Turner v Californian Cars and Sports Trucks Pty Limited

[2002] NSWSC 666

CITATION:	Turner v Californian Cars & Sports Trucks Pty Limited [2002] NSWSC 666
CURRENT JURISDICTION:	Common Law
FILE NUMBER(S):	SC 11482/01
HEARING DATE(S):	24-25 July 2002
JUDGMENT DATE:	2 August 2002
PARTIES :	Harry Turner v Californian Cars & Sports Trucks Pty Limited
JUDGMENT OF:	Davidson AJ at 1

LOWER COURT JURISDICTION :	Local Court
LOWER COURT FILE NUMBER(S) :	603/00
LOWER COURT JUDICIAL OFFICER :	R.A. Brown, Esq

COUNSEL :	I.G. Roberts (Appellant/Plaintiff) D. Raphael with P. Bruckner (Respondent/Defendant)
SOLICITORS:	Ebsworth & Ebsworth (Appellant) Saunders & Standen (Respondent)
CATCHWORDS:	s69 Local Courts (Civil Claims) Act - Total failure of consideration - Part payment conditional on performance of contract
LEGISLATION CITED:	Contracts Review Act 1980 Fair Trading Act 1987 Law Reform (Law and Equity) Act 1978 Local Courts (Civil Claims) Act 1970 Trade Practices Act (Commonwealth) 1974
CASES CITED:	ANZ Bank v Westpac Bank (1988) 164 CLR 662 Baltic Shipping Co v Dillon (1993) 176 CLR 344 British Russian Gazette & Trade Outlook Ltd v Associated Newspapers (1933) 2 KB 616 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 David Securities Pty Ltd v Commonwealth Bank (1992) 175 CLR 353 Dies v British & International Mining & Finance Corporation (1939) 1 KB 724 McDermott v Black (1940) 63 CLR 161 McDonald v Dennys Lascelles (1933) 48 CLR 457
DECISION:	Appeal allowed

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

DAVIDSON AJ

Friday 2 August 2002

11482/2001 HARRY TURNER v CALIFORNIAN CARS & SPORTS TRUCKS PTY LIMITED

JUDGMENT

1 HIS HONOUR: This is an appeal pursuant to s69(2) Local Courts (Civil Claims) Act 1970. That section provides a head of appeal to a person who is dissatisfied with a judgment or order of a Local Court “as being erroneous in point of law”.

2 The appellant (plaintiff) appeals against judgment and consequent orders made by His Worship in the Windsor Local Court on 23 April 2001. Judgment was entered for the respondent (defendant) and also on the respondent’s cross claim. The appellant seeks to have these orders set aside and an order for costs.

3 The facts as found by the learned Magistrate are that on or before 27 April 1998 the appellant and the respondent entered into an oral contract (“the conversion contract”) whereby the respondent was to convert the appellant’s motor vehicle from left hand drive to right hand drive. Pursuant thereto the appellant paid to the respondent $15,000 against the contract price of $25,000. On 11 November 1998 the parties terminated this contract. The appellant removed the dissembled vehicle with the respondent’s consent.

4 There was some dispute before His Worship as to whether there was a completion date for the conversion contract. The appellant contended that it was implicit in the terms of the contract that the conversion should be completed within three months of delivery. The respondent maintained that completion was to be within six to nine months of delivery. On this issue of fact the learned magistrate found in favour of the respondent and held that time was not of the essence of the contract.

5 The vehicle was taken by the appellant on 11 November on a trailer and in dissembled parts. There was also delivered with it a quantity of parts which the respondent had procured from New Zealand with a view to completion of the conversion contract. The learned Magistrate assessed the value of the work done at $1,000, and awarded that sum on the cross claim in favour of the respondent. It seems that on or about 1 December 1998 the sum of $2,000 was also returned to the appellant by the respondent, hence the appellant’s claim is limited to $12,000 in the appeal.

