v S International Pty Limited v Interior Marble Pty Limited - [2005] NSWSC 1142

No judgment structure available for this case.

CITATION:
V S International Pty Limited v Interior Marble Pty Limited [2005] NSWSC 1142

HEARING DATE(S): 25-26/08/05

JUDGMENT DATE :

11 November 2005

JUDGMENT OF:
Burchett AJ

DECISION:
Order to be made in favour of the plaintiff for conversion of goods.

CATCHWORDS:
Bailment by informal loan of equipment - implied promise to return - conduct of bailees amounting to conversion.

CASES CITED:
Myer Stores Limited v Jovanovic [2004] VSC 478
The Plasycoed Collieries Company, Limited v Partridge, Jones & Co, Limited [1912] 2 KB 345
Penfolds Wines Proprietary Limited v Elliott [1946] 74 CLR 204
Borden (UK) Ltd v Scottish Timber Products Ltd [1979] 3 All ER 961
Hobbs v Petersham Transport Co Pty Limited (1971) 124 CLR 220

PARTIES:
V S International Pty Limited (plaintiff)
Interior Marble Pty Limited (first defendant)
The Stone Group Pty Limited (second defendant)
Mondo Stone Pty Limited (third defendant)

FILE NUMBER(S):
SC 5220 of 2004

COUNSEL:
M W Sneddon (plaintiff)
A Gemmell (defendant)

SOLICITORS:
Gye Associates Lawyers (plaintiff)
Bartier Perry (first and second defendants)

LOWER COURT JURISDICTION:

- 14 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BURCHETT AJ

11 NOVEMBER 2005

5220/04 VS INTERNATIONAL PTY LIMITED V INTERIOR MARBLE PTY LIMITED AND ORS

JUDGMENT

1 The plaintiff is admitted to have been the owner, “as at the beginning of 2002”, of certain stone cutting equipment and other equipment, including one Omec Nouva cross-cut saw and one jib crane (“the equipment”). The equipment was in store and had not been used for some two years. In or about May 2002, it was delivered to premises at Churchill Street, Silverwater which had been acquired for the purposes of a proposed partnership involving the defendant companies. In fact, the partnership came into existence under the name The Stone Group Australia by about early August 2002 and it used the equipment until on or about 20 October 2003, when there was a dissolution of the partnership followed by an appointment on 10 November of a receiver and manager. Since then, the equipment has remained in the possession of the first and second defendants.

2 The dispute, which has led to a proceeding in this Court between the plaintiff and the defendants, relates to the question whether the equipment was merely lent to the companies that constituted the partnership, the loan being granted because of the personal relations subsisting between the directors of the various companies, or whether there was an oral contract for the purchase of the equipment pursuant to what was called a contra-agreement, that is to say, an agreement providing for the partnership to do work for the plaintiff company at a specially discounted rate to a total value of $35,000 as the purchase price of the equipment. The plaintiff having demanded the return of the equipment late in October or early in November 2003, the first and second defendants in answer set up the contra-agreement, pursuant to which they claimed the partnership had paid for it, and asserted that ownership had passed to the partners. Since then, the first and second defendants have retained the equipment and have made use of it in their own businesses.

Myer Stores Limited v Jovanovic

The Plasycoed Collieries Company, Limited v Partridge, Jones & Co, Limited

“[I]t is well-established law that where chattels have been placed in the hands of a bailee for a limited purpose, and he deals with them in a manner wholly inconsistent with the terms of the bailment, and consistent only with his intention to treat them as his own, the right to the possession revests in the owner, who can sue the bailee in trover.”

