Thorn Australia Pty Ltd v Peel Hotel Pty Ltd
[2015] VCC 818
•22 June 2015
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISION
EXPEDITED CASES LIST
Case No. CI-13-05280
| Thorn Australia Pty Ltd | Plaintiff |
| v | |
| Peel Hotel Pty Ltd | First Defendant |
| and | |
| Thomas Joseph McFeely | Second Defendant |
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JUDGE: | His Honour Judge Cosgrave | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16-17 March 2015 | |
DATE OF JUDGMENT: | 22 June 2015 | |
CASE MAY BE CITED AS: | Thorn Australia Pty Ltd v Peel Hotel Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2015] VCC 818 | |
REASONS FOR JUDGMENT
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Subject: CONSUMER LAW; NEGLIGENCE; AGENCY RELATIONSHIP
Catchwords: CONSUMER LAW – guarantee that services will be rendered with due skill and care – section 60 of Schedule 2 of the Competition and Consumer Act 2010 (Cth)
NEGLIGENCE – finance broker duty to exercise due care and skill – duty of care in pure economic loss – content of the duty
AGENCY –implied terms into agency agreement – duty to exercise due care and skill – duty to seek instructions – whether duty to act in best interests
Legislation Cited: Competition and Consumer Act 2010 (Cth)
Cases Cited:Astley v Austrust Ltd (1999) 197 CLR 1; Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 227 (15 September 2005); L’Estrange v F Graucob [1934] 2 KB 394; Morlend Finance Corporation (Vic) Pty Ltd v Westerndorp [1993] 2 VR 284; Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67; Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541; Secure Funding Pty Ltd v Moon [2012] QSC 244; Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Wilton v Farnworth (1948) 76 CLR 646.
Judgment: The defendants’ claim against the fourth third party is dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Defendants | Mr G L Rice | Pointon Partners |
| For the Fourth Third Party | Mr P W Lithgow | Davies Moloney |
HIS HONOUR:
1 This case concerns a dispute which has arisen from the provision of finance to lease commercial kitchen equipment for the Peel Hotel in Collingwood (“the Peel Hotel”).
2 The plaintiff, Thorn Australia Pty Ltd (“Thorn”), provided the finance for the kitchen equipment. It sued the first defendant, the Peel Hotel, and the second defendant, Tom McFeely (“McFeely”), (together “the defendants”) for moneys owed under the finance contract. McFeely was the sole director of the Peel Hotel and the guarantor of the Peel Hotel’s obligations to Thorn under the finance contract. The defendants joined four third parties. Proceedings against all parties, save the parties to this hearing, settled before trial. This case concerns only a claim by the defendants against the fourth third party, Auswise Finance Pty Ltd (“Auswise”), which acted as broker for the Peel Hotel in obtaining finance from Thorn.
3 In short, the defendants contended that, as finance broker for the Peel Hotel, Auswise owed a duty to act with due skill and care in obtaining the finance and breached this duty by negligently or carelessly allowing the Peel Hotel to become the victim of fraud by assuming an obligation to pay for goods which were never delivered. The defendants contended that the duty was owed in contract, tort and in the form of a consumer guarantee under Schedule 2 of the Competition and Consumer Act 2010 (Cth) (“the ACL”). The defendants claimed damages.
4 Auswise agreed that it acted as broker in obtaining the finance but it said that it did nothing wrong and did not owe any contractual, tortious or statutory duty to the Peel Hotel.
Issues
5 The parties agreed that the court needed to determine the following issues in the case:
(a) Did Auswise act as broker for the Peel Hotel?
(b) Is the Peel Hotel a “consumer” within the ACL?
(c) Did the agreement between the parties contain terms that Auswise would
(a) exercise due skill and care;
(b) seek instructions as required;
(c) act in the interests of the Peel Hotel?
(d) Was Auswise under a duty to take care in the performance of the agency contract or in its dealings with Thorn on behalf of the Peel Hotel?
(e) When Auswise sent documents for execution by the Peel Hotel and McFeely to the Star Hotel on 13 December 2012, including the acknowledgment of delivery, did it know or suspect or ought it reasonably to have known or suspected that the relevant goods had not been delivered?
(f) In the circumstances, did Auswise breach:
(a) a consumer guarantee
(b) a term of the agreement with the Peel Hotel
(c) a duty owed to the Peel Hotel and McFeely
by sending the acknowledgment of delivery for execution without enquiry, explanation or warning and forwarding the executed acknowledgment of delivery to Thorn?
