Turner v Morlend Finance Corporation (Vic) Pty Limited

[1991] HCATrans 101

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sl28 of 1990

B e t w e e n -

KENNETH WILLIAM REGINALD TURNER

Applicant

and

MORLEND FINANCE CORPORATION

(VIC) PTY LIMITED

Respondent

Application for special leave

to appeal

BRENNAN J
DEANE J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 19 APRIL 1991, AT 12.54 PM

Copyright in the High Court of Australia

Turner 1 19/4/91

MR J. BASTEN: If the Court pleases, I appear for the

applicant in this matter. (instructed by Trenches)

MR P.G. HELY, OC: If the Court pleases, I appear with

MR R.C. McDOUGALL, OC, for the respondent.

(instructed by McCabe Brown)

BRENNAN J:	Mr Basten.
MR BASTEN:	Your Honours, the matter involves the

application and interpretation of section 13 of the

New South Wales Credit Act 1984 and, as noted in

the affidavit in support, the Act is part of some

uniform legislation which is now in force in New

South Wales, Victoria, the ACT, Western Australia and in Queensland in substantially the same form as

the present Act.

The Act regulates the provision of credit to

consumers and, in specific cases, also in relation to commercial vehicles and farm machinery. As the President noted in the Court of Appeal, the Act

implements the recommendations of the Molomby

Report of 1972 for the Law Council of Australia to the Attorney-General of Victoria.

This case turns upon the interpretation of section 13 and, in substance, section 13(2) and 13(4) and although the sections are set out in the

judgment below, may I, for ease of reference, hand

up copies of the relevant provisions for

Your Honours. Your Honours, I have extracted,

firstly, section 13 and then, on subsequent pages,

some of the relevant definitions from

subsection (5)(i) and I will take Your Honours to

those in due course if I may.

The applicant bases his case on the provisions

of subsection (2) and it is the operation of that
section which, if he falls within it, gives rise to
the proper construction of subsection (4). If I

may turn first to the substance of subsection (2),	and I note that the facts to which this provision
are sought to be applied were, in substance, not in dispute at any stage. The Court of Appeal divided in its conclusions, however, on the application of the section.

Subsection (2), at the top of page 23 of the

extract, commences by making reference to:

A contract for the hiring of goods -

and it deems such a contract to be a credit sale

contract and thus regulated within the Act in

relation to certain categories of goods including,

Turner 2 19/4/91

relevantly for present purposes, commercial

vehicles.

The next substantive part to which this case

relates is paragraph (b). The provisions of that

subparagraph require one to consider the conduct of

the supplier of goods at the time that the goods

are supplied. The two requirements which are

imported by that provision are, firstly, that the

conduct is such that the person hiring the goods

ought reasonably to infer that the supplier will be

willing to negotiate for the sale of the goods.

Secondly, the supplier itself, in

subparagraph (ii), should:

expect, or ..... ought reasonably to expect,

that the person -

hiring the goods will negotiate the purchase of the

goods.	The other parts of that provision need not
trouble us.	And subsection (3) to which I need not

take Your Honours in detail provides for a
rewriting, in effect, of the contract of hire if

the deeming takes effect.

TOOHEY J:	Does that mean, Mr Basten, that one can never determine whether a contract for the hiring of
goods is a credit sale contract without evidence
that would support subsection (2)(b)(i) and (ii)?

MR BASTEN: That would be so, Your Honour, in the sense that

one cannot determine that merely from the contract

and the form of the contract. One needs evidence,

in substance, of the conduct of the supplier at the

time that the contract was entered into.