6 His Worship in paragraph 12 of his judgment of 23 April 2001 concluded that none of the “acknowledged categories allowing restitution” applied. He held that there had been no payment under mistake of fact and this is not in any way challenged. Nor, His Worship said, had there been “a total (as written) failure of consideration on the part of the defendant,” citing Baltic Shipping Co v Dillon (1993) 176 CLR 344. He then went on to acknowledge that whilst there may be “in equity”, other grounds on which restitution might be ordered, he held he had no general jurisdiction to grant equitable relief beyond that conferred by s6 of the Law Reform (Law and Equity) Act 1978 enabling the court to give effect to equitable defences which did not apply in this particular case; nor indeed, he said had any such claim for restitution been pleaded or argued. In paragraph 13 His Worship expressed a similar view in relation to s52A of the Trade Practices Act (Commonwealth) and the Fair Trading Act and Contracts Review Act, to the extent to which a possible ground for relief might be based on those statutes. His Worship then concluded in paragraph 14 as to this part of his judgment:

“Consequently, I am obliged to give judgment for the defendant on the claim”.

7 In his summons the appellant asserts four grounds for relief as follows:

A. Dr Brown SM erred in law in that his Worship misapplied the decision of Baltic Shipping Co v Dillon (1993) 176 CLR 344.
B. His Worship erred in law in failing to apply the dictum of Mason CJ at pages 351 and 352 of Baltic Shipping in which his Honour considered Dies v British & International Mining & Finance Corporation (1939) 1 KB 724.
C. His Worship erred in failing to hold that the plaintiff was entitled to a refund of the amount paid to the defendant because of a total failure of consideration.
D. His Worship erred in law in holding that the consensual termination of the contract did not oblige the defendant to repay the part payment (or so much of it as did not represent quantum meruit) to the plaintiff as a matter of contract law.

8 In written and oral submissions Mr Roberts of counsel for the appellant submitted that there were two bases on the facts as found by the learned magistrate which would have entitled the appellant to a verdict and which were both within the jurisdiction of the Local Court to grant. These were:

(a) That the payment of $15,000 was a part payment conditional on performance by the defendant of his promise to convert the motor vehicle.

In this regard I note that although there was a tendency in both the evidence and the pleadings in the Local Court to describe the payment of the $15,000 as a “deposit”, His Worship regarded this description of the payment of $15,000 as inconsistent with evidence of both the appellant and that on behalf of the respondent. His Worship held that it was “rather a part payment” than a deposit (see paragraph 9 of judgment).

(b) There was a total failure of consideration.

Mr Roberts submits that on either of these bases the Local Court had power pursuant to s12 of the Local Court (Civil Claims) Act 1970 to find for the appellant after an admitted set-off amounting in all to $3,000.

9 Mr Roberts submitted that having accepted the categorization of the payment as conditional on performance by the respondent of his promise to convert the vehicle, then, the language of the conversion contract being neutral in this respect the general rule applies, namely that the “purchaser” may recover moneys paid by way of part payment unless the other party to the contract is able to point to something in the contract from which the inference is to be drawn that the other party should be entitled to retain it. Such a claim might be asserted by the plaintiff in an action akin to one for money had and received (Dies & Anor v British and International Mining and Finance Corporation Limited (1939) 1 KB 724). Mr Roberts contends that the underlying principle is that of unjust enrichment which His Worship appears to have characterised as a purely equitable form of relief (see para 12 of His Worship’s judgment c/f Pavey & Matthews Pty Limited v Paul (1987) 62 CLR 221 per Deane J at 256-7; 262). Mr Roberts also relies on the decision of the High Court in ANZ Bank v Westpac Bank (1987-8) 164 CLR 662 where the action for money had and received paid under fundamental mistake of fact was described as a “common law action for recovery of the value of the unjust enrichment”.

