Walker v Sell
[2016] FCA 1259
•27 October 2016
FEDERAL COURT OF AUSTRALIA
Walker v Sell [2016] FCA 1259
Appeal from:
Cross-appeal from:
Walker v Sell [2016] FCCA 452
Walker v Sell (No.2) [2016] FCCA 654
File number: NSD 409 of 2016 Judge: BROMWICH J Date of judgment: 27 October 2016 Catchwords: SALE OF GOODS – appeal from Federal Circuit Court – advertisement of private sale of particular model of collectable car on Gumtree – application of ss 18 and 61 of the Goods Act 1958 (Vic) – meaning of “sale by description” – inspection of car by purchaser – contract for private sale of collectable car – common mistake that car was particular model – post-settlement inspection revealed car was a different model and worth $110,000 less than purchase price – whether vendor or purchaser shoulders risk of the transaction – whether purchaser’s inspection was reasonable – where purchaser had opportunity for expert inspection during one year settlement period – held purchaser shoulders risk – held sale not “by” description –appeal dismissed with costs
CONSUMER LAW – whether private sale advertised on Gumtree is in “trade or commerce” – held not in trade or commerce – whether accrued federal jurisdiction still enlivened if private sale is not in “trade and commerce” – whether consumer claim brought under State or federal jurisdiction – held claim brought under State jurisdiction per s 18 of the Australian Consumer Law (Victoria) – held direct federal jurisdiction not engaged – held accrued federal jurisdiction still enlivened as absence of engagement of direct federal jurisdiction not “colourable”
CONTRACTS – whether particular model of car was express or implied term of the contract for sale – nature of legal relations characterised by objective intention and conduct of the parties as per Toll v Alphapharm – held model of car not an express or implied term – whether oral term of the contract allowed purchaser to rescind on expert valuation – held that oral term allowed purchaser to rescind, but no expert valuation and therefore no rescission
COSTS – cross-appeal to seek to increase fixed costs sum awarded in Federal Circuit Court – interlocutory application seeking to adduce fresh evidence on costs to support increased award of costs – where letter of compromise not put before primary judge – held no error in primary judge’s exercise of discretion to award fixed costs where offer of compromise was not put before primary judge – held cross-appeal and interlocutory application dismissed with costs
Legislation: Australian Consumer Law and Fair Trading Act 2012 (Vic)
Australian Consumer Law (Victoria), s 18
Competition and Consumer Act 2010 (Cth), Sch 2
Evidence Act 1995 (Cth), ss 191, 191(2)(b)
Federal Circuit Court Rules 2001 (Cth), Sch 1
Federal Court Rules 2011 (Cth), rr 1.32, 1.34, 1.35, 25.01, 25.03
Goods Act 1958 (Vic), ss 18, 61
Legal Profession Uniform Law (NSW), s 172
Sale of Goods Act 1923 (NSW), s18
Cases cited: Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441
Australian Knitting Mills Limited v Grant (1933) 50 CLR 387
Beale v Taylor [1967] 3 All ER 253
Bell v Lever Brothers Ltd [1932] AC 161
Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424
Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 76 ALR 173
Cabal v United Mexican States [2001] FCA 427; (2001) 108 FCR 311
Cassar v Pegoraro [2011] VCC 819
Concrete Constructions (NSW) Pty Limited v Nelson (1990) 169 CLR 594
Grant v Australian Knitting Mills Limited (1935) 54 CLR 49
Harlingdon and Leinster Enterprises Ltd. v Christopher
Hull Fine Art Ltd. [1991] 1 QB 564
Hearn v O’Rourke [2003] FCAFC 78; (2003) 129 FCR 64
Li Pei Ye v Crown Limited [2004] FCAFC 8
Marks v Hunt Brothers(Sydney) Pty Ltd (1958) 58 SRNSW 380
O’Brien v Smolonogov (1983) 53 ALR 107
Re Ku-ring-gai Co-operative Building Society (No 12) (1978) 22 ALR 621
Sammut v De Rome [2011] QDC 294
Sobey v Nicol and Davies [2007] FCAFC 136; (2007) 245 ALR 389
Thornett & Fehr v Beers & Son [1919] 1 KB 486
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Tsoutsouras v Wilson [2007] NSWLC 24
Varley v Whipp [1900] 1 QB 513
Warren v Combes (1979) 142 CLR 531
Date of hearing: 22 July 2016 Date of last submissions: 4 August 2016 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 138 Counsel for the Appellant and Cross-Respondent: Mr J Emmett Solicitor for the Appellant and Cross-Respondent: Harris & Company Solicitor for the Respondent and Cross-Appellant: Mr S Chandrasegaran, Albury Legal Pty Ltd ORDERS
NSD 409 of 2016 BETWEEN: LYLE WALKER
Appellant
AND: GLEN SELL
Respondent
AND BETWEEN: GLEN SELL
Cross-Appellant
AND: LYLE WALKER
Cross-Respondent
JUDGE:
BROMWICH J
DATE OF ORDER:
27 OCTOBER 2016
THE COURT ORDERS THAT:
1.The appeal be dismissed with costs.
2.The respondent/cross-appellant’s interlocutory application be dismissed with costs.
3.The cross-appeal be dismissed with costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BROMWICH J:
This is an appeal from orders made by a judge of the Federal Circuit Court of Australia on 3 March 2016, by which his Honour dismissed an application supported by a statement of claim and reserved the quantification of costs to be paid by the applicant to the respondent. This is also a cross-appeal by the successful respondent in the Court below against the limited quantum of costs ultimately awarded to him on 7 April 2016, being party-party costs in the sum of $14,162.17, together with an interlocutory application by the respondent/cross-appellant to adduce additional evidence on the costs cross-appeal.
The main controversy in these proceedings concerns the question of who should bear the loss on the sale of a collectable motor vehicle which was later found not to be the particular model that both the vendor and purchaser had believed it to be. It was common ground that the car was not worth the purchase price paid. That is, the issue to be resolved was who, as a matter of contract law or statute, should bear the risk of the car not being genuine. The primary judge found in favour of the vendor. For the reasons that follow, the appeal must be dismissed with costs.