In the present case, the relevant conduct, if

I may refer to it, may appropriately be summarized

in four parts. It is set out, in substance, by

His Honour the President at pages 38 to 41 of the	appeal papers and the relevant application in the	judgment of Mr Justice Meagher, which was the
majority judgment in the court below, appears at
page 56. May I turn firstly to page 56 and just
make this one point, perhaps, before Your Honours
may wish to adjourn: what I say in relation to the approach that His Honour took to the matter was
that his consideration was limited to matters which really did not go to the issue at stake in the case.
His Honour rejected the application of section 13(2) for two reasons. One relates, and
appears at the following page, 57, at line 11 and
relates to section 13(4) but in relation to the
application of 13(2) itself, His Honour, at line 20

Turner 19/4/91

on page 56 refers firstly to conduct of the broker,

Adavale Financial Services, and that conduct had

been found not to be the conduct of the respondent

and was not relied upon by the applicant in the

Court of Appeal to support its case. There was no

challenge to the finding that the broker was not

the agent of the borrowers. And, secondly, he

refers to the evidence of Mr Landy as not

supporting the relevant expectation. With respect,

Mr Landy, being a director of the company, gave the

evidence referred to at pages 56 and 57 in cross-
examination and it was not sought to depend upon

that evidence as evidence of the conduct of the

company at the time that the contract was entered

into.

Mr Landy's evidence might give rise to an

inference satisfying paragraph (b)(ii) as

indicating what the supplier itself expected at the

relevant time. It need not, of course, have a
subjective expectation but it can have a subjective

expectation and that was the purpose for which

Mr Landy's statement in cross-examination was

relied upon.	Would that be a convenient time,
Your Honour?

BRENNAN J: Yes, thank you. The Court will adjourn now

until 2 pm.

AT 1.02 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.00 PM:

BRENNAN J: Yes, Mr Basten.

MR BASTEN:  Thank you, Your Honour. I think, before lunch,

I had just taken Your Honours to the passages in

Mr Justice Meagher's judgment dealing with the

application of section 13(2) to which objection was

taken. I should perhaps note that Justice Clarke,

in his judgment, did not do more than assent to

His Honour Mr Justice Meagher's conclusions at page 49 of the application papers.

May I turn to the matters upon which the

applicant relies and, in summary, say of them two
things? Firstly, the applicant relies upon the
presentation of a document as part of the

contractual material, a document referred to as a

"Businessman's Waiver" which is a document set out

at pages 57 to 58 of the appeal papers and which

Turner 4 19/4/91

constitutes part of the conduct, all of which, in

my submission, is conduct which is common industry

practice and is industry practice in similar terms

to that summarized in the Molornby Report at page 30

as quoted by the President. So that there is

nothing in the factual material in this case which

we say is peculiar to the particular circumstances

of this case.

However, looking at the conduct

chronologically, I rely on four matters, in vehicle in question was not initially by the
substance: firstly, that the respondent held
itself out and conducted business in the provision
of finance in New South Wales. It was a "credit
provider", as that phrase is known in the Credit

respondent but by the hirers. It was selected by

them and purchased for the purposes of their

business and, indeed, was the subject of a trade-in
of their previous vehicle, and the respondent had

no part in that process and did not seek to do more

than initially value it.

Thirdly, the respondent expressly provided to

the hirers that document which appears at pages 57
to 58 for their signature, and their signatures, of

course, do not appear in the quotation in

His Honour's judgment but each of the hirers was

required to sign the bottom as an undertaking. The

purpose of the document appears, on its face, to be

not perhaps to enable the respondent to comply with

the Credit Act but to bring it within the

provisions of section 13(4) of the Credit Act.

Now that, according to Mr Justice Meagher, at

page 57 line 24, was to underline the applicability

of section 13(4). In my submission, the
significance of that document was to underline the
applicability in the mind of the respondent of

13(2) and thereby to take the transaction in so far

as it could outside the provisions of 13(2) by

attempting to bring itself, whether effectively or

not, within 13(4). So that that document, which is

commonly used in the industry was, in my

submission, part of the conduct of the respondent

which gave rise to the reasonable inference that

this was, indeed, one of those arrangements which

fell within 13(2).

The final piece of conduct upon which reliance

is placed was the explanation given by Mr Brown,

which appears at page 54 of the appeal papers,

again cited by Mr Justice Meagher at line 4, noting

that:

Turner 19/4/91

"and at the end of the lease term the truck

will have a residual of $50,000.00, which must

be paid to Morlend at that time".