(g) Did such alleged breaches cause the loss claimed?
Background
6 McFeely is the sole director of the Peel Hotel. He was first employed at the hotel in 1994 and has operated the hotel in his own right since 1999.
7 McFeely first met Garry Stewart (“Stewart”) in about January 2012. He was introduced by McFeely’s best friend, Dale Smedley. Stewart, together with his partner James Kennedy (“Kennedy”), owned the Star Hotel which was located near to the Peel Hotel. McFeely became very friendly with Stewart to the extent that in March 2012, they made a handshake agreement (later reduced to writing) whereby Stewart and one of his associated companies were to become, in effect, a 30% partner in the Peel Hotel for a consideration of $960,000. McFeely did not meet Kennedy until September 2012, closer to the time the Star was due to open.
8 In late 2012, McFeely decided to procure and install a new commercial kitchen at the Peel Hotel. Around the time McFeely decided to pursue the new kitchen, he was busy with other issues including litigation at VCAT with the landlord of the hotel premises and the worsening health (and subsequent death) of his mother in Scotland. Stewart, who was a builder by trade, was also to perform building work at the Peel Hotel and offered to assist with the installation of the kitchen. In these circumstances, especially because Stewart had an existing relationship with Paul Boyd-Skinner (“Boyd-Skinner”) at Auswise, McFeely was grateful to accept Stewart’s offer to deal with the matter of obtaining the finance which the Peel Hotel required to install the new kitchen.
9 Stewart contacted Boyd-Skinner (using the name Kennedy) and began arranging the requisite finance. After some email correspondence between Stewart and Boyd-Skinner, Boyd-Skinner sent various documents needed for the finance approval. McFeely signed the documents and thereby committed to obtain the goods, worth approximately $167,698, as supplied by Southern Architectural Stainless Pty Ltd and Restaurant and Bar Solutions Pty Ltd (“the Suppliers”).
10 The problem, which later became manifest, was that although Thorn approved the finance and paid the Suppliers upon the receipt of the executed documents, no kitchen equipment was ever delivered. It seems that Kennedy and Stewart were dishonest, and the Peel Hotel and McFeely appeared to be victims of a fraud. McFeely reported the matter to Victoria Police. The court was informed that the Suppliers are in liquidation and Stewart and Kennedy have disappeared and have not been located by the police. McFeely said that he last saw Stewart in August 2013 and that he considered any attempt to issue proceedings against Stewart and Kennedy as futile, particularly as the police had been unable to locate the pair.
(a) Did Auswise act as broker for the Peel Hotel?
11 There is no serious question about this issue. Auswise acted as the broker or agent for the Peel Hotel in this matter. Auswise knew from what Stewart said that his approach for equipment finance was made on behalf of the Peel Hotel and McFeely. Stewart said that McFeely wanted to install a commercial kitchen and start serving food. Boyd-Skinner agreed that he could look at arranging finance for the venture. Boyd-Skinner spoke to McFeely about the matter at some point and McFeely told him that he had let Stewart deal with it because McFeely was busy dealing with other matters. Auswise acknowledged that they acted as a broker for the first defendant.
(b) Is the Peel Hotel a “consumer” within the Australian Consumer Law?
12 In order to be eligible for the benefit of the consumer guarantee under the ACL, Peel Hotel must be a ‘consumer’ within the meaning of the ACL. Although Auswise pleaded that the Peel Hotel was not a consumer for the purposes of the ACL, Auswise conceded at trial that the Peel Hotel is a consumer within section 3 of the ACL. Section 3(1)(a)(i) of the ACL defines all purchases under $40,000 to be taken to have been acquired by a ‘consumer’, regardless of whether the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption.[1] The total commission paid to Auswise was $8,319.95. It thus falls well within the $40,000 amount prescribed by the ACL. This is reinforced by section 10 of the ACL, which creates a presumption that persons are consumers in relation to the goods and services the subject of a proceeding under the ACL unless the contrary is established.
[1]Competition and Consumer Act 2010 (Cth), Schedule 2, section 3(1)(b).
(c)Did the agreement between the parties contain terms that Auswise would
(i)exercise due skill and care;
(ii)seek instructions as required; and
(iii)act in the interests of the Peel Hotel?
