U2 Motor Pty Ltd v Walliwala
[2013] VCC 642
•18 June 2013
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST
GENERAL CASES DIVISION
Case No. CI-12-04573
| U2 MOTOR PTY LTD (ACN 114 783 774) | Plaintiff |
| v | |
| PRADEEP WALLIWALA | Defendant |
---
JUDGE: | His Honour Judge Cosgrave | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28, 29, 30 & 31 May 2013 and 5 June 2013 | |
DATE OF JUDGMENT: | 18 June 2013 | |
CASE MAY BE CITED AS: | U2 Motor Pty Ltd v Walliwala | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 642 | |
REASONS FOR JUDGMENT
---
Catchwords: Contract – Oral terms – Sufficiency of Proof.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Woolley | Jonathan Wong Lawyers |
| For the Defendant | Mr B. Barr | Sabelberg Morcos Lawyers |
HIS HONOUR:
Issue
1 The plaintiff (“U2 Motor”) and the defendant (“Walliwala”) agree that U2 Motor paid to Walliwala the sum of $200,000. The critical issue in the case is whether the $200,000 was a loan or was the purchase price for goods purchased by Walliwala for U2 Motor.
Background
2 Angela Li and Anthony Li own a car repair business called U2 Motor Pty Ltd which operates from premises in Vermont. Angela is responsible for the office and administration aspects of the business while Anthony is a mechanic.
3 Walliwala has known Mr and Mrs Li for about 10 years. He is a customer of their business. He operated a business under the trading name, ASP Rubber Industries. The principal object of his business is to import car parts, mainly engine mounts, and other car products from a Sri Lankan company called SAP Exports. Together with his father, Walliwala has a major interest in this company. Walliwala has sold parts to U2 Motor for several years for use in its business.
4 The parties agree that in early 2012, they made an agreement whereby U2 Motor would become involved in the business formerly conducted by Walliwala. Walliwala said that he was looking to expand the business and he wanted to use others to undertake the day-to-day tasks of making sales, so he could concentrate on the business expansion.
5 The parties agree that, pursuant to the agreement, U2 Motor would:
(a)establish a new legal entity named ASP Rubber Industries (Vic) Pty Ltd (“ASP (Vic)”);
(b)provide warehouse facilities at its Vermont premises for the car parts;
(c)provide parking spaces for the ASP (Vic) vans at its Vermont premises;
(d)carry out stocktaking and restock each of the ASP (Vic) vans at the end of each day;
(e)issue invoices to customers of ASP (Vic);
(f)take telephone orders from customers on behalf of ASP (Vic); and
(g)be responsible for performing the banking on behalf of ASP (Vic).
6 U2 Motor paid $200,000 to Walliwala in three instalments:
·$45,000 on 1 March 2012;
·$45,000 on 10 April 2012;
·$110,000 on 4 June 2012.
7 U2 Motor did not take any security for the loan, although at one time there was some talk of it taking a mortgage over Walliwala’s property.
8 The parties agree that by early July 2012, the agreement had terminated and it is no longer on foot.
9 This case concerns an oral contract. The parties gave the whole of their evidence orally in Court. I am mindful of comments made both by judges and in academic commentary about the difficulties of a judge trying to determine the truthfulness of a witness by reason of their demeanour.[1] There is persuasive evidence to suggest that judicial officers have no special talent in this sphere and that making decisions based solely on demeanour will not necessarily be accurate. Hence, in considering the evidence of the parties in this case, I have sought to find other evidence, either in documents or from ancillary witnesses, against which to assess the parties’ evidence, and in particular, the evidence of Mrs Li. I note also that U2 Motor has the onus of establishing that the $200,000 provided to Walliwala was a loan and not a payment for goods.