Because the appeal must be dismissed, the respondent’s cross-appeal on costs and the related interlocutory application to adduce further evidence in aid of that cross-appeal had to be determined. For the reasons that follow, both the cross-appeal and interlocutory application must be dismissed with costs.
Overview
On or about 21 August 2013, the appellant purchaser, Mr Lyle Walker, entered into a contract with the respondent vendor, Mr Glen Sell, to buy a car for $135,000. A deposit of $10,000 was paid on that day, with the balance to be paid over the following eight months. The car remained with Mr Sell until the final payment was made by Mr Walker. In the result, that period was extended until just under 12 months, at which time the final payment was made and the car was picked up by Mr Walker.
It was the common belief of Mr Walker and Mr Sell that the car was a genuine 1970 GTHO model Ford Falcon Sedan, but with a different engine block and different colour (the car being changed from the original blue to red). That common belief of genuineness proved to be wrong. A week after taking possession of the car, Mr Walker arranged for it to be inspected with a view to having it restored. The car was put on a hoist and the person inspecting it, self-described as not an expert on such cars, apparently immediately said that it was not genuine because there were about 20 things that he could already see were not correct.
Mr Sell honestly believed that the car was in fact a genuine 1970 Ford GTHO Falcon Sedan because as a part of his divorce settlement several years earlier his ex-wife insisted on the car being valued. She chose the valuer. The valuation obtained at that time incorrectly confirmed its identity, albeit upon the rather unsatisfactory basis of simply taking at face value the affixed vehicle identification number (VIN) plate and a letter from Ford confirming identity upon that basis of only that VIN. As part of the divorce settlement, Mr Sell sold his house and paid his ex-wife $48,000. A live issue at trial and on appeal was whether the description of the car provided by Mr Sell was conveyed as being only his belief or not.
Immediately after Mr Walker discovered that the car was not in fact a 1970 Ford GTHO Falcon Sedan, he rang Mr Sell to let him know that the car was not genuine and subsequently sought a refund. When that was not successful he commenced proceedings in the Federal Circuit Court of Australia.
It was agreed between the parties that rather than the car being a 1970 Ford GTHO Falcon Sedan, it was a different model Ford Falcon with a lesser market value of $25,000, leaving a loss of $110,000 to be incurred by either Mr Sell or Mr Walker. It apparently was not in doubt that both parties were innocent victims of a fraud perpetrated by someone on Mr Sell when he bought the car some 30 years ago from a Mr Paul Ward. It is not possible to say who was responsible for that fraud.
In the Federal Circuit Court
The proceedings in the Federal Circuit Court were commenced by an application and statement of claim. The case as pleaded:
(1)relied upon an express term of the contract that the car was “an original 1970 XW GTHO Ford Falcon”;
(2)alternatively or additionally pleaded an implied term of the contract that the car would correspond with the description by which it was sold pursuant to s 18 of the Goods Act 1958 (Vic) or the corresponding provision in the Sale of Goods Act 1923 (NSW); and
(3)relied on either the express or implied term having been breached as the car was not in fact an original 1970 XW GTHO Ford Falcon.
It is common ground that the sale in fact took place wholly in Victoria and accordingly it was the Victorian Goods Act and not the NSW Sale of Goods Act that applied. Although the primary judge erroneously referred to the Sale of Goods Act, nothing turns on that error.
Sections 18 and 61 of the Goods Act provided as follows:
18Sale by description
When there is a contract for the sale of goods by description there is an implied condition that the goods shall correspond with the description; and if the sale be by sample as well as by description it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description.
61Exclusion of implied terms and conditions
Where any right duty or liability would arise under a contract of sale by implication of law it may be negatived or varied by express agreement or by the course of dealing between the parties or by usage if the usage be such as to bind both parties to the contract.
As detailed below, the cases dealing with sale by description provisions such as s 18 of the Goods Act and equivalent provisions in Australia and the United Kingdom have produced diverse results. This is largely as a result of factual differences, but also arising from nuanced differences in legal interpretation of the effect of the statutory departure from common law principles of caveat emptor (let the buyer beware) in favour, to some degree, of caveat venditor (let the seller beware).
The defence pleaded by Mr Sell in the Court below essentially asserted that the reference to the car in the documents signed on 21 August 2013 was no more than a general description and that no more had been represented than a belief on the part of Mr Sell that the car matched the description given. In particular, [13(iii)] of the defence stated “The Respondent made it clear to the Applicant that any statements he made about the Vehicle were made to the best of his knowledge and belief”.
Mr Walker’s case in the alternative was that there had been misleading or deceptive conduct in trade or commerce contrary to s 18 of what was referred to as the Australian Consumer Law. For the reasons discussed below, the correct description was the Australian Consumer Law (Victoria). Mr Sell pleaded that the transaction was not “in trade or commerce” so that s 18 did not apply. This was important, because this claim was the means by which federal jurisdiction was purportedly engaged, giving the Court below and this Court jurisdiction to entertain Mr Walker’s claim.
As detailed below, the jurisdictional issue concerning “trade or commerce” was not just the subject of pleadings, but was expressly identified in writing by the parties in the Court below as an issue to be determined. However, this express issue was not addressed. It was not even mentioned in the reasons of the Court below beyond stating (incorrectly as it turns out) at [1] that the application was “within the Court’s jurisdiction under s. 138A of the Australian Consumer Law”. Instead of grappling with the jurisdictional issue raised, the claim was dismissed on a factual basis.
The factual resolution of an issue raising jurisdictional questions will not suffice if might affect the capacity of a federal court to entertain a case at all. Failure on the part of the primary judge to address the jurisdictional question squarely raised in this case was unsatisfactory. That is not just because the factual conclusion reached is at least questionable and no satisfactory reasoning explains how it was arrived at. More importantly, such jurisdictional issues, once raised, must be determined in federal courts as a threshold issue, especially if, as in this case, that is the only way in which the jurisdiction of the Court below (and this Court) was engaged. The proper determination of a question of jurisdiction may result in a federal court being unable to entertain and adjudicate upon the proceedings at all, including the balance of the claims otherwise beyond jurisdiction. This issue of jurisdiction is addressed below.