Mr Brown was the solicitor for the respondent and,

indeed, the only person associated with the

respondent with whom the applicant came into

contact at or prior to the time of signing the

hiring agreement, and it was a clear statement as

to the circumstances and it was one which, again,

in our submission, reflected the true industry

practice and was one which was consistent with the

approach that had already been noted in the Molornby

Report some years before and to which section 13(2)

was indeed addressed.

DEANE J:	What was the percentage residual value, Mr Basten?
MR BASTEN:	The value of the truck at the time of purchase

was, I think, $160,000, so it is around

30 per cent, Your Honour.

DEANE J:  Thank you. What, the residual value was what?

MR BASTEN:  I am sorry, the residual value was $50,000 and

it was a four-year lease, from recollection. With

respect, those matters to which I have adverted

were the matters upon which His Honour

the President relied in finding that this matter

fell within 13(2).

On the basis that that approach was correct

and that the applicants could establish that that

was the correct approach, they came to the second
hurdle, namely, the application of section 13(4)
and it was to that matter which all of

Their Honours in the court below directed

attention. And the provisions of section 13(4)

have, on any view of it, a curious effect because

they purport to exclude from the operation of

subsection (2) a category of goods and the terms of

the section refer to: 

goods that are or might reasonably be expected

to be used by the person to whom they are

hired for the purpose of a business carried on

by him or by him and another person or other

persons, where the whole or the greater part of the amount payable under the the contract is, or might reasonably be expected to be, a loss or outgoing necessarily incurred in

carrying on the business.

And as all of Their Honours noted, that effectively excludes, from the terms of 13(2), commercial vehicles. Although commercial vehicles are expressly referred to in that subsection, the

Turner 6 19/4/91

effect of 13(4) is to exclude them in substance.

That flows, in part, from the definition of

"commercial vehicle" which, if I might take
Your Honours briefly to the fifth page of the

material handed up, is the definition appearing in section 5(1) of the Act at the bottom of page 6 of

the reprint - No 6 at the top.	They are not in
order.

"commercial vehicle" means -

(a) a motor vehicle ..... constructed or adapted

principally for the carriage of goods but does

not include ..... a utility, a station

wagon ..... or

(b) a vehicle without motive power of its own

and constructed or adapted principally for the

carriage of goods -

Now, if that is the correct interpretation,

and for the present purposes, in my submission, it

must be of a commercial vehicle, it may be seen

that the definition - - -

TOOHEY J:  Why does the definition exclude vehicles such as

a utility? Perhaps a station wagon is easier to

understand but why does it exclude a utility?

MR BASTEN:  I cannot answer that with any direct knowledge,

Your Honour. I can only say that my understanding

was that these were vehicles which would normally

be valued at under $20,000 and would therefore come within what might be called the consumer protection

provisions as such. In general, the Act picks up

goods which are valued at under $20,000 and

provides a regulatory scheme in relation to them.

So, in my submission, if one gives that full

effect to the terminology in subsection (4) which

has that effect of excluding from subsection (2)

does some damage, some significant damage to	the express words "commercial vehicle", then one	subsection (2). If there is an alternative
approach to subsection (4) and, in my submission,
there is, it should, if possible, be adopted.

DEANE J: Except Their Honours are wrong, are they not, when

they say you can only think of extraordinary

examples like something in a museum.	I mean,
perhaps I should confess:	we have a tractor in our

garden which was never intended for a business.

MR BASTEN:  I was going to say, I have a tractor also which

could never have been used for a business.

DEANE J: Well, cur's still is.

Turner 19/4/91

MR BASTEN:  Yes. I think the answer to that though,

Your Honour, is that even if you, as the purchaser,
would not have intended it so, the terminology of

13(4) refers to the nature of the goods and if they

are of such a nature that they might reasonably be

expected to be used when viewed, perhaps, by an

independent third party seeing them in a showroom,

then they appear to be caught within 13(4).