[1]McClellan J, “Who is telling the truth? Psychology, Common Sense and the Law” (2006) 80 Australian Law Journal 655; Re “Oral v Written Evidence: The Myth of the Impressive Witness” (1983) 57 Australian Law Journal 679; Fox v Percy (2003) 214 CLR 118 at [29]-[31]
10 I am not satisfied that U2 Motor has proved its case. I have serious concerns about accepting the evidence of Mrs Li. The concerns arise from three sources. First, the evidence did not sit comfortably with some contemporary documents. Second, the evidence was not consistent with the background context. Third, the evidence was not always persuasive or was not supported by other evidence.
11 My major reason for not accepting the evidence of Mrs Li relates to the letter written by U2 Motor’s solicitor, Jonathan Wong, to Walliwala dated 23 July 2012, soon after the agreement terminated. The letter is in the following terms:
“We act for U2 Motor Pty Ltd.
We are instructed by our client that it entered into an agreement with you for the supply of various car parts (the ‘supply agreement’). In pursuance of the supply agreement, our client paid you (the receipt of which you have acknowledged) the total sum of $200,000 for such supply and delivery on or before 30 June 2012 (‘delivery date’).”
12 Mrs Li said the letter was not accurate insofar as it referred to the existence of the supply agreement rather than a loan agreement. This is a critical difference in the context.
13 I do not accept that Mr Wong’s letter was inaccurate. Mrs Li said that Mr Wong spoke Cantonese, and if instructions were given in Cantonese rather than English, he should have understood those instructions and reproduced them accurately in the letter. The letter says it is written on the instructions of U2 Motor. Mrs Li agreed that this was correct, even though there was a major factual error in the letter, according to U2 Motor’s case. Mrs Li said that she did not see a draft before it was sent and that she had a bad headache at the time she gave instructions to Mr Wong.
14 Mrs Li saw the letter for the first time on 25 or 26 July 2012. At that time, she did not give Mr Wong any instructions to send a correcting letter. In the circumstances, I would have expected U2 Motor to act quickly to rectify a major misunderstanding by its solicitor. Especially was such a letter needed in a context where:
·by letter dated 9 July 2012 from the plaintiff to the defendant, the plaintiff said, “…please return our cash advance payment of AU$200,000 plus 10 per cent interest (Total: AUD$220,000) to us”. Mrs Li suggested in evidence that the expression “cash advance payment” was an alternative description for a loan. According to Mrs Li, Mr and Mrs Li’s 22 year old daughter wrote the letter on Mrs Li’s rushed verbal instructions. Mrs Li said her daughter had good English skills and the contents of the letter were true and correct. On U2 Motor’s case at trial, if the $200,000 were a loan and the expression “cash advance payment” described that loan transaction, then it was not consistent with the supply agreement which Mr Wong referred to;
·further, in his responding letter of 12 July 2012, Walliwala said that the $200,000 he received from U2 Motor was to purchase engine mounts for the latter’s stock. He did not treat the money as a loan. Given the circumstances, I would have expected U2 Motor, consistently with its present case, to have acted promptly to disabuse Walliwala of the notion that the $200,000 was paid for the supply of goods.
15 In the circumstances, I consider it is open to the Court to infer, and I do infer, that where U2 Motor noted the error in Wong’s letter and, without explanation, took no steps to correct the error, this was because the factual matters set out in Wong’s letter were correct. Moreover, U2 Motor did not call its solicitor, Mr Wong (who is still the solicitor on the record for the plaintiff), to give evidence either supporting its position or seeking to explain how his misunderstanding of his instructions came about. I regard it as open to the Court to infer, and I do infer, that Mr Wong’s evidence would not have assisted the plaintiff.[2]
[2]See Jones v Dunkel (1959) 101 CLR 298 and Cross on Evidence 9th Edition, paragraph 1215
16 There are several areas in which Mrs Li’s evidence did not sit comfortably with the background context.
17 First, U2 Motor called evidence from Susannah Shiu, the sister of Mrs Li. Ms Shiu has accounting qualifications from Monash University, has worked as an accountant for three years and is currently studying for her Masters Degree in teaching. She is proficient in English. About two days before the meeting at the office of U2 Motor on 6 July 2012, Mrs Li rang her sister and informed her that she wanted to hire Ms Shiu as an accountant to assist her with respect to the accounts of ASP (Vic). According to Ms Shiu, her sister advised her that she had paid $200,000 to Walliwala, that she had already hired an employee to work in the ASP (Vic) business, that she had set up the administrative framework for the business, but that she had not yet received any money, nor had she received the goods she was expecting.
