter to enter land or premises owned or occupied by it to do so. The Renter indemnifies the Owner against liability, loss, costs, charges, expenses arising because of the repudiation of this Agreement or because of an event or default including, in each case, without limitation, legal costs and expenses on a full indemnity basis.”

56 Clause 11A contains certain acknowledgments by the Renter which are applicable “if any part of the rent relates to or is in any way connected with any services to be provided to the goods or to the Renter by a person other than the Owner”. One such acknowledgment is that

“(iv) the Renter must continue to pay all moneys payable to the owner in accordance with this Rental Agreement in full on the due dates for payment.”

57 This follows acknowledgments that the Renter will not be entitled to any abatement of rent by reason of any default of the service provider and that the Renter’s sole rights will be against the service provider to the exclusion of the Owner.

58 Clause 12 is headed “Exclusion of warranties”. It says that all “express and implied terms, conditions and warranties which otherwise might apply to or arise out of this Agreement . . . are negatived except as provided in this Agreement”. The clause goes on to preserve provisions which cannot be lawfully be excluded or modified by agreement.

59 Clause 14 permits the Owner to “sell or assign either absolutely or by way of security its rights under this Agreement and to the Equipment”.

60 Clause 27 is headed “Indemnities”. Paragraph (b) is as follows:

“The Renter further indemnifies the Owner for (i) the Owner exercising a right under this Agreement; (ii) the Owner doing anything which the Renter should have done under the Agreement; (iii) the Renter failing to comply with the terms and conditions of this Agreement; (iv) any event of default; (v) the Owner repossessing or storing the Equipment; (vi) the owner owning the Equipment (including the registration of the Owner’s interest as owner; (vii) a claim for patent, design, trade mark or copyright infringement, for strict liability, or for any other reason being made against the Owner in connection with the Equipment or its use or operation; (vii) [sic] this Agreement terminating in relation to some or all of the Equipment before the end of the minimum term, including where the Owner incurs costs in breaking its funding arrangements for this Agreement; or (viii) the use of the Equipment by the Renter for any purpose other than that stated by the Renter to the owner. (c) the Guarantor also unconditionally and irrevocably indemnifies the Owner against any loss which the Owner may suffer because any part of any money actually or contingently owing to the owner by the Renter either alone or jointly or jointly and severally under this Agreement and any other rental agreement is not recoverable from the Renter or from the Guarantor, and enforcement costs and any tax.”

61 There are many operative provisions of the agreement (both on the first page and in the Terms and Conditions of Rental appearing on the other three pages) that are binding on the Renter. Operative words include:

“the Renter consents”

“the Renter acknowledges”

“the Renter agrees”

“the Renter will use”

“it is the obligation of the Renter to”

“the Renter must”

62 Indeed, “the Renter must” appears nine times and creates thirty-eight separate obligations.

63 One looks in vain, however, for “the Owner must” or equivalent words in the operative provisions (both on the first page and in the Terms and Conditions of Rental). All that one finds is “the Owner may” (plus phrases such as “the Owner is not responsible” and “if the Owner accepts” and “the Owner will not in any way be obliged”).

64 On their face, therefore, the operative provisions cast numerous obligations on the Renter and none on the Owner. How, then, can there truly be a contract?

65 The lopsided character of the agreement is accentuated by the fact that, leaving aside the recital, the first operative words (coming after the schedule mentioned at paragraph [44] above and the heading set out at paragraph [45]) are words binding on the Renter only: see paragraph [46] above. Nowhere is there any central operative provision binding on the Owner.

TLC’s view of the transaction

66 Having outlined both the steps that led to the “settlement” of 12 July 2007 and the terms of the rental agreement, I should consider the interpretation of the events and documents for which TLC contends.

67 TLC relies upon the absence from the rental agreement of any central operative provision binding on it as the basis for its contention that the only obligation it incurred towards Rollpress was confined to an obligation, sourced outside the rental agreement, to pay money to Independent. TLC emphasises two things: first, that the rental agreement, by its terms, commenced only upon acceptance by TLC on 12 July 2007; and, second, that Rollpress, by means of the completed “Authority to Settle Finance Agreement”, acknowledged that “settlement of this transaction” would consist of forwarding of “proceeds” to Independent.

68 On that basis, TLC says, the real transaction between TLC and Rollpress consisted of TLC providing financial accommodation or assistance to Rollpress by means of the payment of $482,204.24 in return for Rollpress’s execution of the rental agreement the only significant operative part of which was the requirement that Rollpress make sixty monthly payments to TLC.

69 I do not accept that characterisation. The letter of 11 July 2007 from TLC to Rollpress (which was probably written on 12 July 2007 - see paragraph [32] above) referred to “the abovementioned finance agreement” as the thing that was “settled” on 12 June 2007. A copy of “the abovementioned finance agreement” was enclosed, being a copy of the rental agreement. The characterisation adopted by TLC in that letter involved “settlement” of the rental agreement – a concept easily understood as commencement of the rights and obligations derived from the rental agreement. Likewise, in the “Authority to Settle Finance Agreement” dated 12 June 2007, there was an acknowledgement by Rollpress of completion of documentation for the rental agreement.

70 In truth, it seems to me, the “Authority to Settle Finance Agreement” and the letter of 11 July 2007 (being the only direct written communications of any operative consequence between TLC and Rollpress in the course of contract formation) recognised a composite transaction consisting of payment by TLC to Independent (which both TLC and Rollpress obviously understood to be a payment that would cause Independent to sell and deliver title to the truck) and the creation, as between TLC and Rollpress, of the relationship envisaged by the rental agreement (a relationship obviously centred upon the truck).