In the proceedings before the primary judge a statement of agreed facts and issues was filed in the following terms:
Agreed Facts
1.In or about August 2013, the Respondent advertised for sale on the Gumtree website a vehicle described as a ‘1970 Ford GTHO Falcon Sedan’ (the Vehicle).
2.On about 21 August 2013, the Respondent made representations to the Applicant to the effect that the Vehicle was a 1970 Ford GTHO Falcon Sedan, with the exception of the Vehicle’s engine block and colour.
3.On about 21 August 2013, the Applicant inspected the vehicle at the Respondent’s home and agreed to purchase the Vehicle from the Respondent for $135,000.
4.During the inspection, the Respondent provided the Applicant with a letter from Ford Motor Company that purportedly described the Vehicle as a Ford XW GT HO Sedan.
5.The Applicant and Respondent signed a written document recording the sale on about 21 August 2013. This document described the Vehicle as a ‘GTHO 1970’.
6.The Applicant paid the purchase price to the [Respondent] over the course of the next 12 months.
7.The Applicant did not have the Vehicle inspected by an expert at any time before he took possession of the Vehicle.
8.The Applicant took possession of the Vehicle in August 2014.
9.The Vehicle is not a 1970 Ford GTHO Falcon Sedan. Its current market value is $25,000.
Agreed Issues
1.Whether the contract of sale has implied into it a term that the vehicle must conform to its description.
2.Whether the Respondent made an oral representation to the Applicant that the Respondent’s description of the Vehicle was only made to the best of the Respondent’s knowledge and whether, if such a representation was made, it will impact the Respondent’s liability.
3.Whether it was a term of the Contract for sale of the Vehicle that the Applicant was to undertake his own investigations and due diligence into the Vehicle.
4.Whether the sale of the Vehicle arose in trade or commerce.
5.Whether the Federal Circuit Court has jurisdiction to hear the dispute.
It should be noted that while the above facts were agreed by the parties, and the hearing both at first instance and on appeal proceeded upon that basis, the formal requirements of s 191 of the Evidence Act 1995 (Cth) regarding agreement as to facts were not observed in that the agreement was not signed by either the parties or by their lawyers. Accordingly, the restriction on adducing evidence to contradict or qualify an agreed fact without leave contained in s 191(2)(b) did not apply, if indeed the agreed facts were properly binding in any event.
As it turned out, the only material sense in which the agreed facts were disputed and sought to be qualified by the evidence before the primary judge and agitated on appeal in this Court was that paragraph 2 of the agreed facts, reproduced above, which acknowledges representations to the effect that the car was a 1970 Ford GTHO Falcon Sedan, was sought to be qualified by Mr Sell to the effect that this was a representation to the best of his knowledge, rather than an absolute representation as to that being the fact. This qualification assumed some importance because it went to the question of reliance, and was consistent with the defence already pleaded, as outlined above.
The hearing before the primary judge took place on 3 March 2016. Both Mr Walker and Mr Sell gave evidence and each was subject to cross-examination. His Honour delivered a very short ex tempore judgment the same day. That judgment provides little in the way of factual or legal analysis, effectively leaving that to be done for the first time on appeal. His Honour did, however, make some important factual and credit findings, albeit expressed in the form of conclusions rather than reasons, for which he had the advantage of viewing the witnesses, and in particular the two parties in cross-examination. Those conclusions are set out after a summary of the evidence below, in order to understand better what his Honour was referring to.
The primary judge dismissed Mr Walker’s application with costs (the quantum of which was the subject of the present cross-appeal by Mr Sell). In relation to Mr Walker’s case that this was a sale by description, the primary judge concluded that Mr Walker had made his own decision as to whether to purchase the car based on his own inspection, which his Honour found was not reasonable. His Honour therefore found there was no breach of contract by Mr Sell.
In relation to the case of misleading or deceptive conduct, the primary judge found that Mr Walker relied upon his own erroneous assessment as to the genuineness of the car and that any reliance by him upon any representation by Mr Sell was not reasonable. Accordingly, his Honour found that no contravention of s 18 of the Australian Consumer Law was made out.
In a separate and subsequent judgment on the quantum of costs, the primary judge ordered Mr Walker to pay Mr Sell’s costs fixed in the sum of $14,162.17, being what his Honour determined to be party-party costs and disbursements as a subset of the full costs and disbursements incurred of $39,386.60, which was sought to be the subject of an indemnity costs order.
As noted above, that costs order was the subject of a cross-appeal by Mr Sell and a related interlocutory application seeking to adduce fresh evidence on appeal, being a Calderbank letter (or, in the alternative, a notice of offer of compromise) dated 1 July 2015, a notice of offer to compromise dated 30 July 2015 and copies of various invoices and receipts as to the incurring of various costs and disbursements.
Proceedings in this Court
On 23 March 2016, Mr Walker filed a notice of appeal. On 20 April 2016, that was replaced by a supplementary notice of appeal, which was the document upon which the appeal was ultimately heard, the grounds being as follows:
1.His Honour erred in holding that the sale that was the subject of the proceedings below was not a sale by description.
2.His Honour erred in finding that the Appellant did not rely on any representations made by the Respondent.
3.His Honour erred in finding, if he did so find that any reliance on the representations made by the Respondent was not reasonable.
4.His Honour’s finding that a reasonable inspection by the Appellant would have discovered that the vehicle was not, in fact, a 1970 Ford GTHO Falcon Sedan was not supported by the evidence.
5.His Honour did not determine the Appellant’s claim for breach of an express term of the Contract.
Appeals to this Court are by way of a rehearing: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 at 434 [20]. An appeal by way of rehearing requires this Court to decide the case for itself as to both facts and law and give effect to its own judgment: Warren v Combes (1979) 142 CLR 531 at 552.5. However, that does not alter the need to find error on appeal before intervening: Branir at 435 [21]. In practice, the application of these principles will usually entail accepting the findings of the trial judge, especially factual findings, including as to the reliability and credit of witnesses and the weight that should be given to competing evidence, unless shown to be wrong: Cabal v United Mexican States [2001] FCA 427; (2001) 108 FCR 311 at 362 [223]-[224], quoted with approval in Branir at 435 [23].