10 Mr Raphael of counsel who appears with Mr Bruckner of counsel for the respondent contends in his written and oral submissions that the common law remedy for the refund of a part payment will succeed “where there is a total failure of consideration”. Counsel in his written submissions (paragraph 10) then refers to the decision of the High Court in Baltic Shipping Co v Dillon (1993) 176 CLR 344. This case is also referred to by His Worship at paragraph 12 of his judgment in the context of the finding of an absence of a total failure of consideration. As I initially understood Mr Raphael’s submissions the Baltic Shipping case is said to be authority for the proposition that recovery of a part payment in the absence of any term to the contrary may be had only where there is a total failure of consideration. If so, in my view the judgment of Mason CJ which is referred to by Mr Raphael does not bear this out. At page 351 His Honour said:

“An alternative basis for the recovery of money paid in advance pursuant to a contract in expectation of the receipt of the consideration provided by the defendant may arise when the defendant’s right to retain the payment is conditional upon performance of his or her obligation under the contract. This basis of recovery has a superficial, but not a close, resemblance to the concept of an entire contract. In this class of case the plaintiff may be entitled to recover so long as the payment remains conditional.”

11 His Honour then goes on to cite the Dies case as an example of recovery of a part payment although there was not a total failure of consideration. His Honour went on to say as to Dies case (page 352):

“The decision is explicable either on the ground that the seller accepted the plaintiff’s repudiation and thus itself effected the discharge of the contract or on the ground that the payment was a mere part payment, the right to which depended upon performance of the contract and was thus conditional.”

12 I accept the contention implicit in the submissions of Mr Roberts that his Worship’s categorization of the payment in this case as a part payment rather than as a deposit was a finding that it was to be retained by the respondent conditional upon performance of the contract on his part.

13 As to the basis of the appellant’s claim that there was a total failure of consideration, at paragraph 17 of His Worship’s judgment he dealt with the state of the vehicle after it had been returned following the termination of the conversion contract. This may be regarded as a finding of fact as to the extent if any, of performance of the conversion agreement on the part of the respondent. The vehicle, according to His Worship’s finding, had been taken possession of on a trailer with the interior and steering removed. His Worship described as a “mess” the vehicle’s interior fittings. Some wiring had been attempted but was incomplete. The front parking and sidelights were wired. The stereo wiring was not done, and there was some wiring in the rear of the vehicle that had to be altered later. The wiring in the door was still intact. His Worship accepted evidence from the appellant’s expert witness Mr Winston, valuing the work that had been done on the vehicle whilst in the respondent’s custody at less than $1,000.

14 Mr Roberts submits that, His Worship having found as a fact that the conversion had been performed to the value of only $1,000, i.e. 4 percent of the contract price of $25,000, this could not be regarded as part performance of the agreement and there had been, within the meaning of the authorities, a total failure of consideration. As I have already indicated in paragraph 12 of his judgment His Worship found that there had been no total failure of consideration on the part of the defendant, and cited Baltic Shipping Co v Dillon. In so finding His Worship emphasized the word “total” but does not appear to have expanded on this aspect of the matter in his judgment. Mr Raphael, on the other hand, submits that the dismantling of the machine in part and the obtaining of spare parts from New Zealand for the purposes of completing the conversion warrants a finding of part performance within the meaning of the authorities so as to exclude a finding of total failure of consideration.

15 In the Baltic Shipping Co case, at page 350 Mason CJ said:

“If the incomplete performance results in the innocent party receiving and retaining any substantial part of the benefit expected under the contract, there will not be a total failure of consideration.”

His Honour continued at page 351:

“…. the receipt and retention by the plaintiff of any part of the bargained-for benefit will preclude recovery, unless the contract otherwise provides or the circumstances give rise to a fresh contract.”