18 Ms Shiu’s evidence was clear that Mrs Li did not mention in their phone call on 4 July 2012 that the $200,000, the subject of this dispute, was a loan. Her evidence was also clear that there was no discussion during the meeting on 6 July 2012 of the $200,000 constituting a loan. In circumstances where Mrs Li wished to engage her sister as the accountant for the ASP (Vic) business, I would have expected Mrs Li to make full disclosure to the accountant of all relevant financial information relating to the business. Although, according to Ms Shiu, her sister made reference in the phone call to the $200,000, and the failure to receive goods, she did not refer to that money having been advanced to the defendant as a loan. I regard this as a significant omission . The failure to refer to the money as a loan seems to me inconsistent with what would be expected having regard to U2 Motor’s case at trial.
19 It is also apparent from Ms Shiu’s evidence that during the meeting at U2 Motor’s office on 6 July, reference was made to the $200,000 paid to Walliwala. Although both Ms Shiu and Mrs Li spoke at the meeting and Mrs Li became upset with Walliwala at the meeting, neither of the plaintiff directors, nor indeed anybody present, referred to the $200,000 as having been advanced by way of loan. Again, having regard to U2 Motor’s case at trial, I would have expected Mrs Li, when demanding repayment of the $200,000, to have said that it was a loan and that Walliwala had agreed to repay it on demand.
20 Second, Mr and Mrs Li made reference to the fact that $200,000 was, to them, a substantial amount of money. Indeed, there was evidence that Mr and Mrs Li borrowed approximately $60,000 against security provided to their own bank in order to fund part of the payment to Walliwala. That being so, I would have expected Mr and Mrs Li to require some security for the loan. When the initial payment of $45,000 was made, Mrs Li was concerned to obtain a signed acknowledgement from Walliwala that he had received $45,000 in cash. Again, on 4 June, Mrs Li obtained a signed receipt from Walliwala when he received the payment of $110,000. Mrs Li was anxious to record an acknowledgment by Walliwala of receipt of the money.
21 Third, the loan alleged by U2 Motor was made interest free. This too is unusual and the absence of an interest provision is more consistent with the money being advanced by way of purchase price than a loan.
22 Mr and Mrs Li visited the factory in Sri Lanka after they had made the initial payment to the defendant of $45,000. Given that, at the time the payment was made, the Lis had been purchasing car parts from Walliwala for nearly 10 years, it seems to me unlikely that they would have travelled to Sri Lanka simply to see if the factory existed. On the basis of their prior dealings, there were reasonable grounds to believe that Walliwala was sourcing his car parts in the manner he suggested. Again, it seems to me more likely that the Lis were interested to see the factory because of their new or additional association with Walliwala whereby they were to act, in one form or another, as his agent and, consistent with the terms of their agreement, were purchasing car parts from him.
23 Mrs Li’s evidence was not persuasive in other respects. The first concern related to her comments regarding her proficiency in the English language.
24 Mrs Li, with her husband, ran the U2 Motor business for a number of years. She attended to the administrative tasks associated with the business, including managing the books and accounts, attending to the banking and, at least in relation to Walliwala, ordering the stock. She gave no evidence that she struggled to do this due to any difficulties with her command of spoken or written English.
25 In her dealings with Walliwala in relation to the agreement, she established ASP (Vic), arranged the ABN for the company, arranged banking accounts at the Commonwealth Bank of Australia, and arranged a phone line for the company. I note that in order to perform these tasks, she would have had to complete forms in English. She gave no evidence that these transactions caused her any particular difficulty.
26 Mrs Li produced a detailed register of transactions involving entities within the Capricorn business group. She also read part of the Court Book during the trial unaided by the interpreter. Her handwriting on the receipt dated 10 April 2012, which she produced for Walliwala to sign, does not appear to indicate any hesitancy or ignorance with respect to written English. During the trial, she also answered or spoke in English on occasion.