DEANE J: Except, if you go to the second limb, is it not

looking at the particular arrangement?

MR BASTEN:  In my submission, it is not, Your Honour. I

understand the point that Your Honour is making.

DEANE J:  I mean, say, for example, it was something called

a credit sale where 90 per cent of the purchase

price was going to be paid within a period of

6 months. You could look at that and you could say

straight away that the whole or the greater amount

payable under the contract is not going to be a

loss or outgoing incurred in carrying on the

business and it is not intended to be caught by

this Act.

MR BASTEN: Well, that may be a way of reading it down. In

my submission, the second limb, as it were,

expresses the purpose of the section and does not
require or, indeed, permit an analysis of the

individual circumstances of the particular case.

When it says:

where the whole or the greater part of the

amount payable ..... is, or might reasonably be

expected to be, a loss or outgoing necessarily

incurred in carrying on the business -

it does not, of course, for income tax purposes,

determine whether that is a capital outgoing or not

and it would still be an outgoing, in my

submission, for the purposes of the business,

however fast one paid off the amount which was

payable under the contract.

DEANE J: Well, incurred in carrying on as distinct from in

establishing, for example.

MR BASTEN: That may be so, Your Honour. I mean, if the

business is up and running when one - - -

DEANE J:  The only point I was making is I do not have to

think very hard to think of examples other than

museums. I mean, you go back to "commercial

vehicle": again, a motorized horse float

immediately comes to my mind taking the pony club

horses. You are just not down to the - - -

Turner	19/4/91
MR BASTEN:	- - - the bare bones.
DEANE J:	- - -museum, but I am not denying it does put a

big gap in it.

MR BASTEN:  Yes. Perhaps there is no point in pursuing

individual examples but there might, in any case,
arise a question as to what the reasonable
expectations would be of someone purchasing such a
vehicle - one has circus businesses for which it

might well be a valuable asset.

TOOHEY J:  Mr Basten, the construction placed on

subsection (4) by the President which involves
simply reading in the words "other than commercial
vehicles or farm machinery" would seem to take that
category of vehicle or machinery right out of the

section and perhaps give no effect to the

concluding words of subsection (4).

MR BASTEN:  It would take those matters out of the

subsection, Your Honour.

TOOHEY J: Completely.

MR BASTEN:  Yes.

TOOHEY J: So, on that basis, one would not be concerned

with whether or not the whole or greater part of
the amount payable under the contract was a loss or
outgoing necessarily incurred in carrying out the

business.

MR BASTEN: That would follow, Your Honour.

TOOHEY J: So, if I could take it one step further, the

Credit Act, on that basis, would apply to that

category irrespective of the purpose for which it

was used.

MR BASTEN:  Yes.

TOOHEY J:  Is there anything in that notion that is at odds

with the intention of the Credit Act?

MR BASTEN: No. Ironically, perhaps, it strengthens the

intention because, really, the inclusion of

"commercial vehicles and farm machinery" introduce

an element of commercial purchase or credit

provision which is not generally present in the

Act. But may I say two things about the way that

His Honour dealt with it below? The first is that

the logic of the argument, and I do not disagree

with Your Honour's inference as to what flows, is

that both "commercial vehicles" and "farm

machineries" are as specific categories

deliberately included within subsection(2) so that

Turner 9 19/4/91

there is some logic in adopting a consistent

approach to all such vehicles.

The second thing I was going to add was that

if one turns to the terminology of the definition

section, it is, of course, in common terms, as

appearing at the third page of the extract:

In this Act, unless the contrary intention appears -

the following definitions will apply. And if one

goes to the last page there is a definition of

"goods" and "goods" is defined in very wide terms

to include:

(a) all chattels personal other than things in

action and money;

(b) fixtures severable from the realty; and

any present or future product of a farming

undertaking -

and an inclusion for things prescribed.