71 Obtaining the use of the truck was the whole rationale of the transaction from Rollpress’s viewpoint. Neither Rollpress nor TLC, it seems to me, contemplated that Rollpress would be the owner of the truck as a result of the transaction that was “settled” on 12 July 2007. Nor did either of them contemplate that Independent would be the owner after it had been paid $482,204.24. Their mutual intention was that TLC would be the owner of the truck.

72 I proceed therefore to a consideration of the rental agreement.

The status and effect of the recital

73 The absence from the rental agreement of any central operative provision binding on TLC as Owner and of other words of obligation on the Owner raises for consideration the real status and effect of the recital – or what I have described as a recital because, in the traditional way, it starts with the word “WHEREAS”: see paragraph [43] above.

74 The general nature of a recital was described by Campbell JA, in Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [379], as follows:

‘Now this deed witnesses…’

‘It is agreed…’

75 His Honour went on to say, however, that statements in decided cases to the effect that recitals should always be treated in some particular way in construction of an agreement should be treated with caution. Context is all-important. Contextual factors identified by Campbell JA as important to the understanding of a recital are the type of recital under consideration and the type of operative provision the recital is sought to be used as an aid to construction of.

76 Here, as I have said, the operative provisions that must be construed impose no obligations of the Owner. They do, however, reflect certain assumptions about the position occupied by the Owner in the context of the parties’ relationship. There are, for example, references (direct or indirect) to

the Owner retaking or attempting to retake possession of the Equipment

the Owner regaining possession of the Equipment

the return of the Equipment to the Owner

the possibility that the Owner will suffer (and therefore need to be indemnified against) loss or damage to the Equipment or its lawful confiscation

the possibility that the owner will suffer (and therefore need to be indemnified against) claims and costs arising out of the use of the Equipment or defects in the Equipment

a requirement that the Renter deliver the Equipment to the Owner at the expiration or sooner determination of the agreement

the insurable interest of the Owner in the Equipment

sale or assignment by the Owner of its rights to the Equipment

77 There is, in these references, an unmistakeable message that the Owner previously had possession of the Equipment (so that the owner can retake or regain possession), that the Equipment was once with the Owner (so that it can be returned to the Owner), that damage to or confiscation of the Equipment (or use of the Equipment or defects in it) will be an occasion of loss to the Owner and that the owner has rights to and an interest in the Equipment which may be made the subject of insurance, sold and assigned.

78 I return to the recital. In terms, it refers to two past events: an offer of the Renter to rent the Equipment from the Owner; and an agreement of the Owner to rent the Equipment to the Renter. The operative provisions show an agreement by the Renter to take the Equipment and to perform numerous obligations in relation to it, including the obligation to pay “rental”. It is easily inferred that the agreement is thus the sequel to the Renter’s offer to rent the Equipment from the Owner. But the operative provisions do not, viewed alone, allow a corresponding conclusion to be reached as to implementation of the Owner’s recited agreement to Rent the Equipment to the Renter.

79 In relation to the recital and its true effect, it is pertinent to quote the following passage at paragraph 4.10(ii).250 under the title “Deeds and Other Instruments” in Halsbury’s Laws of England (an earlier version of which was relied upon by Templeman J at first instance in Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd [1999] WASC 1046):

“A covenant will arise by construction where the instrument shows an intention that the party is to be bound, although it contains no express words of obligation, for it is a general rule of construction that terms of a written instrument which import that the parties have agreed upon certain things being done have the same effect as express promises, or, in the case of a deed, covenants by the respective parties to do all such things as are necessary to carry out the agreement according to the expressed or manifest intention. However, a covenant will not be implied unless the implication is so necessary that the court can have no doubt what covenant or undertaking to write into the agreement.

It is immaterial whether the words importing the covenant are contained in the recitals or in the operative part of the instrument and it is sufficient if the intention of the parties mutually to contract appears from the instrument as a whole. A recital of agreement will not, however, import a covenant where there is an express covenant relating to the same subject matter, unless the express covenant is so ambiguous as to justify a reference to the recitals in order to explain it. Whether a recital or acknowledgment operates as a covenant is a question of construction in each particular case, and depends on what appears to have been the intention of the parties having regard to the terms of the instrument as a whole and the surrounding circumstances.”

80 One of the cases referred to by Halsbury in support of the last part of this passage is Farrall v Hilditch (1859) 5 CBNS 840; 141 ER 337. The facts may be sufficiently gathered from the headnote:

“An indenture made between the plaintiff and defendant recited that the former was seised or entitled to certain hereditaments and premises, subject to a mortgage and further charge, that he was indebted to the defendant in the sum of 1001. for goods sold and delivered, that the defendant had commenced an action against him to recover the same, and that the plaintiff, being desirous of staying the action and of securing to the defendant the payment of his debt, had proposed and agreed to convey the hereditaments and premises to him, subject to the incumbrances, upon certain trusts for securing the same. It then recited as follows, – and it has also been agreed between the [plaintiff] and [defendant] that he [the defendant] shall be at liberty to sign judgment in the said action so commenced against the [plaintiff] as aforesaid, but that no execution shall issue thereon until this present security be realized’. The indenture then proceeded to convey the premises to the defendant upon certain trusts.”

81 Williams J, delivering the judgment of the court, entertained no doubt that a provision cast as a recital might amount to a covenant, but said that the court “ought to be cautious in spelling a covenant out of a recital of a deed; because that is not the part of a deed in which covenants are usually expressed”. He noted that the “proper office” of a recital, according to Lord Mansfield in Moore v Magrath (1774) 1 Cowp 9; 98 ER 939, is “to serve as a key to what comes afterwards”. Williams J then said (at ER 342):

“But, in the present case, we think it sufficiently appears by the whole deed that it was intended to express thereby the whole arrangement and transaction, and to ratify it under the seals of both parties. It is mentioned that the now defendant has commenced an action to recover the debt of 1001., and that the now plaintiff is desirous of staying such action, and of securing the payment. And this is followed by a distinct and unqualified statement of an agreement that the execution should be stayed. If the recital had been that it has been [and is] agreed, this would surely have been a covenant to that effect. And it seems to us that the intention which [and is] would have expressed, does sufficiently appear by the words used, when construed with reference to the subject-matter.”