Penfolds Wines Proprietary Limited v Elliott

Borden (UK) Ltd v Scottish Timber Products Ltd

Hobbs v Petersham Transport Co Pty Limited

or implied

3 The real issue in this case seems to me to be entirely a matter of fact. The plaintiff’s director, Michael Volpato, is the brother-in-law of Nicholas Mancuso, the director of the third defendant, Mondo Stone Pty Limited. When Mr Mancuso, from the beginning of the year 2002, was contemplating a partnership between Mondo Stone Pty Limited and the first defendant, Interior Marble Pty Limited of which a Mr Pagano was director, and the second defendant The Stone Group Pty Limited of which a Mr Gorga was director, according to the plaintiff’s case, Mr Volpato was prepared to assist by lending them his then idle equipment. He and Mr Mancuso say (although Mr Gorga denies) that there was also discussion about his becoming a partner himself. It should be noted at this point that Mr Pagano did not give evidence, although there was no suggestion he was not available. Mr Volpato’s affidavit is quite detailed on the subject, notwithstanding his proposed involvement could not be more than a background issue for the concoction of which no sufficient motive appears or was suggested in cross-examination, and I accept Mr Volpato’s version that until about late February there were discussions on the subject of the proposed partnership which contemplated his participation. The relations between the parties provide the background, not only to the loan of equipment put forward by the plaintiff, but also to the alternative suggestion of a rather special agreement for the purchase of the same equipment by the partnership put forward by the first and second defendants.

4 Indeed I have come to the conclusion, after considering the rather confused evidence of the witnesses in this case, that one thing the Court should accept is there was a loan of the equipment arranged by Mr Volpato on behalf of the plaintiff with Mr Mancuso on behalf of the then proposed partners in about late March 2002. The real question is not whether that occurred, but whether there followed a further agreement for the purchase of the equipment which replaced the still nascent arrangement. That the equipment should be moved to the new premises the use of which the partners were acquiring, at Silverwater, was at the time a matter of some convenience to the plaintiff, which otherwise would have had to continue to provide for its storage. Mr Volpato, who was much overseas on business, had not for some two years being using this equipment.

5 The third defendant filed a submitting appearance, and its director Mr Mancuso gave evidence which supported the plaintiff’s case. As I have said, Mr Pagano the director of the first defendant, Interior Marble Pty Limited, did not give evidence although Mrs Pagano, who worked in the business and was in charge of the accounts, did. The main witness for the first and second defendants was Mr Gorga, the director of The Stone Group Pty Limited, the second defendant. Mr Gorga gave evidence that the parties traded in partnership from about the beginning of August 2002 as stone suppliers, cutters and installers under the business name The Stone Group Australia. There was no written partnership agreement. It was Mr Gorga’s account (denied by Messrs Volpato and Mancuso) that he and Mr Mancuso had reached an agreement with Mr Volpato some months before the commencement of the partnership business that the partnership would do manufacturing work “up to the value of the equipment” on behalf of the plaintiff, by doing which it would purchase the equipment. The arrangement was that the manufacturing would be done at “a reduced rate” for Mr Volpato and that when the value of the work reached a total of $35,000 the partnership “would own the equipment”. In his affidavit of 20 October 2004, Mr Gorga set out this version of events, stating that “[p]rior to February 2002, Nicholas Mancuso and myself (on behalf of all three defendants) had discussions with Mr Volpato about acquiring certain plant and equipment from Mr Volpato (or from a company of his) for use by a partnership intended to comprise the defendants”. Then, “[e]arly in 2002” he and Messrs Mancuso and Volpato reached the agreement at Mr Mancuso’s home, Mr Mancuso compiling minutes of the meeting which all three of them signed. These minutes, no copy of which was produced, were alleged by Mr Gorga to be kept by Mrs Mancuso or Mr Mancuso in a file called the Churchill Street file in the partnership’s premises at 6-8 Churchill Street, Silverwater.

6 It is common ground that the equipment was brought to the Churchill Street premises in about May 2002, so this version has it that the delivery there was always for the purpose of the purchase by the partnership and not upon loan. There are, of course, difficulties about that; prior to February 2002 would take the matter back long before the partnership came into existence, and it seems a little unlikely that at a date early in 2002, Mr Volpato would not only be selling equipment to intending partners who were not in fact going to form a partnership until August, but would also be arranging for the transaction to depend upon the doing of a substantial amount of skilled work by the still unformed partnership at an undetermined discount rate at some time in the future. And that some months later he would deliver the equipment on that basis, still about three months before the partnership came into existence. The premature, or at least early, delivery, with nothing in writing, seems to me much more consistent with an informal loan made because of the relationship between the parties, and perhaps also to save Mr Volpato the cost of storage.