In this case, I can see no reason why I should not accept and apply the credit and reliability findings of the primary judge as summarised below. His Honour had the advantage of seeing the parties give evidence in cross-examination and thereby in deciding which account should be preferred at points of conflict. In any event, many of the key findings do not turn on resolving any such conflict. Further, the paucity of reasoning by the primary judge gives me a relatively free hand in deciding what to make of the evidence before his Honour, applying the legal principles contained in the authorities discussed below.
Key evidence in the Court below
The critical evidence on the appeal goes to the question of whether there was a sale by description, as opposed to, for example, by inspection with a description to identify the specific car. A related question was whether, objectively rather than subjectively, there was reliance on the description that was provided. The evidence reproduced below needs to be considered in the context of the statement of agreed facts reproduced in part above. In these reasons I have largely avoided referring to, or relying upon, evidence which is disputed unless it goes directly to the issues in dispute. The ambit of relevant factual dispute, in the sense of making any difference to the outcome of the appeal, was in any event quite narrow.
The key documentary evidence was as follows:
(1)A letter from Ford dated 9 August 1995, which acknowledged a letter from Mr Sell, which listed the serial prefix and serial numbers that must have been provided by Mr Sell from the VIN plate and advised, on its face upon that basis alone, that the car was originally built in 1970 as a Falcon GT model 18939 XW GT HO Sedan, along with certain other details, including the original blue colour.
(2)A 21 August 2013 contract signed by the parties which included these sentences “I Glen Sell will state that I will hold said vehicle GTHO 1970 Vin: JG33KP16488 for a period of 8 months maximum. Final payment to be made no later than 21st Day April 2014”, and acknowledged payment of a $10,000 deposit that day.
(3)A subsequent version of the same 21 August 2013 document with additional text recording:
(a)the initial $10,000 deposit payment;
(b)four subsequent payments between 4 September 2013 and 12 April 2014 totalling a further $85,000, leaving a balance of $40,000 owing as of 12 April 2014;
(c)an extension of time of four months to pay the remaining $40,000 and an extension of time of time of two months to pay an interest amount of $3,500; and
(d)stating a balance paid of $40,000 plus an additional $1,280 for insurance and registration on 7 August 2014.
(4)Two reports by a car expert, Mr Cuthbert. The first report was prepared well before the contract in this case was formed (being for the divorce proceedings between Mr Sell and his ex-wife) and concluded that the car was genuine. The second report was prepared for the purpose of these proceedings and stated that upon further inspection, the car was not genuine.
The key affidavit and oral evidence (in cross-examination) of Mr Walker and of Mr Sell going to the topics of sale by description or reliance is reproduced below.
In his affidavit sworn 20 November 2014, Mr Walker deposed to the following (as per original):
4.Shortly after I replied to the Advertisement, I had a telephone conversation with [Mr Sell] to the following effect:
I said: ‘what is the year and model of the car?’
He said: ‘it’s a 1970 XW GTHO Falcon.’
I said: ‘can you tell me about it?’
He said: ‘its in very good condition. The only changes to it are the engine which blew several years ago and the colour. It was originally starlight blue but I repainted it track red a long time ago, no one wanted a blue muscle car back in the 1970s.’
I said: ‘I’d like to come and have a look at it.’
He said: ‘Ok, its in Wodonga.’
…
8.I inspected the Vehicle for approximately 30 minutes. During this time, I had a conversation with [Mr Sell] to the following effect:
I said: ‘can you show me the Vehicle Identification Number on the shock tower, radiator support panel and compliance plate?’
He said: ‘yes, but you can’t see the number on the shock tower very well, it was painted over when the car was resprayed from starlight blue to track red.’
I observed that the VIN contained the serial prefix ‘JG33’, which I understand to be that which corresponds to a GT Falcon. I also observed that the VIN located on the compliance plate and radiator support panel was identical. While I could not clearly see the VIN on the shock tower, I could see that it contained the ‘JG33’ prefix.
9.I then had a further conversation with [Mr Sell] to the following effect:
I said: ‘why are you selling the car?’
He said: ‘I just had to pay my ex-wife a lot of money as part of a divorce settlement and I am looking to buy a house soon. I don’t really want to sell the car but I need the money.’
I said: ‘How long have you owned the car?’
He said: ‘I bought it about 35 years ago. I’ve used it for personal use and weddings recently.’
I said: ‘Is it a Phase 2 GTHO?’
He said: ‘Yes, I have a Ford verification letter describing it as a Phase 2 with the relevant details. But, I’m led to believe that it is a Phase 2.5, because it has the bonnet of a Phase 3. This car is actually more rare than a Phase 2. It is one of only seven with this bonnet, it doesn’t have bonnet pins like a phase 2.’
I said: ‘Do you have log books?’
He said: ‘No, they were lost a long time ago.’
I said: ‘Has the car ever been restored?’
He said: ‘No, apart from the new engine and respray to change the colour. Everything else is original.’
I said: ‘What happened to the original engine?’
He said: ‘It blew. The original engine was a D Block. You can pick up a D Block for about $3,500.’
…
12.After about 5 minutes, I entered [Mr Sell’s] house with Mr Naumovski and had a conversation with [Mr Sell] to the following effect:
I said: ‘Do you have the letter from Ford you mentioned earlier?’
He said: ‘Yes’. [Mr Sell] then handed me a letter on ‘Ford’ letterhead, as well as the certificate of registration for the Vehicle. The letter contained the same VIN as the certificate of registration and that which I had observed on the Vehicle. The letter stated that the VIN corresponded with a Phase 2 GTHO Falcon.
In his affidavit sworn 28 August 2015, Mr Sell deposed to the following:
8.The reasons for my belief in the genuineness of the car are as follows:
(a)I trusted Mr Ward and did not doubt his word that the car was genuine when I bought it from him;
(b)I made my own personal enquiries with the Ford Customer Assistance Centre and was provided with a letter from the Centre dated 9 August 1995 stating that the car was originally built in 1970 as a Falcon Gt with the Model Code 18939 XW GT HO Sedan; and,
(c)When my marriage broke down in 2005, as part of my divorce property settlement, my former wife insisted on a full expert valuation being conducted of the car. The expert valuer (Mr Graeme Cuthbert of Melbourne) came to Wodonga and spent some hours inspecting the car before assessing it as a genuine GT HO Sedan and valuing it at $80,000.00.