82 The same approach had been taken in The Great Northern Railway Co v Harrison (1852) 12 CB 576; 138 ER 1032. That case concerned a deed by which it was recited that the railway company was “desirous of being supplied with 350,000 sleepers of Dantzic or Memel timber”, based on a particular specification. The other party covenanted to supply the company with 350,000 such sleepers and to deliver them by mid-summer 1848 “as and when, and in such quantities, and in such manner as the engineer of the company should, by order or requisition on writing, from time to time, within the period limited by the specification, direct or require”. There was no covenant by the company to buy and take 350,000 sleepers but the Exchequer Chamber held that the recital quoted above amounted, in the context, to a covenant. Parke B, delivering the judgment of himself, Wightman J, Erle J, Platt B, Crompton J and Martin B, said (at ER 1045):

“[The deed] begins with a recital that the company ‘are desirous of being supplied with 350,000 sleepers’. If the words had been ‘have agreed to take 350,000 sleepers’, there would have been an end of the argument; but if the deed goes on to shew that such was the intention of the parties, and it is sufficiently made out by the language they have subsequently used that the company have agreed to require that quantity, it will equally constitute a covenant on their part to take them.”

83 The guiding principle was stated by Parke B in these terms (also at ER 1045):

“No particular form of words is necessary to form a covenant; but wherever the court can collect from the instrument an engagement on the one side to do or not to do something, it amounts to a covenant, whether it is in the recital or in any other part of the instrument.”

84 In the present case, the recital must be taken to evidence a promise by the Owner to “rent” the Equipment to the Renter. There is, as I have said, an entire absence of promises and obligations of the Owner in the operative provisions. This, coupled with fact that the Owner, in its printed form, contemplates the creation of an “Agreement” (thereby indicating that there must be some quid pro quo given by the Owner for the numerous promises on the part of the Renter), drives one to the recital as the only source of anything that the Owner “has agreed” to do. The words “the Owner has agreed to rent to the Renter”, while, on their face, referring to a past event, should, in the circumstances, be taken to reflect a promise of the Owner to “rent to the Renter” that is current and operative as at the time the agreement takes effect. In The Great Northern Railway Co v Harrison (above), Parke B was of the view that a recital that the railway company “have agreed to take” would have been “an end of the argument” as to whether they were obliged to take – the clear implication being that the recital of past agreement to take would have continued as a presently operative promise to take. And in Farrall v Hilditch (above), the recited agreement that execution should be stayed was construed as a covenant not to proceed to execution, the words “it has been agreed” being regarded as the equivalent of “it has been and is agreed”.

85 The conclusion must therefore be that the agreement is, on the Owner’s part, an agreement to “rent” the Equipment to the Renter, with the Renter, in turn, giving a very large number of promises to the Owner to constitute the bipartite bargain; and the Owner occupying, in relation to the Equipment, a position having the incidents or attributes listed at paragraph [76] above.

The effect of the agreement “to rent”

86 There can, I think, be no doubt that the “rent” concept, employed in relation to goods (with “rent” being used as a transitive verb connoting something that someone does to goods), is a concept of giving possession of goods for reward. To “rent” is, in general parlance, the same as to “lease” (viewed from the landlord’s perspective); and it seems to me clear that the contract with which I am here concerned is in substance a “lease” of goods according to the analogy which causes that term, which is strictly applicable to land, to be applied also to goods so as to indicate a transaction under which a person in whom resides the right to possess the goods gives possession to another for a period in return for payment by that other: see, for example, the definition of “lease”, in relation to goods, in s 3 of the Registration of Interests in Goods Act 1986.

87 Such a contract is properly described as a contract of hire, as explained by Baroness Hale of Richmond in TRM Copy Centres (UK) Ltd v Lanwall Services Ltd [2009] UKHL 35; [2009] 1 WLR 1375 at [23]:

“The essence of hire is that the hirer acquires the use and possession of the goods from the provider in return for a rent, whether payable in cash or in kind.”

88 In terms of the classifications of Holt CJ in Coggs v Bernard (1704) 2 Ld Raym 909; 92 ER 107, this is locatio; and it is perhaps noteworthy, in the present context, that Baroness Hale referred to the quid pro quo given by the hirer as “a rent”.

89 If one were seeking to draw an analogy with a lease of land, two aspects of significance would be noticed. First, the grant of a lease creates in the lessee a leasehold estate in the land and that interest is itself an item of property. Second, a covenant for quiet enjoyment is implied in favour of the lessee but a covenant for good title (or good right to confer possession) is not: see Budd-Scott v Daniell [1902] 2 KB 351. The covenant for quiet enjoyment would be breached by interference or disturbance of possession by the lessor or someone lawfully claiming through or under the lessor. That covenant, of its nature, would not be breached by someone claiming under a title paramount, that is, a title superior to the lessor’s. Interference of that kind would be relevant only to a covenant for good title.

90 Another instructive analogy is with hire-purchase unregulated by hire-purchase legislation. Karflex Ltd v Poole [1933] 2 KB 251 concerned a hire-purchase agreement of the kind exemplified by Helby v Matthews [1895] AC 471 under which a hiring for a term was coupled with an option for the hirer to buy the goods at the end of the term. Goddard J said in that case (at 264-265):

“I do not think that hire-purchase is an ordinary contract of bailment. The bailor who lets out the goods is not an ordinary bailor, nor is the customer, who agrees to pay these instalments with the hope and intention of becoming the full owner, an ordinary bailee, and there are special contracts and special representations in such an agreement, and I cannot doubt that one special representation is that the bailor is the owner of the goods at the time that he delivers them.