7 The assertion that the agreement was reached “[e]arly in 2002” was consistent with, but less precise than, the allegation made in instructions given in an undated letter to the firm of the receiver and manager which, I conclude, was provided when the dispute first arose, that is, in the first week or two of November 2003. The letter is signed by both Mr Gorga and Mr Pagano and it uses the same expression, “[p]rior to February 2002”, with reference to the preliminary discussions, and then says the agreement “was reached” at a meeting involving Mr Gorga, Mr Volpato and Mr Mancuso, who is alleged to have taken minutes, “[i]n about February 2002”. By that agreement, the equipment was “valued at $35,000” and “we (ie the partnership which existed between Nicholas Mancuso, Tony Pagano and myself) would work off the debt by manufacturing stonework for Michael Volpato at a rate which would be agreed”.

not

“5. Bridgesaw – (Maurice [ie. Mr Gorga] to approach Michael Volpato re. Figure)”.

Mr Gorga made it clear, in his evidence, that the reference to a bridgesaw is a reference to the cross-cut saw which is one of the major items of the equipment in contention. That being so, if the meeting of intending partners of 24 April 2002 authorised Mr Gorga to approach Michael Volpato to put a figure on the bridgesaw, there cannot have been a concluded agreement in February to purchase all the equipment including the bridgesaw for $35,000. At the hearing, Mr Gorga gave oral evidence changing the statement in his affidavit about discussions with Messrs Mancuso and Volpato “[p]rior to February 2002” to “in early February 2002”, and changing the approximate date of the meeting at which he said the agreement was concluded from “[e]arly in 2002” to “in or around late April or May 2002”. In fact, a meeting as late as that could only have been held after 5 May 2002, since Mr Volpato’s passport shows he was absent from Australia from 8 April until 5 May 2002. No minute was produced or evidence given of any meeting of the intending partners after 24 April 2002 at which any negotiated figure in respect of the bridgesaw (either under that name or as a cross-cut saw) was discussed or accepted.

“We are instructed that an agreement was entered into by Mr Volpato from your client and Mr Pagano, Mr Gorga and Mr Mancuso from TSG [The Stone Group Australia] in late 2002. The terms of this agreement included:

(i) Your client would sell certain equipment to TSG including an Omec Crosscut saw and a Vector Radial Arm Jib crane.

(ii) As payment for this equipment TSG would provide services relating to stone supply and cutting to your client at agreed discounted rates to a value of $36,000.00.

We are instructed that the services provided total $37,279.00 and that on 19 December 2003 your client was provided with invoices for this amount. Pursuant to the agreement TSG is the rightful owner of the equipment.”

late

8 Another puzzling feature of the alleged contra-agreement is the absence of any reference to goods and services tax. The difficulty about the discounted rate, the ascertainment of which seems never to have been discussed, might possibly be overcome by the receipt of invoices without objection, but nothing in the evidence indicates how it was to be determined whether the total of $35,000 or $36,000 should be calculated by including or by excluding GST.

9 Stone manufacturing work was in fact done by the partnership on behalf of the plaintiff, as it had been previously by at least one of the companies forming the partnership, Interior Marble Pty Limited. Twenty-four invoices were sent by the partnership to the plaintiff between August 2002 and May 2003. The first and second defendants point to the fact that none of these invoices was paid up to the time the partnership was dissolved and the dispute arose. As to that, the plaintiff, while acknowledging it had made no complaint prior to May 2003, asserts dissatisfaction with work done earlier than that and major dissatisfaction from May 2003 onwards in respect of an important job known as the Vogue project, which the partnership abandoned. That delay in payment of invoices, in these circumstances, might not necessarily reflect the alleged contra-agreement is confirmed by the fact that separate invoices of the first defendant, although paid, were delayed and in some cases for many months, from October 2002 to July 2003. The plaintiff says that much more significance should be attributed to the form of the invoices, which made no reference at all to any contra-agreement, but on the contrary in terms required payment within 30 days. Also, their total exceeded the amount of $35,000, being $37,279, but nothing on the invoices themselves or in any accompanying letter or other document made any reference to any change in the partnership’s right to payment pursuant to its invoices upon the reaching of the total of $35,0000.