13 The defendants alleged in the Amended Statement of Claim against Auswise that it agreed to act for reward as its agent regarding the procuration of finance to acquire kitchen equipment. It contended that there were terms of the contract that Auswise would exercise due skill and care; seek instructions as required; and act in the interests of the Peel Hotel.
14 The terms were said to be implied from the nature of the transaction, the relationship between the Peel Hotel and Auswise, and the need to give business efficacy to the transaction.
(i)Exercising due skill and care
15 It could not be denied that Auswise acted as broker for the Peel Hotel. To the extent that Auswise provided service as a finance broker, it is appropriate to imply a term that Auswise exercised due skill and care in procuring finance for the Peel Hotel. Such a term would be readily found in any similar agreement. Where the agent in Auswise’s position holds itself out as having a particular skill or expertise, and accepts payment to provide its expertise, then the standard of skill and care required will be that of the ordinarily competent person in that area of work or having that expertise. [2]
[2]Halsbury’s Laws of Australia, (5) Duties of Agent to Principal, at [15-170].
16 In this case, Thorn, the financier, and not the borrower paid Auswise’s commission. I did not understand there to be any dispute that Auswise remained the agent of the borrower. This seems to accord with established authority.[3]
[3]Morlend Finance Corporation (Vic) Pty Ltd v Westerndorp [1993] 2 VR 284; Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67; Secure Funding Pty Ltd v Moon [2012] QSC 244.
(ii)Seeking instructions as required
17 The defendants further argued that Auswise was under a duty to seek instructions and that such a term should be found to be implied into the agency contract. The defendants contended that “any prudent person acting as an agent or broker to acquire finance should seek proper instructions…”. It is well-established that an agent acting on behalf of a principal has a duty to follow strictly the instructions of that principal.
18 Again in this context, it is appropriate to imply a term that Auswise should seek instructions where required. As an agent, Auswise was obliged to follow whatever instructions it received from the Peel Hotel in relation to the obtaining of the finance. At trial, Auswise acknowledged that it owed a duty to get instructions. This is not a controversial proposition. It is well-established that agents are to act within the scope of the authority given to them by their principal. Hence, an agent is required to have the necessary instructions from the principal and to abide by those instructions
(iii)Acting in the interests of the Peel Hotel
19 I have already found that Auswise acted as an agent for the Peel Hotel in obtaining finance for the kitchen equipment. In so doing, Auswise was to act on the instructions of the principal.
20 As Professor Dal Pont states, “an agent engaged to facilitate, effect or negotiate a transaction on behalf of a principal owes a duty to the principal to foster the principal’s best interests”.[4] The duty to act in the best interests of the principal often relates to the need to obtain the best deal for the principal. For example, a real estate agent is under a duty to obtain the best price on the most favourable conditions for the vendor. The position in this case is different from other commercial relationships because of the special connection between Auswise and the Peel Hotel. Generally, when commercial parties are acting at arm’s length, the parties are free to act in their own interest and, at least in Victoria, there is usually no implied duty of good faith. Warren CJ in Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL[5] stated:
“If a duty of good faith exists it really means a standard of contractual conduct that should be met. … [w]here commercial leviathans are contractually engaged, it is difficult to see that a duty of good faith will arise, leaving aside duties that might arise in a fiduciary relationship.”
[4]G E Dal Pont, Law of Agency, (3rd ed, 2014), para 11.20.
[5][2005] VSCA 227 (15 September 2005).
21 Accordingly, I find that the defendants have established each of the terms alleged were included in the agreement between the Peel Hotel and Auswise to procure finance.
(d)Was Auswise under a duty to take care in the performance of the agency contract or in its dealings with Thorn on behalf of the Peel Hotel?
22 The defendants further allege that Auswise owed a duty to exercise reasonable care and skill in the performance of its agency contract and in its dealings with Thorn on behalf of the defendants. Although the allegation was not subject to any detailed argument at trial, I infer the allegation is based upon the tort of negligence.
23 In Astley v Austrust Ltd,[6] Gleeson CJ, McHugh, Gummow and Hayne JJ expressed the view that the two duties, owed in contract and in tort, exist concurrently and independently:
“Long before the imperial march of modern negligence law began, contracts of service carried an implied term that they would be performed with reasonable care and skill. Persons who give consideration for the provision of services expect that those services will be provided with due care and skill. Reliance on an implied term giving effect to that expectation should not be defeated by the recognition of a parallel and concurrent obligation under the law of negligence. The evolution of the law of negligence has broadened the responsibility of professional persons and requires them to take reasonable care and skill even in situations where a contractual relationship cannot be established.”[7]
[6](1999) 197 CLR 1.