…
13.On a Wednesday or a Thursday, I received a telephone call from [Mr Walker] (who I had never known before). [Mr Walker] introduced himself to me.
He then said, “I am interested in the GT. Is it an original?”
I told him, “No, this is why it is going so cheap. If it was a complete original it would be selling for almost double the price. It is a genuine item but not original condition.”
He then asked me, “What is wrong with the GT?”
I replied, “It does not have the original block or paint job. It is supposed to be Starlite Blue, not Track Red. When I bought the GT 30 years ago, this is how I got it and nothing has been changed. When I got the GT repainted I went back to red because I love red. I never intended on selling the car. The only reason I am now selling is because I lost my family home through a divorce and want to buy another house. This is the only way I can do it.”
14.I told [Mr Walker] that I had a letter from the Vic Ford Motor company stating that the car was genuine. I also told [Mr Walker] I had a letter from Graham Cuthbert (a Melbourne expert car valuer) which also confirmed this. I told him Mr Cuthbert was chosen by my ex-wife’s solicitor to value the car and I had no say in it.
15.I then told [Mr Walker] that to the best of my knowledge everything else was fine. He said, “That’s okay” and that he would still like to come and look at the car. I told him no worries and just asked him to let me know when he would like to look at the car.
…
21.When I returned to the garage, I lifted the car bonnet up to show [Mr Walker] what I said was true about the block. I also told him “I am not sure on the radiator support and there have been suggestions it is not right.” I showed him damage caused by spilt brake fluid to the engine and engine bay, but he did not seem concerned about it.
…
29.[Mr Walker] then told me that the only thing that he wants to do is to get his own valuation done before he pays the car off. He told me he has a friend in Sydney he can send down to look at it. I told [Mr Walker], “Lyle, that would not be a problem. The only thing is that I want to be here when your friend checks out the GT. No offence, but I don’t trust anyone.”
…
34.At no point after 21 August 2013 did [Mr Walker] ask to make arrangements for any inspection of the car.
In his affidavit in reply sworn 17 September 2015, Mr Walker deposed to the following:
5.In relation to paragraph 8 of [Mr Sell’s] Affidavit:
(a)Prior to purchasing the Vehicle (as defined in my affidavit sworn 20 November 2014), [Mr Sell] did not disclose who he purchased the Vehicle from;
(b)[Mr Sell] provided me with the letter referred to in paragraph 8(b) of his affidavit; and
(c)[Mr Sell] did not give me a copy of any document from Mr Cuthbert, nor did he tell me that Mr Cuthbert valued the Vehicle in 2005 at $80,000.
…
11.In relation to paragraph 21 of [Mr Sell’s] Affidavit, I deny that [Mr Sell] has ever said to me ‘I am not sure on the radiator support and there have been suggestions it is not right.’ Had [Mr Sell] said this to me, I would not have purchased the Vehicle. This is because at the time, I was aware that the Vehicle Identification Number, which is critical to establishing the identity of a vehicle, was stamped on the radiator support panel. In relation to the final sentence of paragraph 21 of [Mr Sell’s] Affidavit, I was not concerned about the stain on the engine from the brake fluid, as I intended to recondition the engine and restore the vehicle in any case.
…
14.In relation to paragraph 29 of [Mr Sell’s] Affidavit, I deny the conversation set out in that paragraph. As I had agreed to purchase the Vehicle for $135,000, I did not intend to have the Vehicle valued. I did, however, want to have the Vehicle restored, as described in paragraph 26 of my affidavit sworn 20 November 2014.
The relevant passages of Mr Walker’s evidence in cross-examination by Mr Chandrasegaran, solicitor for Mr Sell, were as follows:
MR CHANDRASEGARAN: In signing to buy the car, you signed to do so based on your personal inspection of the car on that occasion, didn’t you? When you actually went to Wodonga, you saw the car. You had a look at it. According to your affidavit, you spent a fair amount of time looking at the car. And then you decided to buy it based on your personal inspection of the car; is that correct?---With my witness, that’s correct.
…
MR CHANDRASEGARAN: After seeing the car, you offered to purchase it, in the end, for $135,000; is that correct?---Sorry, can you repeat the question?
After inspecting the car on that one occasion in Wodonga - - - ?---Yes.
You had made this decision to buy it for 135,000; is that correct?---That’s correct.
…
MR CHANDRASEGARAN: … So when you say that you were relying on things that Mr Sell told you, that – about the car and that it was a genuine car - - -?---I did not say I was relying on what Mr Sell told me only.
So what were you relying on?---I wanted to see, you know, the evidence of – that the car was genuine. I wanted to see his registration papers. I wanted to see his – you know, whether stampings were on the vehicle, the VIN – chassis number.
All right?---I wanted to see reports – a letter from Ford.
Yes. And when you asked for those things, did you see them?---Yes, I see them.
Did Mr Sell show them to you?---He showed me to – them to me, except - - -
Did he open the bonnet of the car so you could look at the VIN – the numbers?---He did. He did. I asked him about them.
So you really weren’t relying on Mr Sell’s opinion about the genuineness of the car. You had made your – you were relying on your own observations, weren’t you?---My own observation, as well as Mr Sell’s – I wanted to hear about what he was talking to me – about the car, about - - -
But $135,000 is a lot of money, isn’t it?---Yes.
And you had only just known Mr Sell. You hadn’t had a long period of association with Mr Sell?---That’s correct.
So it would have been prudent for you to have got your own expert, independently, to come in to look at the car, wouldn’t it?---Sorry, I don’t understand what you – prudent - - -
It would have been prudent – careful?---What does “prudent” mean, sorry?
Sensible, prudent, careful - - -?---No.
No?---No, not when I had all the VIN, chassis number and all that stuff before me, the rego papers, the letter from Ford. That, to me, would indicate that the car is genuine. And I spoke to Mr Sell about the car, and he told me that they were all genuine.