10 Perhaps more significant than the form of the invoices is certain evidence about them. “From time to time, “ Mr Gorga acknowledged in cross-examination, “there was [sic] profit and loss reports done and in those profit and loss reports we could see how much money obviously was owing from our clients.” Mr Gorga admitted, with some reluctance, that the books of the partnership did show the amount of the invoices sent to the plaintiff as an amount owing to the partnership. It was “shown in the books as a debt”. Consistently with this, the receiver and manager on 19 December 2003 made a demand on the plaintiff for the total of the invoices, being the sum of $37,279. While it is perhaps conceivable that an accounts clerk might send out invoices, omitting by an error to refer to an important contra-agreement, it is much more difficult to understand profit and loss reports and records for the partnership continuing for a period of in excess of a year to show a growing and ultimately large amount as owing to the partnership if the partners knew that it was not, but was instead paying off a substantial amount of equipment; and that this should happen without the accounts clerk, who was the wife of one of the partners, having the matter called to her attention, if not before, at least upon one of the occasions when profit and loss reports were presented to the partners, or without the accounts being otherwise corrected. Messrs Gorga, Pagano and Mancuso were all three business men who ran their own separate companies and must have had some understanding of accounting records. Mr Gorga certainly understood the significance of the point when it was raised with him in cross-examination.

11 Not only was the matter not corrected at any meeting of the partners; according both to Mr Volpato and the plaintiff’s accounts clerk, Nada McGrath, Mrs Pagano did not treat the invoices issued by the partnership as merely accumulating payment for the equipment, but kept telephoning to seek payment of them. Ms McGrath said “she was chasing money regularly”. Mr Volpato gave similar evidence. Mrs Pagano denied following up the invoices, except those issued by the first defendant company itself, but I accept the evidence of Ms McGrath and Mr Volpato. That evidence having been accepted, it is also significant that Mrs Pagano does not suggest she ever received a response from either Ms McGrath or Mr Volpato, or any assertion from either of them, to the effect that payment was not being made because of the contra-agreement.

12 For the first and second defendants, reliance was placed on an unsigned minute of a partners’ meeting of 11 July 2003 in which reference was made to a lack of working space at the partnership premises. Mr Mancuso is recorded as saying “that he was willing to come in this weekend to move all the stock in the way although with the decision to dissolve it would be better to sell Michael’s old saw, splitting the money and using that area as the work bay.” Mr Mancuso admitted that he had said this, and the submission for the first and second defendants was that it involved an assertion that the partnership did own the cross-cut saw which was an important item in the equipment in contention in this case. However, Mr Mancuso explained in evidence that at the time of the meeting in question he was simply accepting Mr Gorga’s assurance that he had arranged with Mr Volpato the acquisition by the partnership of the saw. A further minute relied upon by the first and second defendants is one labelled “DRAFT ONLY” relating to a meeting of the partners with their accountant on 18 September 2003 which was not shown ever to have been adopted. It contained a heading “Equipment Purchased by the Partnership” beneath which were grouped three items, the first being “Blades and small equipment purchased” and the third being “Telephone equipment – on lease”. The third item clearly casts some doubt on the accuracy of the heading as a description of all that follows, but the item relied on by the first and second defendants is the second which reads as follows:

“Volpato Machine, Edge liner, furniture, and new machine to be valued. (Note – if any amounts are still outstanding on these machines then the creditors will also have to be paid out)”.