[7](1999) 197 CLR 1, at 23.
24 The High Court in Astley agreed that the two duties could exist concurrently in tort and contract as they differed in their elements, limitation periods, tests for remoteness and damages.[8]
[8]Ibid.
25 The defendants’ claim against Auswise is for pure economic loss. From the authorities, it seems that a variety of factors influences whether or not a person owes a duty of care to someone suffering pure financial loss. In Caltex Refineries (Qld) Pty Ltd v Stavar,[9] Allsop P said[10] that where the posited duty is a novel one, the proper approach is to undertake a close analysis of the facts bearing on the relationship between the claimant and the putative tortfeasor by references to the salient features or factors affecting the appropriateness of imputing a legal duty to take reasonable care to avoid harm or injury. The salient features included:
[9](2009) 75 NSWLR 649.
[10]Ibid, at [102] – [107].
·the foreseeability of harm;
·the nature of the harm alleged;
·the degree and nature of control able to be exercised by the defendant to avoid harm;
·the degree of vulnerability of the plaintiff to harm from the defendant’s conduct, including the capacity and reasonable expectation of a plaintiff to take steps to protect itself;
·the degree of reliance by the plaintiff upon the defendant;
·any assumption of responsibility by the defendant;
·the proximity or nearness in a physical, temporal or relational sense of the plaintiff to the defendant;
·the existence or otherwise of a category of relationship between the defendant and the plaintiff or a person closely connected with the plaintiff;
·the nature of the activity undertaken by the defendant;
·the nature or the degree of the hazard or danger liable to be caused by the defendant’s conduct or the activity or substance controlled by the defendant;
·knowledge, either actual or constructive, by the defendant that the conduct will cause harm to the plaintiff;
·any potential indeterminacy of liability;
·the nature and consequences of any action that can be taken to avoid the harm to the plaintiff;
·the extent of imposition on the autonomy or freedom of the individuals including the right to pursue one’s own interests;
·the existence of conflicting duties arising from other principles of law or statute;
·consistency with the terms, scope and purpose of any statute relevant to the existence of a duty;
·the desirability of, and in some circumstances, need for conformance and coherence in the structure and fabric of the common law.
26 His Honour said that there was no suggestion in the cases that it was compulsory in any given case to make findings about all of these features. He said the list was not exhaustive. Rather, it provided a non-exhaustive universe of considerations of the kind relevant to the evaluative task of imputation of the duty and the identification of its scope and content.
27 A number of the factors referred to by Allsop P were material in this case.
28 Here it was foreseeable that if Auswise performed its work negligently, then the Peel Hotel might suffer economic loss. For example, if the business were depending on the finance to install the kitchen and thereby serve food to customers, economic harm would probably result if the finance were not obtained due to an act or omission by Auswise.
29 The Peel Hotel was vulnerable to the extent that McFeely (through Stewart) engaged Auswise to find the necessary finance. No doubt there were other brokers in Australia or other sources through which McFeely could have sought funds for the projected work. However, at the time, McFeely was busy with other issues and was content to let his friend, Stewart, deal with the matter because it was one less thing for McFeely to worry about. Apart from this, the arrangement with Stewart was also convenient for McFeely because his hotel traded at night and he was not there much of the time during the day.
30 Due to the way in which McFeely had arranged for the procuration of the finance to be organised by Stewart and Auswise, McFeely relied heavily on the pair of them to get the job done.
31 Auswise assumed responsibility for the task of obtaining finance to pay for the installation of the kitchen. Auswise did the work to have the requisite papers signed and then present properly completed documents to Thorn. Auswise charged a 5% commission for its work as the broker.
32 The circumstances were such that there was important relational proximity between Auswise and the Peel Hotel. The hotel needed the funds to install the kitchen and was reliant upon the expertise of Auswise to obtain the finance. At a practical level, the relationship between Auswise and the Peel Hotel was one of close proximity.
33 The nature of the activity undertaken by Auswise meant that it would have (or at least should have) appreciated keenly the nature of its task and the likely effect upon the Peel Hotel if it failed to obtain the finance through an avoidable act or omission on the part of Auswise.
34 In the circumstances, I consider that Auswise owed a duty of care to the Peel Hotel to act with the skill and care of a reasonably competent commercial finance broker to prevent the hotel from suffering economic loss due to the negligent performance of its finance broker.