27 Notwithstanding the matters referred to above, Mrs Li said to Walliwala more than once that she lacked the skills in English necessary to be an agent and said that her lack of skills with the English language meant she could not understand the proposal which Walliwala suggested for the Lis’ consideration.
28 Given both her conduct in Court and her conduct before the litigation began in connection with the U2 Motor business and Walliwala, I am not convinced that Mrs Li’s command of English is as poor as she suggests. If Mrs Li said to Walliwala that her English skills were so limited as to prevent her from undertaking any role as a sales agent, I consider the better explanation for such limitation is that proposed by Walliwala, namely, that Mrs Li lacked the technical knowledge to understand and explain to prospective customers the qualities and appropriate usage of parts in a particular context.
29 Mr Li obviously had great difficulty in speaking English. He said that he could not understand what was said between Ms Shiu and Walliwala at the meeting held at the premises of U2 Motor on 6 July 2012. Later he signed the letter from U2 Motor to Walliwala dated 9 July 2012, even though he had not read the letter and said that he would not have understood it even if he had tried to read it.
30 Mr Li’s evidence was generally supportive of his wife’s evidence. However, neither of them addressed in evidence in chief the problem of the solicitor’s letter dated 23 July 2012 or the failure to tell Ms Shiu that the $200,000 was provided to Walliwala as a loan. These omissions were notable. There is authority for the view that the omission to ask questions of a friendly witness is more significant than the failure to call the witness.[3] The presumption that the testimony would not have been favourable to the party’s case is stronger than the presumption arising from the failure to call the witness.[4] Also, the failure to give evidence on an issue which is within the knowledge of a party is a matter which the Court can take into account in evaluating other evidence given.[5]
[3]Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, 418-9 (CA)
[4]Cross on Evidence 9th Edition, paragraph 1215
[5]Kidman v Corstorphan [1999] VSCA 28 at [24]
31 Although I have not accepted the case advanced on behalf of U2 Motor, it should not be thought that I have uncritically accepted all the evidence of Walliwala. His evidence was in part confusing and unclear. However, he had no onus of proof to discharge and the plaintiff’s proofs have been inadequate.
32 Because the parties agreed upon what constituted the critical issue in the case, I have not regarded it as necessary to determine all the terms of the agreement, which party breached which terms, or which party repudiated the agreement. But I note that even if Walliwala had repudiated the agreement and U2 Motor were entitled to damages, then I would not have awarded U2 Motor the amount claimed of $194,588, being $200,000 less an allowance of $5,412. Such repudiation would not of itself have entitled U2 Motor to receive the $200,000 advanced (less the allowance) in circumstances where I have found it was not a loan.
33 At the hearing, Walliwala’s counsel said that if the Court found that U2 Motor advanced the $200,000 to buy car parts and not by way of loan, then it agreed to make available to U2 Motor the parts purchased with its funds. Accordingly, having regard to my findings, I expect Walliwala to honour this commitment.
34 Further, U2 Motor acknowledged at trial that if the Court found that the $200,000 was not advanced as a loan, then Walliwala was entitled to judgment on its counter-claim in the sum of $1,383.25, being 22 per cent of the total sales of $6,287.49 procured by Walliwala for ASP (Vic).
35 Accordingly, subject to hearing from the parties as to the final form of order, I propose to make the following orders:
(a)the plaintiff’s claim be dismissed and there be judgment for the defendant;
(b)there be judgment for the plaintiff by counter-claim in the sum of $1,383.25;
(c)the plaintiff pay the defendant’s costs of the proceeding to be taxed on scale in default of agreement.
---
Certificate
I certify that these 8 pages are a true copy of the reasons for decision of His Honour Judge Cosgrave delivered on 18 June 2013.
Dated: 18 June 2013
Catherine Kusiak
Acting Associate to His Honour Judge Cosgrave
0
5
0