As was pointed out in the argument, if that were not the case, the hotel-keeper who furnishes his hotel on the hire-purchase system, as so many hotel-keepers do, might find himself in the position, while his business was going on and he was regularly keeping up the instalments, of having the whole of the furniture swept out of his hotel by somebody coming in with a title. It is said that he would have a cause of action against the person who sold it to him, but it seems to me that no man in his sane senses would entered into such a position as that except upon the condition that the person who is letting the furniture to him is, at the time he lets, the owner of the property.”

91 It was thus observed that, in the case of a hire-purchase agreement, there is a so-called “special representation” that the bailor is the owner at the time he delivers the goods to the hirer. In the later case of Mercantile Union Guarantee Corporation Ltd v Wheatley [1938] 1 KB 490, Goddard J said (at 497) that, when a person lets goods on hire-purchase, “it is a condition that at the time he lets them he is the owner of the property in question” (see also Barber v NWS Bank plc [1996] 1 WLR 641). In Australian Guarantee Corporation Ltd v Ross [1983] 2 VR 319, by contrast, the Full Court of the Supreme Court of Victoria held that the condition required only that the bailor have ownership at the time at which transfer of ownership to the bailee is required.

92 A significant consideration in these cases, as the quoted extract from the Karflex case shows, was that a person who lets goods on hire under a hire-purchase agreement “is not an ordinary bailor” and that the person taking goods under such an agreement ”with the hope and intention of becoming the full owner” is not “an ordinary bailee”. Hire-purchase cases were thus seen as distinguishable from “ordinary” bailment, the difference being that the hirer entering into a hire-purchase agreement sets store by the right ultimately to become the owner, while the “ordinary” bailee seeks only to have possession and enjoyment for the period of hire.

93 The present case concerns “ordinary” bailment. The leasehold and hire-purchase analogies are not directly applicable. The situation of the “ordinary” bailee was considered by Marks J in Australian Guarantee Corporation Ltd v Ross (above). In a judgment concurred in, as to the relevant matter, by Murray J, his Honour focussed on what was “critical to the operation of the agreement”. Ownership, as such, was not critical in the case of the ordinary bailment. Marks J said (at 329):

“I consider that a person who expressly hires out a chattel, as did AGC, inter alia, in this case, expressly agrees to confer on the hirer rights which a hirer normally enjoys such as exclusive use and control of the thing hired. The expressions ‘hire’, ‘hirer’ in the agreement compel such a meaning be given to the words.”

94 Marks J then, at 329-330, quoted a number of sources:

in rem

Rich v Aldred

Franklin v Neate

"The salient feature of bailment is, ... the element of possession. Bailment is not only one of the modes of transferring possession, but while the bailment lasts it connotes possession. As between bailor and bailee that was recognised very early in our law."

"All bailees from time immemorial have been regarded by the English law as possessors and entitled to the possessory remedies."

It follows in my view that the condition as to bailment in the agreement was that the respondent have physical control of the Ford (see Paton, Bailment in the Common Law, p. 9) whilst the bailment lasted. . . “

95 A number of points of significance emerge from the quoted sources: possession is “the salient feature” of bailment, with the bailee obtaining a “legal interest in the form of possession”, which interest is the product of a division of interests in rem and sustains an entitlement to the possessory remedies; and bailment, while it lasts, “connotes possession”.

96 The references to a bailee’s interest in the goods are of particular significance. The bailee’s right to possession which qualifies the owner’s general property in the goods are not “purely contractual rights”: On Demand Information plc v Michael Gerson Finance plc [2002] UKHL 13; [2003] 1 AC 368 per Lord Millett at [29]. The ability of a bailee in possession to defend that possession by an action in trespass or for some other possessory remedy amounts to a “special property” in the goods. Thus, in Chang Yuan Xu v Council of the Law Society of New South Wales [2009] NSWCA 430, Handley AJA said at [52] – [53]:

Gatward v Alley

The grantee of an Australian passport, as a bailee at will can create a sub-bailment in favour of others such as his or her travel agent, hotel, airline, solicitor, trustee in bankruptcy, or a court. The sub-bailment would not be binding on the Commonwealth, but if it was created for reward the sub-bailee, subject to the terms of the bailment, could retain possession of the passport against the sub-bailor.”

97 References to a “legal interest in the form of possession”, a “possessory interest” and “special property” and the qualification they impose upon the owner’s rights emphasise that a bailee in possession has more than “purely contractual rights”: hence the recognition by Marks J (in the passage quoted at paragraph [93] above) that someone who “expressly hires out a chattel . . . expressly agrees to confer on the hirer rights which a hirer normally enjoys such as exclusive use and control of the thing hired”. The word “expressly” must be emphasised. Marks J made it clear that an express hiring entails an express agreement to confer the particular rights or, looking at the matter in another way, to cause the hirer to have the “special property” in the chattel that is the product of the right to possession that arises not from contract express or implied but from the very nature of bailment. An express letting on hire entails, as its essence, accrual of a possessory interest to the hirer. So too an express agreement to let on hire entails, as part of its very nature, an express contractual obligation to cede a possessory interest to the hirer and to cause that interest to arise in the hirer. Unless the hirer obtains possession, there is no bailment and therefore no hire and no creation of a possessory interest.

98 A hirer’s right to possession does not depend on or proceed from an implied term of a contract for hire. It is part and parcel of that which the contract expressly promises and which, when given, creates the hirer’s possessory interest or “special property”. This, as Marks J said, is simply the force and effect of the use of the words “hire” and “hirer”.

99 I am accordingly satisfied that there was, through the promise to “rent” contained in the recital, an express contractual obligation upon TLC to give possession of the truck to Rollpress.