(e)When Auswise sent documents for execution by the Peel Hotel and McFeely to the Star Hotel on 13 December 2012, including the acknowledgment of delivery, did it know or suspect or ought it reasonably to have known or suspected that the relevant goods had not been delivered?
35 Boyd-Skinner was the sole witness for Auswise. He had been a finance broker for approximately 12 years. He was certified as a mortgage broker. Formerly, when he worked as a residential finance broker he was a member of the Finance Brokers Association of Australia. Boyd-Skinner obtained equipment finance in about September 2012 for Stewart and Kennedy at the Star Hotel. A short time later after that job was completed, Stewart contacted him again to ask if Boyd-Skinner could arrange finance for a friend who had a hotel just down the road from the Star Hotel and wanted to install a commercial kitchen.
36 Boyd-Skinner set to work and arranged, mainly but not exclusively through Stewart, to obtain signed copies of the necessary documents for submission to Thorn. The documents were the rental agreement; direct debit form; secured guarantee; and the acceptance of delivery of all goods by customer (“the Acknowledgment”).
37 Boyd-Skinner sent the completed documents electronically to Thorn. Once Thorn was satisfied,[11] it paid the Suppliers for the kitchen equipment. In the usual course, the items of equipment would then be delivered to the party financing their acquisition for installation at the relevant premises.
[11]After Boyd-Skinner obtained for Thorn a certificate of currency for the insurance and McFeely’s trust deed.
38 Boyd-Skinner said in evidence that once the transaction settled on about 17 December 2012, and Thorn paid Auswise its commission soon after, Boyd-Skinner had no further dealings with McFeely until June the following year. On 28 June 2013, McFeely sent Boyd-Skinner an email in which he sought his assistance in getting the kitchen issues ‘sorted out’. McFeely said that there had been a mix-up and the equipment destined for the Peel Hotel had gone instead to the Star Hotel. McFeely said that while the delay initially had suited him, it was now near the end of the financial year and he wanted the kitchen installed before summer.
39 Boyd-Skinner responded to McFeely by email after an unsuccessful attempt to speak on the phone. Boyd-Skinner said that this was the first he knew of any mix-up. He said that the paperwork for the transaction was in order or otherwise the deal would not have settled. Boyd-Skinner indicated to McFeely that he would get to the bottom of it.
40 Boyd-Skinner rang Stewart who informed him that McFeely was probably just having a bad day. Boyd-Skinner told Stewart that he wanted to arrange a conference call for the three of them, but that never happened. Boyd-Skinner did not speak again directly to McFeely or Stewart about the non-existent kitchen.
41 By email dated 29 July 2013, McFeely advised Boyd-Skinner that he had been in contact with Stewart and that they were planning to catch up later that day. The evidence does not disclose what if anything flowed from that meeting.
42 Boyd-Skinner said in his evidence that he contacted the Suppliers who each told him that they used an external entity to deliver equipment. Each supplier said that there had been no delivery to the Peel Hotel. Although the invoices referred to by the Suppliers stated that the equipment was owned by Thorn and was to be delivered to the Peel Hotel, the Suppliers told Boyd-Skinner that Stewart had instructed them both to deliver it ‘up the road’. Boyd-Skinner said that it was at this point he suspected fraud and he contacted Thorn. Boyd-Skinner said he believed that there was no equipment. The usual methodology was followed in this case whereby Thorn paid the Suppliers directly once it had the signed papers, including the Suppliers’ invoice and the insurance certificate. Companies in Thorn’s position sought to protect themselves by dealing only with suppliers whom they had previously accredited. Boyd-Skinner said that for such frauds to work, the supplier had to be complicit with the borrower.
43 The evidence suggested that Stewart and Kennedy both disappeared in about mid-2013 and the police had been unable to locate them subsequently. This was consistent with the Suppliers receiving the money from Thorn and then passing it on to Stewart.
44 I have no reason to doubt the evidence of Boyd-Skinner. He presented as a credible witness who gave direct answers without prevarication or unnecessary elaboration. His evidence was consistent with the objective evidence. He is experienced and has been involved in brokering many finance transactions. Especially when he had heard nothing for 6 months after settlement, he was, in my view, entitled to assume that the transaction had proceeded in the usual way. Even though Boyd-Skinner acknowledged that frauds of this description had happened to every bank in Australia, there was no evidence to suggest that Boyd-Skinner knew, or had reason to suspect before June 2013, that there was a fraud occurring in this case.