My submission is that the way to approach

section 13(4), if one seeks to read it down, is to

say that it is that definition of "goods" which

needs to be reconsidered when one addresses the use

of that word at the end of the first line in

subsection (4). In other words, the interpretation

for which I would contend is that where

subsection (4) refers to "a contract for the hiring

of goods", it does not intend "goods" in that

context to include commercial vehicles or farm

machinery. One is required by the context to read

down the word "goods" and the context upon which I

rely is the terminology of subsection (2) which

expressly includes "commercial vehicles" and "farm

machinery". But subject to that qualification, I

accept the approach that His Honour the President

adopted below, but that would be an alternative way

of pressing the argument which gives rise to the

conclusion.

My submission is that although that approach

does some damage to subsection (4), the damage it

does leaves subsection (4) with work to do and

preserves with real work the express terminology of

subsection (2) where that subsection refers to

"commercial vehicle or farm machinery", and it is

on that basis that, in my submission, a more

appropriate approach is the reading down of

subsection (4) so as not to exclude the commercial

vehicle in this case. That is the basis of the

application, in substance, Your Honours.

Turner 10 19/4/91

BRENNAN J: Yes, thank you, Mr Basten. Mr Hely, we will be

calling upon you but before we do so, we will stand

it down for a moment while we dispose of the matter

of Kodak (Australasia) Pty Limited v Commonwealth

of Australia.

AT 2.20 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.21 PM:

BRENNAN J: Yes, Mr Hely?

MR HELY:  If the Court pleases. Your Honours, perhaps,

should have a copy of the terms of the lease

agreement because whilst there is reference in the

appeal books to the residual value clause, the

clause, I think, is nowhere set out. In fact, it

is clause 13.2 which appears upon page 4 of the

document. It is a conventional provision whereby

possession is to be taken of the goods at the

expiration of the lease. There is an option in the

respondent to sell the goods if the sale price

realized is less than the residual value.	Then the
applicant's obligation is to make good the difference.

Our submissions are these: firstly, the

operation of section 13(2) is not attracted unless
two things are established, first, that the
supplier engaged in the precontractual conduct

which is referred to in subsection (1) and, second,

that the supplier held or should have held the question of fact and a question of evidence.
expectation which is referred to in subsection (2).

There are concurrent findings of fact in the

courts below that the first of those matters was

not established. There is no finding in the courts

below that the second of those matters was

established. Given those concurrent findings of
fact, we would submit that no justification has

been shown for this Court to look at the factual

issue or to review the factual issue for the second

time.

DEANE J: They are a bit hard to accept though, are they

not, that in the face of clause 13.2 silence does
not amount to section 13(2)(b)(i)? In other words,

that the position is that the purchaser will have

no right to buy, that the hirer will be entitled to

Turner 11 19/4/91

keep - say, "No, I won't sell to you'', sell to

somebody else and then claim the difference between

the residual value and the sale price from the

person who has hired the vehicle.

MR HELY:  Could I put two submissions in response to what

Your Honour puts to me?

DEANE J: What, you are going to say I have got the facts

all wrong, have I?

MR HELY:  The question wrong, with respect, and the facts

wrong. As to the first, the question is not what

is the hirer's expectation; the question is has the

supplier engaged in conduct which engendered that

expectation? So that one has to find the supplier

doing something, apart from existing as a finance

company and apart from entering into a contract,

the provisions of which are not a sham. So that one has to find some activity on the part of the

hirer which produces the expectation that

Your Honour refers to.

BRENNAN J:  Why is that not done by proffering a form of

contract on which they are prepared to enter?

MR HELY:  Because the form of contract negatives the

existence of any option or entitlement or
expectation in the hirer to acquire the goods in

question.

BRENNAN J: But that is not the point that is raised by

paragraph (1), is it?

MR HELY: Paragraph (1) is directed towards a nod and a wink

so that it is directed towards something in

addition to the entering into the contract in

question which produces the consequences referred

to in that subsection.