His Honour (at page 351) described as an alternative basis for recovery of a part payment when the defendant’s right to retain the money is conditional upon performance on his part of his obligations under the contract. This in turn will depend on whether on its proper construction the contract is one in which the consideration for the payment of the money is an entire and indivisible obligation. If so performance of that entire obligation will be a condition precedent to the respondent’s retention of the money. But incomplete performance resulting in the innocent party recovering “any substantial part of the benefit expected under the contract” will mean there was not a total failure of consideration and the respondent will be entitled to retain the money (p350).

16 Mr Roberts contends that in dealing with the matter as he did in paragraph 12 of his judgment His Worship, in emphasizing the word “total” indicated that he had misapplied the law as stated in the Baltic Shipping case. In this case the benefit which the appellant was entitled to expect under the contract was the conversion of the vehicle from left hand drive to right hand drive. What he received, as I understand Mr Roberts’ submission, could not in any sense be so described. There had been no performance, as opposed to an incomplete performance as there may have been, for example, if there had been a conversion which was faulty. The appellant had received no part of what he had bargained for.

17 Mr Raphael relies on a further passage from the judgment of Mason CJ in the Baltic Shipping Co case at page 352 as follows:

“The question whether an advance payment, not being a deposit or earnest of performance, is absolute or conditional is one of construction. In determining that question it is material to ascertain whether the payee is required by the contract to perform work and incur expense before completing this performance of his or her obligations under the contract. If the payee is so required then, unless the contract manifests a contrary intention, it would be unreasonable to hold that the payee’s right to retain the payment is conditional upon performance of the contractual obligations.”

Mr Raphael submits that the conversion contract did require the respondent to perform work and incur expense, more particularly in the obtaining of parts from New Zealand (see paragraph 7 Lower Court judgment).

18 Although there may be some overlapping between the two distinct bases on which Mr Roberts relies as providing a common law right to the appellant to recover, in my view, the facts in the Baltic Shipping case are distinguishable from the case which was presented in the Local Court here. At page 352 Mason CJ after citing the general rule which enables the payee of money under a contract to recover as stated by Stable J in Dies case, went on to cite a passage from the judgment of Dixon J in McDonald v Dennys Lascelles (1933) 48 CLR 457 at 477, to the effect that a part payment of the purchase money in advance on a contract for the sale and purchase of land is considered not to be absolute but conditional on the subsequent completion of the contract. The Baltic Shipping Co case involved a contract for the provision of a 14 day cruise in which 10 days benefit had been provided to the plaintiff before the ship sank. It was held that there had been no total failure of consideration, nor as I understand the judgment, had there been a payment of the cruise fare conditional upon completion of performance. In my view the obligation undertaken by the respondent to convert this motor vehicle was an entire and indivisible one and work done in dismantling the vehicle, and in procuring parts from New Zealand could not be regarded as “incomplete performance” resulting in the innocent party “receiving and retaining any substantial part of the benefit expected under the contract”. Hence, there was no total failure of consideration and the contract was one in which the consideration for the payment was entire and indivisible i.e. the conversion of the vehicle to right hand drive.

19 Mr Raphael further relies however, on the document Exhibit D (Exhibit 2 in the Local Court). This document is signed by one Mr Allan Reed as well as by the appellant. It clearly relates to the transaction in question, but although Mr Reed may be assumed to be a director or other officer of the respondent, nowhere in Exhibit D does he purport to sign the document on behalf of that corporate entity. The document commences, “This document is to certify”. It then describes the vehicle in question having been purchased for the appellant at his request by Mr Reed. It then states that the appellant “owns the said vehicle outright and owes no money against it whatsoever.” It states that Mr Reed has been “paid fully for this vehicle” and “does not own any part of the vehicle nor does he have any lien or ownership whatsoever over the vehicle.” In my view this document is not contractual in its effect. Although His Worship found that the document, “the agreement to terminate,” was “made for valuable consideration” I am unable read it in a way which would support the contention that, by signing Exhibit D, the appellant forewent any right to recover the whole or part of the payment under the conversion agreement.