He told you that they were all genuine?---He told me that the car, sorry, I - - -
Sorry, he told you the car was genuine?---That’s correct.
Did he tell you that the car was genuine, to the best of his knowledge?---No. He did not say that. He never said that. That’s incorrect.
I put it to you that Mr Sell did say that to you, that - - -?---That’s incorrect.
He said, as far as he was aware, it was a genuine GTHO?---That’s not correct.
…
MR CHANDRASEGARAN: … I suggest to you, Mr Walker, that you also told Mr Sell that you would get your – you had a friend in Sydney, and you would get that friend to come to Wodonga to inspect the car before you paid the car off. Do you recall saying that to Mr Sell?---Yes. I said that in the initial conversation.
And in response Mr Sell agreed to let your friend have a look at it, but only if he were present at the same time, to make sure nothing happened to the car?---Yes.
Do you recall his response?---Yes.
And I would suggest to you that on one of the occasions when you called into his house to drop in an instalment of cash, around about Christmas 2013, Mr Sell asked you when you would likely get your – he called it “evaluator” – to value the car. And you replied to him that it would be within the next two months. Do you recall saying that to him?---Yes.
…
HIS HONOUR: …---… But they [Mr Sell and his partner] did ask me, on a number of occasions, “Do you want your friend to come down and see it?” And I was – kept saying yes – kept saying yes, but eventually I just – yes. I didn’t. To me, all the evidence was there that the car was a genuine vehicle, from the stampings and the rego papers and the letter from Ford.
The relevant passages of Mr Sell’s evidence in cross-examination by Mr Spencer, counsel for Mr Walker at trial, were as follows:
MR SPENCER: … Well, you were aware that – on your understanding of it, at least from 2010, you understood that you had a car worth about $80,000?---Mr Cuthbert come and valued the car for approximately $80,000. He said to me that with the scratches, the bits that need doing, everything else, he said that’s all he could value it at. He told me it’s worth between 80 and 150 as is.
Yes. And so the answer to my question is that you were aware, at least from the time that you met Mr Cuthbert, that you had a car that was worth at least $80,000?---Yes.
And you’re aware that authenticity was a significant component in the value of that car, weren’t you?---Yes.
…
MR SPENCER: You knew that what he wanted was a genuine GTA Charger?---Yes.
And he didn’t want an XY rebodied car that had never been a GTA Charger in any shape, or form, did he? You knew that?---I didn’t know that. I didn’t [sic] it was an XY.
I’m not asking you that question, but you knew that what Mr Walker wanted was a GTA - - -?---Yes.
MR CHANDRASEGARAN: Your Honour, how could the witness comment - - -
HIS HONOUR: No. I will allow the cross-examination.
MR SPENCER: You understood fully, at the time that Mr Walker came, that what he was after was a genuine GTA Charger?---Genuine. Yes.
Yes. Now, you didn’t show him Mr Cuthbert’s report, did you?---Well, there was no need for it. I told him a report. [Mr Walker] did not ask for it, for one. He asked me for the Ford, so I gave him the Ford report.
…
MR SPENCER: … And if you turn to page 14, that’s the letter that was signed on that day. Do you agree with that?---Yes.
And that made it perfectly plain, didn’t it, that the car that was the subject of the sale was supposed to be a GTHO?---Yes.
And supposed to have the VIN number that’s recited in that letter?---Yes.
…
MR SPENCER: … And Mr Walker took the car?---Yes.
And that was, effectively, on 7 August 2014?---Yes.
And two weeks after, he rang you and – well, less than two weeks later, he rang you and complained that what you had sold him wasn’t a GTHO?---Mr Walker rang me, and told me, he said, “You’ve sold me a fake”, and I said, “Excuse me?” He said, “You’ve sold me a fake”, and I said, “I’m sorry. It is not. To my – best of my knowledge it’s not.”
Right. But it was a fake, wasn’t it?---Well, I only found that out after it was inspected by the man who said it was a genuine item.
Yes. But it was a fake?---Apparently. Yes.
The primary judge found:
(1)the evidence of Mr Walker to have been self-serving and evasive and the answers given by him were non-responsive on a number of occasions;
(2)Mr Walker was seeking to advocate his case in a manner that undermined his credit;
(3)to the extent of a conflict, the evidence of Mr Sell was preferred to that of Mr Walker;
(4)that the circumstances in which Mr Walker entered into the contract to purchase the vehicle entailed Mr Walker forming his own conclusion as to the genuineness of the vehicle as described that he was inspecting, and that conclusion was based on that inspection and his belief as to his ability to identify whether the vehicle was genuine or not;
(5)that the inspection by Mr Walker was not what an ordinary, reasonable person would have done in relation to a vehicle of that kind and age in circumstances in which he had been informed that it had been the subject of a change in colour, the engine block had been replaced and an alteration to the radiator had occurred;
(6)that in those circumstances an ordinary, reasonable person would have engaged in a thorough examination or required a person familiar with such vehicles to determine whether the vehicle was in fact as described;
(7)the inspection by Mr Walker was not thorough or reasonable;
(8)that while there were advertisements that gave rise to the attendance of Mr Walker at the premises of Mr Sell at Wodonga, Mr Walker had relied upon his own inspection of the car in deciding to purchase it; and
(9)Mr Walker did not rely on any representations made by Mr Sell either orally or in writing.
The primary judge also made adverse credit findings against Mr Walker based on the evidence given in cross-examination.
Submissions for the parties
Each of the parties provided comprehensive written and oral submissions which were of great assistance in determining what the outcome of the appeal and cross-appeal should be. I expressly record my appreciation for the quality of the representation on both sides. On any view, this has been a difficult decision made at least more focused and better informed, if not easier, by the efforts of the legal representatives.
Submissions in chief for the purchaser appellant (Mr Walker)
Mr James Emmett of counsel appeared for Mr Walker on his appeal, not having appeared in the Court below. The written submissions under the hand of his instructing solicitors and adopted by him at the hearing of the appeal may be summarised as follows.