BRENNAN J: But is this not the question: if the purchaser

looks at clause 13.2 of the contract and asks

himself the question whether the supplier is

willing to negotiate a sale to me of the goods for

that amount, the answer that he would give in the

light of 13 ( 2) is "Yes".

MR HELY:  If he is to look at clause 13.2, one must assume

that he looks at the other provisions of the

contract which are relevant to this question.	The
first of them is condition 5.

DEANE J:  I wonder who was the last person who read all the

provisions of this contract.

MR HELY:  Mr McDougall says it was him. He also says he was

the first. Could I respectfully invite

Turner 12 19/4/91

Your Honours' attention to condition 5 which

appears upon page 53 of the application book, and

to condition 8 which appears upon page 54. If one

is to take a peek, as it were, at the provisions of

the contract, as the basis for drawing a conclusion

as to the application of subsection (2), in my

respectful submission, one must look at all of the

provisions of the contract and come to a conclusion

as to what is their combined effect. If one does

that, I would submit that one could not draw an

inference from the mere proffering of the contract

itself that the subsection (1) expectation was

engendered.

Second, there is the evidence on page 56 of

Mr Landy who was an executive or officer of the

respondent. The proposition that was being put to

Mr Landy in cross-examination was that there was no

expectation on the part of the finance company that
at the expiration of the lease it would obtain

physical possession of the chattels in question.

He said, "That's not correct.	What we want is
physical possession".	And at the top of the next

page, in effect, he has listed the range of

possibilities or options which were open to the

finance company at the conclusion of the lease. So

that we would respectfully submit, in response to

Mr Justice Deane, that the proposition that anybody

who looked at this document must appreciate that he

would have an option to purchase - must appreciate

that the finance company would negotiate for the

purchase, firstly, is inconsistent with the

totality of the document; second, is inconsistent

with the evidence of Mr Landy which was accepted by

the trial judge and, thirdly, for the reasons I
have so far put, is not directly the test or the

question which the section poses.

DEANE J:  Mr Hely, I am sorry, I do not follow. Why does

not that evidence you just referred us to say that

"We would sell it at the residual price"?

MR HELY: It says, first, "We want possession".

Second - - -

DEANE J:  "We advise that that is a residual sum. That's

how much we will sell it for".

MR HELY:	Yes.
DEANE J:	To them?

MR HELY: Perhaps.

DEANE J: Well, it says so. "And it is only if we are not

paid the residual sum", that is, it is only if they

Turner 13 19/4/91

do not take advantage of the offer, "that we would

sell it to someone else".

MR HELY:  Yes, Your Honour, but what the witness is doing is

simply indicating his perception of every available

possibility at the conclusion of the lease. This

is not precontractual conduct engaged in by the

finance company.

DEANE J:  But then they say, "If the purchaser didn't want

to buy it and having knocked us back, we got a

surplus, we'd treat that as the purchaser's."	I
keep saying "purchaser".	I do not mean
"purchaser". ,

MR HELY:  Yes, I understand what Your Honour means.

DEANE J: Well, it is pretty strong stuff.

MR HELY:  As to that, we say two things: the first thing is

that it is just a specification of the range of

available possibilities; the second thing is that

it is not evidence to which the Court can have

recourse in determining whether the subsection (1)

test is satisfied because this is the internal

musings on the part of an officer of the

respondent, not conduct engaged in by such an

officer prior to the contract with respect to the

applicant. It is simply an uncommunicated thought.

It is not information which was conveyed to anybody.

BRENNAN J:  Where is the finding of the trial judge with

respect to (2)(b)(i)? Could you direct me to that?

MR HELY:  The first, upon page 11, lines 25 to 30, which is

fleshed out by what His Honour says on page 2, the

most immediately relevant part is line 25, across

to page 3, and perhaps line 5. Apparently, the

conduct which was relied upon by the applicant as

satisfying the subsection (1) test before

Mr Justice Newman was abandoned by the applicant in

the Court of Appeal. Different conduct was relied

upon in the Court of Appeal as satisfying the
subsection (1) test. I take that simply from the

judgment, not from the conduct of the proceedings

because I was not involved in them.