20 Mr Raphael submits that Exhibit D should be read as a mutual release of the obligation of the parties to the conversion agreement and operates by way of accord and satisfaction, in that the appellant has relinquished any cause of action he may have had for the recovery of the $15,000 or any part thereof. This view of Exhibit D does not appear to have been asserted in the Lower Court and indeed, in my view, is inconsistent with the notice of cross claim which asserts a repudiation or breach by the appellant of the contract for conversion and claims damages therefor. His Worship dealt with the document in paragraph 11 holding that it was not possible to conclude that there was any implied term in Exhibit D which would entitle the appellant to recover. His Worship did not deal with the question whether there may have been an implied term in favour of the respondent, the effect of which was to operate as a relinquishment by the appellant of any cause of action for recovery of any part of the $15,000. The evidence before His Worship is that Exhibit D was compiled by, or at the instigation of the respondent and I accept the submission of Mr Roberts that ambiguity must be resolved against the interests of its maker. There is certainly no express relinquishment of any rights which the appellant may have had to the recovery of the $15,000 or part thereof. I accept the submission of Mr Roberts that this document is substantially an acknowledgment of the appellant’s entitlement to the motor vehicle that no moneys remain outstanding for the purchase of it by the appellant to the respondent and that the vehicle had been recovered by the appellant and accordingly that the respondent has no on-going lien in respect of it.

21 The document Exhibit D, in my view, is of evidentiary significance only particularly so far as the case for the respondent is concerned in that it states:

“The vehicle has been taken delivery of in part converted (RHD) form, and which has also been fully paid to Californian Cars and Sports Trucks Pty Limited, Mr Harry Turner on this date.”

Although the reference to the vehicle being in “part converted form” is of significance, when regard is had to the question whether the appellant got any substantial part of what he bargained for when compared with what he got in fact according to the findings of His Worship, in my view the appellant did not recover any substantial benefit under the contract for conversion. In this respect Mr Roberts relies on the passage from the joint judgment in David Securities Pty Limited v Commonwealth Bank (1992) 175 CLR 353 at 382:

“…. the notion of total failure of consideration now looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact.”

In my view the authority cited by Mr Raphael, British Russian Gazette & Trade Outlook Ltd v Associated Newspapers Ltd (1933) 2 KB 616 does not assist in relation to this part of the case for the respondent. (c/f McDermott v Black (1940) 63 CLR 161 at 184).

22 Mr Raphael made a number of other submissions with which however, I find it unnecessary to deal. I am satisfied that the judgment and orders of the Local Court are erroneous in point of law within the meaning of s69 Local Courts (Civil Claims) Act 1970 in that:

(a) His Worship was in error in holding (in para 12 of judgment) “I cannot conclude that any of the acknowledged categories allowing restitution applies ….”. His Worship should have held that the language of the conversion contract being neutral on the question, the general rule applied that the appellant was entitled at common law to the right to recover his money and the respondent was unable to point to contrary language from which the inference might be drawn that the parties intended and agreed that he should not ( Dies v British and International Finance Corporation (1938) 1 KB 724).

(b) His Worship was in error in holding that there had been no total failure of consideration on the part of the defendant (para 12 judgment) His Worship failed to advert to the correct test, that is to say whether any substantial benefit which the appellant had been entitled to expect under the conversion contract had accrued to him. If the correct test had been implied, then on the evidence His Worship was bound to conclude that there was a total failure of consideration.

23 On either of these bases the appellant was entitled to succeed in the Lower Court. Although Exhibit D (Exhibit 2 in the Local Court) was not pleaded or argued as constituting a mutual release so as to operate by way of accord and satisfaction, having heard submissions on the question I am satisfied that it did not so operate.

24 Accordingly, I allow the appeal. There will be a verdict for the appellant. The matter is further adjourned for further submissions as to the terms of the final orders including costs.

**********

Last Modified: 08/15/2002