The car was advertised for sale as a “1970 Ford GTHO Falcon Sedan”, was referred to in the letter from Ford as having a VIN that matched a “Ford XW GTHO Sedan” and reference was made to an expert valuation report which referred to the car as a “Ford XW GT HO” – noting that, quite correctly, Mr Walker did not rely on the advertisement as a term of the contract for sale. After Mr Walker agreed to purchase the car, Mr Sell’s partner prepared a document signed by the parties which referred to a “GTHO 1970” and included the VIN found on the car.
A sale of goods by description will occur where the purchaser relies on the description given by the vendor, citing Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441. It was submitted that it is not necessary that the purchaser places exclusive reliance on the description given, citing Thornett & Fehr v Beers & Son [1919] 1 KB 486.
A number of authorities establish that the fact that goods have been viewed by a purchaser does not prevent the sale being by description, as detailed below.
In the Privy Council decision in Grant v Australian Knitting Mills Limited (1935) 54 CLR 49 (Grant PC), in a judgment delivered by Lord Wright it was said at 61.6:
[T]here is a sale by description even though the buyer is buying something displayed before him on the counter: a thing is sold by description, though it is specific, so long as it is sold not merely as the specific thing but as a thing corresponding to a description, e.g., woollen under-garments, a hot water bottle, a secondhand reaping machine, to select a few obvious illustrations.
Prior to Grant PC in the High Court, Dixon J in Australian Knitting Mills Limited v Grant (1933) 50 CLR 387 (Grant HCA) [overturned by the Privy Council and reinstating the trial judge’s judgment for the purchaser, but on grounds not material to the principles at issue in this case] said at 417.5 (bold emphasis as per submissions):
When identified goods are sold, it is obvious that they remain the subject of the sale whether they do, or do not, correspond with the description which the parties have given them. But, however certainly the identity of the goods may be established, the parties must, since the intention is expressed or communicated, refer in some way to the goods. They must use some “description” to refer to them. A difficulty, therefore, cannot but arise in determining when the sale is “by” description and when not. Apparently the distinction is between sales of things sought or chosen by the buyer because of their description and of things of which the physical identity is all important.
A sale of goods by description will occur if the buyer has seen the goods and, quoting from Beale v Taylor [1967] 3 All ER 253 at 255F, the “deviation of the goods from the description is not apparent”.
On the basis of the above principles, to establish a breach of the implied warranty, Mr Walker must demonstrate that:
(1)the car was given a description;
(2)he placed some reliance on the description; and
(3)the car did not meet the description.
The evidence, which was referred to in some detail, did not support the primary judge’s finding that Mr Walker’s inspection was the only thing he relied upon, and that it was impossible to say that Mr Walker placed no reliance on the description that had been given in all the circumstances – there was at least some reliance, and that was enough.
The primary judge did not explain how the like cases of Beale v Taylor, Sammut v De Rome [2011] QDC 294 and Cassar v Pegoraro [2011] VCC 819 had been distinguished, each of which had some factual similarities, and the purchaser had succeeded. [It is important to note at this juncture that one such point of distinction, relied heavily upon by Mr Sell, is that none of those three cases involved any lengthy intervening period between advertisement, viewing and inspection and completion of the sale, although it is regrettably correct that the primary judge made no reference to that or any other point of perceived distinction. I also add that while Beale v Taylor warranted closer attention, I did not find Sammut or Cassar particularly helpful in terms of principle as each turned on its own facts.]
It was submitted that the primary judge erred in finding that it was not reasonable for Mr Walker to rely on the representations made by Mr Sell as to the identity of the car, because such reliance was reasonable in all the circumstances. The primary judge’s finding that a reasonable inspection would have revealed that the car was not as it had been described was a finding that imposed an unrealistic and inappropriate standard on purchasers that was inconsistent with the evidence and incorrect as a matter of law because:
(1)none of the cases cited sought to impose on purchasers an obligation to conduct a thorough inspection, or the use of an expert, in order to obtain the benefit of the implied warranty;
(2)the inspection by Mr Walker was no less thorough than those in the cases cited, such that it could not be concluded that it was not a thorough inspection;
(3)Mr Walker did not have any expertise and a reasonable person in his position would not identify any physical characteristic to suggest the car was not as described, analogous to the position of the buyer in Beale v Taylor;
(4)Mr Cuthbert, an expert, got it wrong and therefore it was unreasonable to expect Mr Walker to have correctly identified the make of the car;
(5)the primary judge did not determine Mr Walker’s claim for breach of an express warranty arising out of the description in the 21 August 2013 document signed by the parties.
Mr Emmett’s oral submissions acknowledged that while the starting point is caveat emptor, Mr Walker relied upon three established exceptions which effectively passed the risk of genuineness to the vendor, being:
(1)s 18 of the Goods Act;
(2)an express term of the contract; and
(3)a representation in trade or commerce.
Mr Emmett relied on Beale v Taylor at 255-256 and Grant PC at 61 (quoted above). He properly accepted that once the propositions of law were stated, it then becomes a matter of factual analysis. He submitted that this case was on all fours with Beale v Taylor, being a relatively straightforward sale by description. There was no displacing of the terms of s 18 of the Goods Act as allowed by s 61. It was submitted that this conclusion was supported by Ashington Piggeries at 495 and 511.
Mr Emmett further submitted that the fact that Mr Sell accepted that if the goods were not as described, Mr Walker would be able to rescind the contract indicated that this was a contractual requirement. The reliance by Mr Walker did not have to be reasonable, provided it actually existed.
Submissions for the vendor respondent (Mr Sell)
Mr Suryan Chandrasegaran, solicitor, appeared for Mr Sell both in the Court below and in this Court. His written submissions on the appeal largely sought to defend the conclusions reached by the primary judge. The key points made by Mr Chandrasegaran are detailed below.
It was submitted that the primary judge was correct to conclude that no representations were relied upon by Mr Walker, as admitted by him in evidence and demonstrated by conduct including at the time of contracting making his own investigations into the basis for Mr Sell’s belief and making it clear he intended to rely upon his own expert. It was not a sale by or based on description, but rather based on Mr Walker’s “own physical inspection and his belief as to his ability to identify the original genuineness of the vehicle by his inspection” (primary judgment [5]) as well as communications with an unknown “friend who was an expert, who [Mr Walker] had communicated with in relation to the nature of the vehicle” (primary judgment [6]).