Could I perhaps turn to the other matters that

my friend relied upon as establishing compliance
with subsection (l)? The first was that the

respondent is a credit provider. In my submission,

subsection (1) is talking about something which the

credit provider does as distinct from being brought

into existence as such. It is not just talking

about a ..... incorporation or what label one

Turner 14 19/4/91

attributes to it, it is looking at something which

it does apart from existing.

Second, he referred to the fact that the

commercial vehicle was acquired by the applicants

rather than by the respondent. That, in my

respectful submission, must be irrelevant to the

subsection (1) inquiry because it has nothing to do

with conduct on the part of the respondent.

Thirdly, he relied upon the "Businessman's

Waiver". We would submit that that is irrelevant.

The fact that one seeks to bring oneself within an

exception or a qualification to a rule is not an

admission that the rule is otherwise applicable to

( 1 ) .

Finally, he relied upon the evidence of

Mr Brown at page 54, lines 3 to 6. The context in

which that statement was made appears from the

decision of the trial judge upon page 5, lines 8 to

15 which is, shortly, to the effect that Mr Brown

was the solicitor for the finance company. The

hirers came to him to execute the documents and he

endeavoured to persuade them to obtain independent

legal advice but they declined to do so. They read

the documents and he endeavoured to explain their

legal effect to them. Mr Brown was accepted by the

trial judge as not only a witness of truth but a

person whose conduct was in conformity with proper
professional standards.

So that our submissions on this aspect of the matter are twofold: firstly, we submit, (a) is not

appropriate and no reason has been shown for the

Court to have a secondary view of the factual

issue. Even if the Court were to undertake that

review, it could not be satisfied that the

applicant has established the subsection (1) or the

subsection (2) tests. If, contrary to those

submissions, one has to look at subsections (2) and

(4), then it seems to be commonly accepted that

what one has is a legislative oddity because

something is brought within the section and then

ought to have been either - may I withdraw that and

start again? One has something brought into the

section and whatever the precise operation of

subsection (4) in terms of garden tractors and

horse floats, that which is introduced is

substantially withdrawn.

One can understand that there is a policy

which supports the introduction of subsection (2).

One can understand that there is a policy which

underlies the introduction of subsection (4).

Perhaps the subsection (4) policy could be loosely

expressed this way: if one is to treat payments

Turner 15 19/4/91

pursuant to a relationship for tax purposes as

payments pursuant to a lease, then consistently and

for all purposes that transaction should be

regarded as a lease.

It may be true that one cannot give full

effect to the policy which lies behind

subsection (2) and one cannot give full effect to

the policy which lies behind subsection (4) but

that, in our submission, provides no justification

for the Court making a selection as to which of the

two is paramount. In those circumstances, all that

one can do is to give effect to the language used

by the legislature and we would submit that the

approach adopted by Mr Justice Clarke and

Mr Justice Meagher is correct and the Court would

refuse leave to appeal because there is

insufficient doubt as to the correctness of that

approach to justify the granting of special leave

to appeal.

DEANE J:  Mr Hely, do you read subsection (4) as referring

to a type of goods or as referring to the

circumstances of the case?

MR HELY:  We would submit it is cumulative. It is goods

which have particular characteristics in relation

to the person to whom they are hired.

DEANE J: In other words, if I go in and say, "I want to buy

a trailer, I am not in business, I am just going to

use it for my own purposes", or if that is the

fact, it would not come within (4)?

MR HELY: It would not.

DEANE J:  What if I just go in and say, "I want to buy a

trailer". I suppose most trailers are used by

people who do not carry on business but some

trailers are used by people who carry on business.

MR HELY:  The section seems to postulate two tests: first,

goods that are to be used by the hirer for the

purpose of a business carried on by him; second,

goods that might reasonably be expected to be used

for that purpose. So, I suppose, two things are

important: first, the fact; and second, the

reasonable expectation of the finance company.