45 The defendants could not identify any specific evidence which supported their case on breach. The defendants did not call any expert evidence to suggest that Boyd-Skinner either ought to have realised what was happening or ought to have performed his role in procuring the finance in some different way which would or might have alerted him to Stewart’s nefarious conduct. Nor did the defendants put to Boyd-Skinner that he knew or should have known of the fraud.
46 The defendants queried with Boyd-Skinner whether clients had previously asked him whether they should sign the Acknowledgment before they received the goods. Boyd-Skinner said that no client had ever asked him about this. I believed and accepted Boyd-Skinner’s answer on this matter.
47 In short, I do not consider that Auswise and Boyd-Skinner had any basis on or about 13 December 2012 to know or suspect that the Peel Hotel and McFeely were victims of a fraud. Auswise and Boyd-Skinner might well have known or suspected that, as at 13 December 2012, the kitchen goods had not been delivered. This was because delivery normally occurred after settlement which took place on 17 December 2012.
48 Even if I were to find that Auswise and Boyd-Skinner knew or suspected that the goods had not been delivered to the Peel Hotel on 13 December 2012, no conclusion would necessarily follow from that premise. From one perspective, before such a finding could assist the Peel Hotel, the defendants would also have to prove that acting as broker, obtaining signed documents, and passing them on to Thorn before delivery took place was in breach of the contract with the Peel Hotel or otherwise constituted a breach of duty. Subject to one qualification, it seems that these financial transactions are normally done in the way in which events unfolded in this case with the signed documents going to the financier before the financed goods are received by the client. Boyd-Skinner says Auswise does hundreds of deals each year but fraud only happens when there is collusion between the supplier and the customer.
49 The qualification relates to some evidence given by Boyd-Skinner where he notes that once the approval advice comes through from the financier, the supplier of the goods knows that it will be paid because it is dealing with a large institution with whom it has dealt previously. The approval advice in this case was effectively a preliminary approval conditional upon production to the financier of supporting documents. Boyd-Skinner stated that once this approval advice was received, the accredited supplier would manufacture or order in the goods in anticipation of payment. If that were correct, then a client could receive goods before completing and returning to the financier all the paperwork.
50 The evidence did not disclose that there was any problem with the Peel Hotel inspecting the goods beforehand at the Suppliers or entering some agreement with the Suppliers in relation to the delivery of the financed goods.
(f)In the circumstances, did Auswise breach:
(i) consumer guarantee
(ii) a term of the agreement with the Peel Hotel
(iii) a duty owed to the Peel Hotel and McFeely
Consumer guarantee
51 As the Peel Hotel was a ‘consumer’ for the purposes of the ACL, Auswise were required to guarantee that services were rendered with due skill and care pursuant to section 60 of the ACL.
52 Section 60 of the ACL states:
“If a person supplies, in trade or commerce, services to a consumer, there is a guarantee that the services will be rendered with due care and skill.”[12]
[12]Competition and Consumer Act 2010 (Cth), Schedule 2, section 60.
53 Miller’s Australian Competition and Consumer Law Annotated describes the standard of care to be rendered as thus:
“Due care and skill is a common law negligence standard. If a person fails to use due care and skill and, as a consequence, someone to whom a duty of care is owed suffers loss or damage, compensation may be awarded for the loss or damage. The effect of this section is to negate the opportunity to contract out of or limit a claim for negligence by consumers, in relation to the supply of services in trade or commerce.”[13]
[13]Miller’s Australian and Competition Law Annotated (35th ed), page 1647.
54 As a result of the application of the ACL, the question arises – did Auswise render its services to the defendants with due skill and care? The defendants alleged in their claim against Auswise[14] that it breached its obligations under the ACL because it:
[14]Amended Statement of Claim Against Third Parties, para 35.
(a) did not seek instructions from the defendants whether or not the goods had been delivered;
(b) did not advise the first defendant not to sign the equipment acceptance form until the goods had been delivered to the first defendant;
(c) sent the equipment acceptance form to the plaintiff without first seeking instructions whether the goods had been delivered to the first defendant; and
(d) failed to warn the first defendant that if the goods were not delivered to the first defendant, the defendants might remain liable to the plaintiff under the rental agreement or the secured guarantee.
The same particulars constituted the breach of contract and breach of duty which the defendants alleged against Auswise.