100 This is consistent with clause 1(b) of the rental agreement (see paragraph [51] above) which states that “it is hereby agreed and declared that . . . the Renter is the bailee of the Equipment only”.

Possible contractual qualification – clause 12

101 Having reached that point, I must consider whether and, if so, how the obligation of TLC to give possession of the truck to Rollpress is tempered or modified – or even excluded – by other provisions of the agreement.

102 I consider first clause 12 of the terms and conditions of rental. That provision, as I have said, states that all terms, conditions and warranties that might otherwise apply are negatived, except as the agreement itself provides (and subject to any law precluding contractual modification).

103 A curious aspect of clause 12 is that it purports to extend not only to implied terms but also to express terms: “all express and implied terms, conditions and warranties which otherwise might apply to or arise out of this Agreement . . . are negatived except as provided in this Agreement”. Express terms no doubt include those actually stated in the agreement, with the result that clause 12, in dealing with express terms, is really saying that terms actually stated in the agreement are excluded except as the agreement otherwise states. This is meaningless. Clause 12 should not be taken to exclude terms that the agreement itself actually states.

104 If there were – and I do not consider that there is - an implied condition of quiet enjoyment (a possibility canvassed, by analogy with sale of goods, by counsel for TLC, referring to Microbeads AG v Vinhurst Road Markings Ltd [1975] 1 WLR 218) or an implied condition that the bailor is the owner, clause 12 would no doubt exclude it.

105 But clause 12 cannot and does not exclude or make inoperative the express agreement, inherent in and derived from the word “rent” (which is here the equivalent of “hire”), to give possession of the goods and thereby a possessory interest in them. The express nature of that agreement is referred to at paragraph [93] above.

Possible contractual qualification – clause 1(a)

106 It is necessary next to deal with clause 1(a) of the terms and conditions of rental upon which TLC places particular reliance:

“It is hereby agreed that (a) it is the obligation of the Renter to obtain delivery of the Equipment.”

107 Delivery, of its nature, is something to be given. In the sale of goods context, it is the duty of the seller to deliver the goods to the buyer in accordance with the terms of the contract of sale. What must be done by the seller to discharge that duty will depend on circumstances. For example, if the goods are in the possession of a third party, delivery by the seller to the buyer may be effected by the seller’s obtaining for the buyer that person’s acknowledgment that he hold the goods on the buyer’s behalf; and in the case of goods in a warehouse, the seller may effect delivery by handing over the key in conjunction with a grant of permission for the buyer to enter and take them. Likewise, despatch and receipt of a bill of lading or like document may constitute delivery.

108 When one person makes delivery, another takes or accepts delivery by acquiescing in the process set in train by the person making delivery. Accepting or taking delivery involves some relevant form of co-operation complementing the steps taken to make delivery. In the simplest case, the person making delivery of a chattel holds it in his or her hand, extends that hand towards the person to whom delivery is to be made and puts it into his or her hand.

109 Obtaining delivery, in terms, involves more than taking or accepting delivery. Taking and accepting may be quite passive, in the sense just described. Obtaining, by contrast, connotes some active step to complete or implement a process by which delivery is intended to be made. The active step required will, of course, depend on circumstances.

110 The clause 1(a) “obligation of the Renter to obtain delivery of the Equipment” must thus be an obligation to take whatever active step is necessary on the Renter’s part to bring about delivery the effectuation of which ultimately lies within the power of someone else. This is an important point. One cannot obtain delivery without some form of co-operation by the person capable of giving delivery. The obligation to obtain delivery therefore can only be regarded as an obligation to do everything necessary to ensure that a person able and to make delivery actually does so. It cannot be an obligation the due discharge of which will always and inevitably result in the taking of delivery.

111 It was submitted on behalf of TLC that the clause 1(a) obligation of Rollpress displaced any duty of TLC to put Rollpress into possession of the forklift truck. I do not accept that submission.

112 Someone can diligently do everything that it is necessary and possible for him or her to do in order to obtain delivery without thereby bringing about the result that some other person obliged to give possession actually does so. Non-performance of an obligation to give possession is not somehow excused by the mere existence of a counter obligation to obtain delivery; nor is the obligation to give possession inconsistent with and, as it were, cancelled out by the counter obligation to obtain delivery.

Possible contractual qualification – clauses 3(f) and 4(b)

113 TLC also relies on clauses 3(f) and 4(b) of the terms and conditions of rental. Clause 3(f) obliges the Renter to “continue to meet all obligations under this Agreement including to pay Rentals herein notwithstanding any defect in, or accident to or seizure of the Equipment”. Clause 4(b) says that the Renter must “indemnify the Owner against any loss or damage to the Equipment (including lawful confiscation thereof)”.

114 TLC places emphasis on the references to “seizure” and “lawful confiscation”. If the Renter, having obtained possession, is later dispossessed through “seizure” or “lawful confiscation”, the consequence stated in clause 3(f) or clause 4(b) follows. In the one case (“seizure”), the Renter must continue to make the rental payments; in the other (“lawful confiscation”), the Renter must indemnify the Owner against the loss of the Equipment occasioned by the confiscation.

115 Neither of these clauses impinges upon the Renter’s express obligation to “rent”. Each is concerned solely with a particular event that may befall the equipment. Each makes a stipulation that becomes operative in that event. Nothing at all is said about the Owner’s obligation to “rent”.

Possible contractual qualification – clause 11A

116 The relevant part of clause 11A is set out at paragraph [56] above.

117 It may be accepted that some part of the monthly rent of $10,553.64 related to or was connected with the work Independent was to do in modifying the truck. This is because the overall price of $482,204.23 was for the truck with completed modifications.

118 But the quoted part of clause 11A does not have the effect that, just because some element of third party service was included in the rent, the monthly payments were to be paid regardless of all other circumstances. And fundamentally, of course, the existence of the element of third party service does not in any way abrogate or modify the Owner’s contractual obligation to give possession.