DEANE J: Well, if it is a trailer, if you take out one

registration, you can use it for commercial

purposes; if you take out another, you cannot use

it for commercial purposes. I have put it back to

front. If you are going to use it for commercial

purposes, you have to pay more for registration.

MR HELY: Yes.

Turner 16 19/4/91

DEANE J:  Would that be relevant?

MR HELY: It depends, I suppose, upon the facts as they are

presented to or known by the credit provider and
the inferences which he should probably or

reasonably draw from those facts. If, for example,

Your Honour's trailer had emblazoned upon it,

"XYZ's Garden Supplies Pty Ltd", perhaps a

particular conclusion could be drawn.

DEANE J:	Thank you.
MR HELY:	Those are our submissions, if the Court pleases.

BRENNAN J: Yes, Mr Basten?

MR BASTEN:  Your Honours, there are some matters in relation

that is appropriate. Firstly, in relation to the carrying on of the business: it was indeed the carrying on of the business and the holding out of the credit provided, not its formation or incorporation upon which we sought to rely.	to the conduct which I would seek to clarify if the omission of the respondent to take any part in
that acquisition of the goods upon which I sought
to rely. Thirdly, in relation to the document, the
"Businessman's Waiver", it was not sought to be relied on as an admission by the respondent but as conduct by the respondent which could give rise to
the reasonable inference referred to in the
section. Fourthly, in relation to Mr Brown's
explanation which, as my friend has pointed out at
page 5, was an explanation of the legal effect of
the document, it is the fact that it was a
deliberate explanation of the legal effect and the
substance of the inference which - or, indeed, the
express statement which is therein contained upon
which the applicant seeks to rely.

So there are, in my submission, four major and

properly understood, within 13(2) and which would	significant matters which would take the conduct,
give rise to the necessary inferences in subparagraphs (1) and (2).
The only thing I would seek to add in relation to the interrelationship of subsections (2) and (4)
is that in relation to the example that Your Honour
Justice Deane gave in respect of trailers, it seems
to me that such matters as the registration and
possible later painting of the trailer with signs
could not be relevant. Even if contrary to my
primary submission one needed to go beyond the
nature of the goods, the second limb, as I read it, picks up the nature of the contractual terms for payment and the reference to there being incurred

Turner 17 19/4/91

in the carrying on of the business goes back to the

business which is associated with the goods.

So, the very furthest one could take the

application of the section beyond considering the

nature of the goods is to consider the terms on

which amounts are payable under the contract,

coming back, perhaps to Your Honour's earlier

question to me. In my submission, one cannot go to

further factors such as those raised by Your Honour

with my learned friend.

DEANE J: This is possibly an unfair question, but what

would you say the position was with the ordinary

light trailer that is not reinforced for business

but just the sort that you have on the back of your

car?

MR BASTEN: There may well be questions of fact relating to

different sorts of vehicles which would arise in

this case - I do not dispute that - and that takes

one back to the question of whether one would

reasonably expect those goods to be used for the
purpose of a business, and that would be

pre-eminently a question of fact which would need

to be determined at first instance. This is a case

dealing with a large articulated truck and it does

not give rise to that sort of problem in my

submission. Those are my submissions in reply, if

Your Honours please.

BRENNAN J:  The Court will adjourn briefly to consider what

course it should take in this matter.

AT 2.50 PM SHORT ADJOURNMENT

UPON RESUMING AT 3.00 PM:

BRENNAN J: 

As the Court is not satisfied that there are

proper grounds for going beyond the concurrent
findings of fact made with respect to the issues

under section 13(2) of the Credit Act 1984, New

South Wales, this case is not a suitable vehicle in

which to consider the construction of

subsection (4) of section 13. Accordingly, special

leave will be refused.

MR HELY:  I ask for an order for costs, Your Honour.

BRENNAN J:  Mr Basten? It will be refused with costs.

AT 3.01 PM THE MATTER WAS ADJOURNED SINE DIE·

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