13 Although the documents minuting meetings of 11 July and 18 September 2003 to which I have referred were put into evidence, there was no minute tendered that corresponded to the minute alleged by Mr Gorga to have been signed by Mr Mancuso and himself, and also by Mr Volpato, setting out the alleged contra-agreement. Mr Mancuso and Mr Volpato, of course, denied that any such minute had ever been signed and that any such agreement had ever been made by them or in their presence. For the first and second defendants, it was contended that the alleged minute had been kept by Mr Mancuso or his wife, Mrs Mancuso, and had been placed in a file called the Churchill Street file at the premises at 6-8 Churchill Street, Silverwater, that file being under the control of Mr and Mrs Mancuso. Although the hearing proceeded on affidavit evidence, on the second day one Rose Taberner was called by counsel for the first and second defendants to give oral evidence that she had been unemployed since 2001 and had at one time done casual work for Mr and Mrs Mancuso who were neighbours. Her evidence was extremely vague and confused, but she did say that she knew of a file which was referred to as the Churchill Street file and that she had filed documents in that file. Ms Taberner’s evidence gave the impression that she would be most unlikely to have understood business documents of the least complexity, and she did not claim to have read documents in the file but merely to have observed what they were. Her evidence was not evidence on which I would feel able to place any reliance. However, she did say that there were minutes containing a reference to “Volpato Machinery”. It will be obvious from what I have already written that what she claimed to have seen could have been a document which was put into evidence, not the alleged missing minute, but the draft minute of 18 September 2003. Furthermore, the evidence shows that a copy of the minutes of the meeting of 24 April 2002, in which reference was made to the “Bridgesaw”, previously discussed, and to the name, Michael Volpato, were sent by Mrs Pagano on 30 April 2002 by facsimile to one “Miriam”. The first name of Mrs Mancuso, who was also the sister of Mr Volpato, is Miriam. So if Ms Taberner saw in a file under the control of Mrs Mancuso a reference to Mr Volpato and some machinery, it is entirely possible that what she saw was a minute relating to the meeting of 24 April 2002, not any missing minute.

14 On the whole of the evidence, I have come to the conclusion that, while probably some consideration was given, particularly by Mr Gorga, to the possibility of acquiring the equipment or some of the equipment, no agreement to do so was ever concluded. I find that all of the equipment claimed was delivered on the basis alleged by the plaintiff and subject to an implied promise to hand it back upon demand. On the evidence, the first and second defendants have converted the equipment and are liable accordingly. However, I do not find any damages have been proved beyond the value of the goods, that is to say, for loss of the use of the goods over the past approximately two years. That is because the goods were not in use at the time of the loan made to the intending partners and the loan was free of rent or other remuneration. It may be the parties can now arrange for the return of the goods in an expeditious fashion, so I shall delay making orders to give them that opportunity. I shall direct that short minutes of appropriate orders, including an order for costs against the first and second defendants, be brought in at a convenient date after a short delay for the purpose I have indicated.

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Citations

v S International Pty Limited v Interior Marble Pty Limited [2005] NSWSC 1142

Cases Citing This Decision

0

Cases Cited

2

Statutory Material Cited

0

Myer Stores Limited v Jovanovic [2004] VSC 478

Hobbs v Petersham Transport Co Pty Ltd [1971] HCA 26

CITATION:	V S International Pty Limited v Interior Marble Pty Limited [2005] NSWSC 1142
HEARING DATE(S):	25-26/08/05
JUDGMENT DATE :	11 November 2005
JUDGMENT OF:	Burchett AJ
DECISION:	Order to be made in favour of the plaintiff for conversion of goods.

CATCHWORDS:	Bailment by informal loan of equipment - implied promise to return - conduct of bailees amounting to conversion.
CASES CITED:	Myer Stores Limited v Jovanovic [2004] VSC 478 The Plasycoed Collieries Company, Limited v Partridge, Jones & Co, Limited [1912] 2 KB 345 Penfolds Wines Proprietary Limited v Elliott [1946] 74 CLR 204 Borden (UK) Ltd v Scottish Timber Products Ltd [1979] 3 All ER 961 Hobbs v Petersham Transport Co Pty Limited (1971) 124 CLR 220
PARTIES:	V S International Pty Limited (plaintiff) Interior Marble Pty Limited (first defendant) The Stone Group Pty Limited (second defendant) Mondo Stone Pty Limited (third defendant)
FILE NUMBER(S):	SC 5220 of 2004
COUNSEL:	M W Sneddon (plaintiff) A Gemmell (defendant)
SOLICITORS:	Gye Associates Lawyers (plaintiff) Bartier Perry (first and second defendants)