The acknowledgement of receipt

119 TLC relies on the so-called “acknowledgement of receipt” contained in the rental agreement. Since Rollpress thereby acknowledged having received the truck, TLC says that Rollpress cannot now complain about failure of TLC to give possession of the truck.

120 As I have said (see paragraph [47] above), the operative words on the first page of the rental agreement under the heading “RENTER’S SIGNATURE AND ACKNOWLEDGEMENT OF DELIVERY OF EQUIPMENT AND RECEIPT OF TERMS AND CONDITIONS OF RENTAL” do not in fact contain any acknowledgement of delivery. This places a serious question mark over whether there was in reality any statement by Rollpress in the document that it had received delivery. One view is that a provision of a contract introduced by a heading should be construed solely according to the words of the provision itself and that the words of the heading cannot be injected into the provision. Counsel for Rollpress referred, in that connection, to Digby v General Accident Fire and Life Assurance Corporation Ltd [1943] AC 121 at 136.

121 The problem here is that the operative provision following the heading is silent on the particular matter mentioned in the heading, so that there are no words with respect to that matter to which effect can be given independently of the heading. That leaves the alternative possibility that, by a process akin to that already adopted in relation to the recital, it should be concluded that there is, through the heading alone, an acknowledgement by Rollpress of delivery of the equipment.

122 Such a possibility might be adopted if indicated by the whole of the circumstances. As a factual matter, however, it simply cannot have been the case that Rollpress received delivery of the equipment before its officers signed the rental agreement containing the words (in the relevant heading) “acknowledgement of delivery of equipment”. Moreover, both TLC and Rollpress knew that that was so.

123 Rollpress executed the document on 7 June 2007. The form of agreement executed on that day was then forwarded to TLC consistently with the system reflected in the document itself under which execution by the Renter should be followed by acceptance and execution by the Owner. Acceptance and execution by TLC occurred on 12 June 2007. It was only at that point that TLC (or, more accurately, Classic, as TLC’s principal) made payment to Independent. No one can conceivably have expected or intended that Rollpress would receive possession of the truck before Independent had been paid; and no one can conceivably have expected or intended that Independent would be paid before the rental agreement executed by Rollpress had been received by TLC, found to be in order and accepted and executed by TLC.

124 It follows that no one in fact believed that delivery had been made to Rollpress on or before 7 June 2007, the day on which Rollpress executed the document. The relevant words in the heading therefore cannot be construed as a statement by Rollpress founding a fiction that it had achieved what, in the circumstances, was - and was known to be - a clear commercial impossibility.

Estoppel by convention?

125 The conclusion just stated is relevant to TLC’s submissions concerning estoppel by convention, which submissions TLC indicated were relied on if it were found that it had an obligation to give possession of the truck to Rollpress.

126 The matters necessary to establish estoppel by convention were stated by Brereton J in Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) NSW ConvR 56-172 at [47] in a passage approved by Tobias JA (with whom Mason P and Campbell JA agreed) in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 at [200]:

Moratic assumed that the only rent payable by it under the lease was that reserved by clause 4.1;

127 The essential ingredient is the existence and pursuit of a common understanding in the sense that each party, to the knowledge and with the concurrence of the other, proceeds on the basis of the shared assumption that their relationship is to be conducted on that understanding.

128 TLC’s contention is that TLC and Rollpress proceeded on a shared assumption that Rollpress had, on or before 7 June 2007, obtained delivery of the truck as stated in the acknowledgement section of the form of rental agreement executed by Rollpress alone that Rollpress forwarded to TLC on 7 June 2007. The representation by Rollpress in the “acknowledgement of delivery of equipment” in that document is put forward by TLC as evidence of the shared assumption on the basis of which, it says, both parties proceeded.

129 For reasons I have stated, it is not possible to find that the parties believed that Rollpress had in fact obtained possession at or before it sent the rental agreement document to TLC on 7 June 2007. Rather, as I have stated, both parties knew that any delivery of the truck to Rollpress by Independent would not take place until Independent had been paid the $482,204.23 to be sourced from TLC; and TLC obviously knew that that sum had not been paid as at 7 June 2007.

130 There is accordingly no basis for finding the conventional estoppel relied on by TLC.

Some additional facts

131 It is necessary to refer in more detail to matters arising after the agreement was concluded on 12 July 2007. They concern, in large measure, the modifications to the forklift truck.

132 In April 2007 – that is, at a very early stage of relevant events – representatives of Rollpress had meetings with representatives of Independent concerning modification of a standard forklift to meet Rollpress’s requirements. Shortly after representatives of Rollpress had inspected the particular unit, Independent produced a “concept plan” for the modification. Rollpress endorsed its approval on the “concept plan” on 15 May 2007.

133 It was clear that the modification would take some time. Rollpress nevertheless chose to proceed with the acquisition.

134 Mr McDowell of Rollpress gave evidence that, in May 2007, he made an arrangement with Independent that Independent would pay Rollpress half of each monthly rental amount “until the modifications of the forklift are completed and until it is delivered to us around September”. It was thus clearly recognised between Rollpress and Independent that delivery of the modified unit would be delayed beyond commencement of the finance lease.

135 In late August 2007, Mr Kearns of Rollpress spoke to Mr Wood of Independent to obtain a progress report on the delivery of the forklift. Mr Wood said words to the effect that everything was fine and the truck was being modified according to the concept plan and would be delivered “in a couple of weeks”.

136 Mr Kearns made contact with Mr Wood several times during September 2007. He received reassurances of various kinds but, on 4 October 2007, learned that IFS had “gone into liquidation” (in fact, voluntary administration).

137 On 23 October 2007, Rollpress, through its solicitors, took the formal step of demanding that TLC deliver to it the truck described in the rental agreement. TLC’s solicitors, by letter dated 30 October 2007, reminded Rollpress of its obligation to keep up monthly payments under the rental agreement. After some further correspondence between solicitors, these proceedings were commenced.