55 As a general observation I note that the defendants failed to adduce any expert evidence in support of the various claims alleged. I accept that in some cases, it is not essential to have expert evidence to establish negligence or breach of duty by professional persons rendering services.[15] Sometimes, the court can reach its own conclusion regarding negligence without an expert. For example, in my view, the inference of negligence or a failure to use due skill and care would be clear in a case where a surgeon removed a patient’s leg instead of their spleen or performed a hip replacement on the wrong hip. But generally, a plaintiff must prove through a suitably qualified expert that the defendant, by an action or omission, has not acted in accordance with the standards of the reasonably competent person in that field. The defendants here did not produce any expert evidence which supported the allegation that the matters referred to above in paragraph 54 constituted a breach of Auswise’s obligations. Nor did the defendants refer to any authorities or texts which set out well-established principles supporting the particular allegations made.
[15]See Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541, at 556.
56 I note also that the defendants did not put to Boyd-Skinner that:
· it was usual or common practice for ordinarily competent brokers in his position to seek instructions whether or not the goods have been delivered;
· Boyd-Skinner’s failure to inquire whether McFeely understood the document and its significance was a failure to exercise due skill and care in his role as broker;
· failing to provide McFeely with an explanation or warning about signing the Acknowledgment was a failure to exercise a due skill and care in his role as broker; and
· failing to recommend to a client that he get legal advice before signing such an Acknowledgment was a failure to due skill and care in his role as broker.
57 In a case where the Peel Hotel and McFeely relied upon these matters as constituting the breaches of obligation to them which warranted an award of compensation, I consider that the substance of these claims should have been addressed with the only person giving evidence for Auswise. While Boyd-Skinner’s answers would not necessarily have been determinative or indeed accepted, it was certainly appropriate, and probably obligatory, to raise the issues in cross-examination.
58 The defendants did not adduce any evidence whether from an expert or otherwise to establish that Boyd-Skinner had behaved or conducted himself in a way which breached the agreement with the defendants or either of them, or breached any duty owed to them.
Seeking instructions on whether the goods had been delivered
59 The evidence is clear that Auswise did not seek instructions from the defendants whether the goods had been delivered. The defendants did not establish any basis for contending that this was a necessary part of the role undertaken by Auswise. It is one thing to make an assertion or argument to this effect; it is another to prove it.
60 The defendants did not point to any term of Auswise’s retainer or usual practice or any other basis to make good their contention. There was no expert evidence adduced to show that such work was an integral or essential part of the work undertaken by a commercial finance broker.
61 Here, Auswise obtained the finance from Thorn. It arranged the paperwork including the insurance, submitted the documents to Thorn, and was paid soon after for its work. In my view, especially when it heard nothing more of the matter (at least until June 2013) Auswise was entitled to assume this transaction had proceeded to a successful conclusion – as most transactions do. Auswise did nothing wrong in organising the finance either by refusing to follow the defendants’ instructions or in its dealings with Thorn. It has not acted to commit some egregious wrong which must on its face be regarded as a breach of its statutory duty.
Failing to advise the Peel Hotel not to sign documents until after delivery
62 It is uncontested that Boyd-Skinner did not advise the Peel Hotel not to sign the Acknowledgment until the goods had been delivered to it. Boyd-Skinner said that transactions of the kind in issue here take place every day. People in McFeely’s position commonly sign documents like the Acknowledgment when the goods are to be installed but have not yet been delivered. There was nothing unusual about signing the goods delivery receipt document. The terms of the document expressly contemplate that the goods have not been received but arrangements for installation have been made.
63 Boyd-Skinner said in cross-examination that if he knew the goods had not been delivered and no arrangements had been made to get them he would, if asked, probably have recommended that McFeely not do anything. Here, from his conversations with McFeely and Stewart, Boyd-Skinner knew that Stewart was arranging the finance and installing the kitchen for the Peel Hotel.
64 I do not consider that Auswise did anything wrong in this case by not giving the Peel Hotel the advice alleged. First, there is no proper basis on the evidence to find that it was an essential part of Auswise’s retainer (or part of its professional duty) to do so.
65 Secondly, in circumstances where:
· McFeely was experienced in the trade and working at the Peel Hotel;
· McFeely could read and write;
· McFeely understood what he was doing with the documents and why; and
· the Acknowledgment gave the reader major warnings
it was hardly necessary to give such advice. In particular the Acknowledgment was headed:
“Important – Please read carefully
DO NOT SIGN IF GOODS/EQUIPMENT HAVE NOT BEEN DELIVERED & FULLY ACCEPTED”[16]
[16]Defendants’ Court Book, at 116.