Decision on TLC’s claims

138 Given my finding that the rental agreement imposed on TLC a contractual obligation to put Rollpress into possession of the truck, the immediate question is whether TLC performed that obligation.

139 The answer must be that it did not. This follows simply from the fact that Rollpress in fact never had possession of the truck and that physical custody rested at all material times with Independent which, however, did not own it. No one capable of lawfully putting Rollpress into possession actually did so, so that the result required by the promise of TLC was never forthcoming.

140 The first consequence of TLC’s failure is that stated with disarming simplicity by Finnemore J in Warman v Southern Counties Car Finance Corp Ltd [1949] 2 KB 576 at 582-583:

“I should have thought it was plain that, if A purports to hire a car to B and delivers to B a car which belongs, not to himself, but to C—a car to which A had no right whatever in law—and B does not pay the hiring charges, A would have no possible claim for them. It is difficult to see how he would ever frame his case. How could he come into court and say: ‘I claim money from B arising out of my hiring to him C's car, to which I have no right.’ I cannot conceive that any court would direct B to pay A money for the use of somebody else's car, and I do not see here how the defendants can claim any money from the plaintiff for the use of someone else's car.”

141 In the present case, of course, there was not even delivery of a vehicle belonging to “C”. There was delivery of no vehicle at all, with the result that Rollpress came under no obligation to pay the hiring charge.

142 Because Rollpress incurred no obligation to pay the hiring charge, its failure to pay was not a breach of contract. There was accordingly no repudiation by Rollpress, with the result that TLC’s claims outlined at paragraph [13] above fail.

Decision on Rollpress’s claims

143 This leads on to Rollpress’s contention that there was a total failure of consideration.

144 The relevant concept of total failure of consideration was authoritatively explained by members of the High Court in David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48: (1992) 175 CLR 353, Baltic Shipping Co v Dillon [1993] HCA 4: (1976) 176 CLR 344 and Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516. In the first of these cases, at CLR 382, Mason CJ, Deane J, Toohey J, Gaudron J and McHugh J quoted with approval the following passage in the judgment of Kerr LJ in Rover International Ltd v Cannon Film Ltd (No 3) [1989] 1 WLR 912 at 923:

“The question whether there has been a total failure of consideration is not answered by considering whether there was any consideration sufficient to support a contract or purported contract. The test is whether or not the party claiming total failure of consideration has in fact received any part of the benefit bargained for under the contract or purported contract.”

145 Their Honours then said:

total

Rover International Ltd

Rowland v Divall

146 The concept of a “total” failure of consideration became the subject of further comment in Roxborough v Rothmans of Pall Mall Australia Ltd (above) by reference to what was said in Baltic Shipping Co v Dillon (above). Gummow J said (at [105] to [107]):

“At this stage attention is required to the notion that the failure relied upon be “total”. The general rule, exemplified in Baltic Shipping, is that where there has been a partial failure in performance of a contractual promise there is no right to recover back a proportionate part of the money paid on an action for money had and received. One reason for this requirement that the failure be “total” appears to be that, in cases in which the question has arisen, the plaintiff already will have a remedy in damages which will be governed by principles of compensation under which the plaintiff may recover no more than the loss sustained; to allow the plaintiff to claim restitution in respect of any breach,

Another reason for the general rule reflects the law's difficulty with apportionment in respect of an entire obligation, namely one in which the consideration for the payment of money is entire and indivisible. The rule is that the action will not be maintainable where “the money payable is neither apportioned by the contract, nor capable of being apportioned by a jury”. The nineteenth century cases whence that rule is derived were decided when fact finding was the function of juries not judges. They reflected an appreciation of the imperfections of that method of trial and also what today would be called a “default rule” that the allocation of such gains and losses was properly the exclusive function of the terms of the parties’ contract.

no

147 In the present case, Rollpress did not receive any part of the benefit for which it bargained with TLC. According to the bargain, TLC was to give Rollpress the benefit of possession of the forklift truck for a term of sixty months. The common expectation was that TLC would first come to occupy, by virtue of its own transaction with Independent, a position in relation to the truck that would enable it to confer that benefit on Rollpress. TLC never obtained any ownership (or other) rights in relation to the truck so as to put itself in a position to give possession to Rollpress. It never gave possession to Rollpress. There was accordingly a total failure of consideration.

148 It is beside the point to refer to the fact that Independent continued for a time to perform work on the truck to Rollpress’s specifications with a view to providing Rollpress with the enhanced vehicle it sought. This is because Rollpress was never given possession of any truck, whether or not enhanced. The fact that Independent paid Rollpress the equivalent of one-half of each of several monthly rental payments is also beside the point. This is made clear by the decision in Rowland v Divall [1923] 2 KB 500, the decision of the English Court of Appeal referred to in the above extract from the joint judgment in David Securities Pty Ltd v Commonwealth Bank of Australia.

149 Rowland v Divall was a sale of goods case. The plaintiff bought a car from the defendant and used it for several months until compelled to surrender it to the true owner from whom it had been stolen. The plaintiff recovered the purchase moneys as on a total failure of consideration. It was held that the use he had had for several months was no part of the consideration for which he had contracted. He had bargained for property and lawful possession and had received neither.

150 In the present case, the bargain was for possession. The fact that Rollpress received money from Independent under an arrangement made between those parties regarding completion of modifications included in the sale price of $482,204,24 in no way alters the circumstance that possession was never received by Rollpress and that TLC therefore failed entirely to perform its obligation to give possession to Rollpress.

151 The total failure of consideration means that Rollpress is entitled to a restitutionary remedy in respect of the payments it made to TLC. Because the benefit for which Rollpress bargained was never given by TLC, Rollpress should be put into the position it would have occupied had the payments it made for nothing had not been made.

Disposition

152 Upon the further amended statement of claim, there will be judgment for the first defendant and the second defendant.

153 Upon the amended cross-claim, there will be judgment against the plaintiff/cross-defendant and in favour of the first defendant/cross-claimant in the sum of $52,768.20 together with interest at the rates specified in Schedule 5 to the Uniform Civil Procedure Rules 2005:

(a) on $10,766.64 from 12 June 2007 to the date of judgment;

(b) on $10,553.64 from 12 July 2007 to the date of judgment;

(c) on $10,553.64 from 13 August 2007 to the date of judgment;

(d) on $10,553.64 from 12 September 2007 to the date of judgment; and

154 There will also be an order that the plaintiff pay the costs of the first defendant and the second defendant of the proceedings.

155 Because of the need to make the interest calculations, I will ask that the parties agree short minutes of orders and deliver them to my Associate within seven days, with a view to the making of orders on a particular date a few days after delivery. The calculations should be made accordingly.

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Citations

The Leasing Centre (Aust) Pty Ltd v Rollpress Proplate Group Pty Ltd [2010] NSWSC 282

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CITATION:	The Leasing Centre (Aust) Pty Ltd v Rollpress Proplate Group Pty Ltd [2010] NSWSC 282
HEARING DATE(S):	22/03/10, 23/03/10
JUDGMENT DATE :	16 April 2010
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	1. Upon the further amended statement of claim, judgment for the first defendant and the second defendant. 2. Upon the amended cross-claim, judgment against the plaintiff/cross-defendant and in favour of the first defendant/cross-claimant in the sum of $52,768.20 together with interest at the rates specified in Schedule 5 to the Uniform Civil Procedure Rules 2005: (a) on $10,766.64 from 12 June 2007 to the date of judgment; (b) on $10,553.64 from 12 July 2007 to the date of judgment; (c) on $10,553.64 from 13 August 2007 to the date of judgment; (d) on $10,553.64 from 12 September 2007 to the date of judgment; and (e) on $10,553.64 from 12 October 2007 to the date of judgment. 3. Order that the plaintiff pay the costs of the first defendant and the second defendant of the proceedings.
CATCHWORDS:	CONTRACTS - general contractual principles - construction and interpretation of contracts - where operative words of contract contain no obligation on one party - where recital states that that party "has agreed" to "rent" chattel to the other party - where second party's obligations relate to "renting" of that chattel from first party - whether, as a matter of construction, the recital contains a contractual promise of the first party - BAILMENTS - particular bailments - hire of chattel - promise by one party to "rent" chattel to other party - meaning of "rent" - held promise to hire chattel - express content of promise requires giving of possession of chattel - CONTRACTS - implied terms - express term excludes all terms that would otherwise be implied - whether requirement under agreement for hire that possession be given is an express term or an implied term - held an express term - ESTOPPEL - estoppel by convention - written statement by party to whom possession to be given that it has received possession - whether parties therefore had and proceeded on shared assumption that possession had passed - where commercial and financial circumstances were such that neither party could possibly have believed that possession had been obtained - RESTITUTION - restitution resulting from unenforceable incomplete illegal or void contracts - recovery of money paid - where several monthly payments of "rent" made but possession never obtained
LEGISLATION CITED:	Corporations Act 2001 (Cth), Part 5.3A Registration of Interests in Goods Act 1986, s 3 Uniform Civil Procedure Rules 2005, Schedule 5
CATEGORY:	Principal judgment
CASES CITED:	Australian Guarantee Corporation Ltd v Ross [1983] 2 VR 319 Baltic Shipping Co v Dillon [1993] HCA 4: (1976) 176 CLR 344 Barber v NWS Bank plc [1996] 1 WLR 641 Budd-Scott v Daniell [1902] 2 KB 351 Chang Yuan Xu v Council of the Law Society of New South Wales [2009] NSWCA 430 Coggs v Bernard (1704) 2 Ld Raym 909; 92 ER 107 David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 Digby v General Accident Fire and Life Assurance Corporation Ltd [1943] AC 121 Farrall v Hilditch (1859) 5 CBNS 840; 141 ER 337 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 Helby v Matthews [1895] AC 471 Karflex Ltd v Poole [1933] 2 KB 251 Mercantile Union Guarantee Corporation Ltd v Wheatley [1938] 1 KB 490 Microbeads AG v Vinhurst Road Markings Ltd [1975] 1 WLR 218 Moore v Magrath (1774) 1 Cowp 9; 98 ER 939 Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) NSW ConvR 56-172 On Demand Information plc v Michael Gerson Finance plc [2002] UKHL 13; [2003] 1 AC 368 Rover International Ltd v Cannon Film Ltd (No 3) [1989] 1 WLR 912 Rowland v Divall [1923] 2 KB 500 Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 The Great Northern Railway Co v Harrison (1852) 12 CB 576; 138 ER 1032 Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd [1999] WASC 1046 TRM Copy Centres (UK) Ltd v Lanwall Services Ltd [2009] UKHL 35; [2009] 1 WLR 1375 Warman v Southern Counties Car Finance Corp Ltd [1949] 2 KB 576
TEXTS CITED:	“Deeds and Other Instruments” in Halsbury’s Laws of England, paragraph 4.10(ii).250
PARTIES:	The Leasing Centre (Aust) Pty Limited - Plaintiff Rollpress Proplate Group Pty Limited - First Defendant RPG Australia Pty Limited - Second Defendant
FILE NUMBER(S):	SC 2008/00279009
COUNSEL:	Mr P T Taylor SC/Mr D L Cook - Plaintiff Mr J G Duncan - Defendants
SOLICITORS:	Swaab Attorneys - Plaintiff Middletons as agent for McCullough Robertson Lawyers - Defendants