Further, the Acknowledgment contained the following clause on the face of the front page:
“I/we refer to the above Agreement and acknowledge that all the items of Equipment as listed below are subject to the Agreement, as ordered by me/us have been delivered and installed, or arrangement has been made for installation, to my/our satisfaction, and found by me/us to be in good working order and acceptable. And have been accepted by me/us. I/we hereby authorise Thorn Equipment Finance (TEF) to commence my/our agreement and release the funds to the supplier(s).”
Thirdly, as noted above, Auswise assumed the deal had been successfully completed.
66 McFeely gave evidence that he had been involved in the business at the Peel Hotel for approximately 20 years. McFeely presented as an intelligent and well-spoken person with common sense and business acumen.
67 In his evidence McFeely acknowledged or agreed that:
· he asked Stewart to deal with the finance for the kitchen equipment;
· he authorised Stewart to undertake that work;
· Auswise arranged the finance for the kitchen equipment;
· he received various documents from Auswise in relation to the finance for the kitchen equipment;
· he read and understood the finance documents which had to be completed and submitted to Thorn;
· he read the Acknowledgment
· Stewart told him that if satisfactory arrangements had been made to install the equipment, McFeely should sign the Acknowledgment;
· McFeely trusted Stewart when he said that he should sign the Acknowledgment; and
· McFeely signed the Thorn documents including the Acknowledgment.
68 It is consistent both with the evidence and established principle that the defendants be bound by the documents signed. Generally, adult persons are bound by a contractual document which they sign whether or not they actually read or understood the document before signing.[17]
Sending the acceptance form to Thorn without checking the goods had been delivered to the Peel Hotel
[17]L’Estrange v F Graucob [1934] 2 KB 394 at 403; Wilton v Farnworth (1948) 76 CLR 646 at 649; Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165.
69 The evidence is clear that Auswise sent the equipment acceptance form to Thorn without first seeking instructions from McFeely whether the goods had been delivered to the Peel Hotel. I do not consider that Auswise did anything wrong in so acting. There is no proper basis on the evidence to find that it was a term of Auswise’s retainer (or part of its professional duty) to make such confirmatory inquiries before sending the requisite documents to the financier.
Failing to warn the defendants of the risks if the goods were not delivered
70 It is not contested that Auswise failed to warn the Peel Hotel that if the goods were not delivered the defendants might remain liable to Thorn under the rental agreement and guarantee. However, in my view, there is no evidence from which I can find that it was a term of the agreement between Auswise and the Peel Hotel, of part of the duty owed by Auswise to the Peel Hotel, to give the warning referred to.
71 Secondly, because:
· Stewart was a builder, and a prospective partner in the Peel Hotel;
· Stewart was to install the kitchen in the Peel Hotel;
· Stewart told McFeely to sign the finance documents; and
· McFeely regarded Stewart as a close friend
McFeely trusted Stewart and signed the documents for Thorn. McFeely and the Peel Hotel were victims of a fraud. In the circumstances, any comment by Boyd-Skinner would probably have no effect on McFeely.
Term of the agreement with the Peel Hotel
72 I have referred above[18] to the terms of the agreement relied upon by the Peel Hotel. I find that Auswise did not breach any of the terms alleged. Through Boyd-Skinner, Auswise acted appropriately to obtain the funding for the kitchen. He sought instructions as required from the Peel Hotel through Stewart or McFeely. Auswise acted in the interests of the Peel Hotel in procuring the finance for the kitchen project. For the further reasons addressed above,[19] I do not find there has been any breach of the agency agreement under which Auswise obtained finance for the Peel Hotel.
[18]Para 53.
[19]Para 55-65.
Duty owed to the Peel Hotel and McFeely
73 In relation to the alleged breach of duty, I find that the Peel Hotel has established no such breach.
(g)Did such alleged breaches cause the loss claimed?
74 On the facts, I accept that the Peel Hotel incurred a liability to repay Thorn regarding the finance for the proposed kitchen equipment. Because the Peel Hotel never received the equipment, it has plainly suffered financial loss. However, I am not satisfied that Auswise is legally responsible for that loss whether through any breach of statutory guarantee, breach of agreement, or breach of duty.
Conclusion
75 I find that the Peel Hotel has not established its claim against Auswise.
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