In relation to the cases relied upon by Mr Walker, it was submitted that Ashington Piggeries and Grant PC could be distinguished because there was no opportunity to inspect. In Thornett the statutory warranties had been found not to apply because the buyers had an opportunity to conduct a proper inspection and chose not to. Beale v Taylor could be distinguished because the buyer had no opportunity to inspect, the vehicle in that case was not roadworthy at all, and the price, even adjusted to current values, was not such as to give rise to any expectation of due diligence on the part of the buyer, unlike this case. Cassar and Sammut could similarly be distinguished because there was little opportunity to inspect and ascertain that the car in question was not as described, and in Sammut there was an indication of impropriety by the seller.
It was suggested that a better case to compare was Tsoutsouras v Wilson [2007] NSWLC 24, in which it was concluded that a failure to take advantage of an opportunity to investigate the genuine nature of a collectable car constituted an election to take the risk, relying on the principle stated in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40] that it is not the subjective beliefs or understandings of the parties that matters in determining rights and liabilities under a contract, but rather what each party by words and conduct would have led a reasonable person in the position of the other party to believe. Applying Toll v Alphapharm to this case, by maintaining during a nearly one year settlement period that he was intending to have the car inspected by an expert, Mr Walker led Mr Sell reasonably to believe there was no reliance on Mr Sell’s representations as to the genuineness of the car.
It was submitted that even if the primary judge erred in finding that this was not a sale by description, the operation of s 61 of the Goods Act applied by reason of the agreement to let Mr Walker commission his own expert prior to settlement so as to negative any statutory warranty that otherwise applied. Even if there was reliance it was not reasonable because Mr Sell was not an expert in cars and never held himself out to be, Mr Walker was on notice of express departures from the supposed original state of the car, putting him on notice that there may be an issue in this regard and that he should make his own investigations, and the value gave rise to a need for buyer diligence.
The finding by the primary judge that an ordinary reasonable person would have conducted a thorough examination to determine whether the car was genuine was neither unrealistic nor inappropriate, and that this is a standard imposed by Thornett and Tsoutsouras in relation to cars of significant value when there was a real opportunity to inspect.
The suggestion that Mr Cuthbert, in the course of preparing his first expert report, did not detect that the car was not genuine and therefore any expert retained by Mr Walker would not be able to either is not supported by the fact that the person who examined the car after settlement identified it as not being genuine immediately, a point reinforced in oral submissions. It is convenient to note at this point that Mr Cuthbert stated in his second report that he relied on the letter from Ford and did not undertake an examination to confirm identity at the time. That rather tends against statements in Mr Cuthbert’s first report that he inspected the vehicle on 13 July 2010, provided comprehensive details in relation to the location of the VIN on the car, and that in the preparation of his report had made all necessary enquiries that he believed were desired and appropriate and that no matters of significance had been withheld. The evidence indicates that the person who examined the car after settlement did not hold himself out as an expert.
The suggestion of a failure to determine Mr Walker’s claim for breach of an express term of the contract fails because this was a common mistake so that the purchaser assumed the risk, applying Bell v Lever Brothers Ltd [1932] AC 161; and because it was an oral term of the contract that Mr Walker would arrange his own expert to inspect the car before settlement.
Mr Chandrasegaran’s oral submissions sought to distinguish the authorities relied upon by Mr Emmett for Mr Walker upon the basis that unlike any of those cases, there had been a very substantial time in which Mr Walker could have carried out an inspection. The provision for inspection was part of the contract, and was a s 61 agreement or otherwise the negativing of any statutory warranty or condition. The inspection was a contractual right that Mr Walker chose not to exercise. The true nature of the contract was that Mr Walker had assumed the contractual risk as to whether or not the car was genuine, encapsulated by the notion that Mr Sell was, in context, asserting no more than that the car was, to the best of his knowledge, genuine. The right to inspect the car was not merely permission outside the terms of the contract, but rather an oral term of the contract for sale to enable Mr Walker to carry out such an inspection before settlement.
It was submitted that it was open to the primary judge to find that the car was not purchased on the basis of the description given to Mr Walker by Mr Sell, but rather based on Mr Walker’s own physical inspection of the car, his belief as to his own ability to identify what a genuine car would look like by his inspection, and his contractual right to have a further expert inspection prior to settlement. The substance of the case for Mr Sell was that this was a sale by inspection rather than by description, both at the time of signing the contract, and by way of a right created then, exercisable in the future, but never in fact exercised, to have an expert inspection.
Mr Chandrasegaran further submitted orally that, consistently with his written submissions:
(1)Ashington Piggeries was distinguishable because in that case there was no opportunity for inspection. The role of the year of the car provided in the signed contract was in the nature of identifying a kind, class or species rather than a particular quality or identity.
(2)Thornett was directly applicable, because in that case, as in this, the buyers had an opportunity to conduct a proper inspection.
(3)Grant PC was distinguishable because in that case there was no opportunity to inspect, forcing reliance on the description, and it is also authority for the proposition that the implied condition only applies to defects not reasonably discoverable.
(4)Mr Walker had given express evidence that he decided to buy the car based on his personal inspection.
(5)The evidence as to Mr Walker getting the car valued had to be understood as having its genuineness ascertained because that was the primary driver of value.
Submissions in reply for the purchaser appellant (Mr Walker)
In reply, Mr Emmett said that the issue of inspection had no express reference to assessing genuineness, and the difference was considered in Mr Cuthbert’s second report. The post-settlement examination on behalf of Mr Walker entailed the use of a hoist, which was not contemplated by the parties during the one year settlement period. There was no evidence that the inspection contemplated by the parties would have revealed that the car was not genuine, and also no evidence of any agreement on the form of inspection (other than that Mr Sell had to be there while whomever attended). [As is noted below, whatever subjective view of this agreement was held by Mr Walker, when viewed objectively as required, the inspection agreed to was unfettered as to scope or manner.]
Mr Emmett also submitted that the right to inspect was not a contractual term, but rather only the giving of permission or the language of understanding. Any collateral contract to that effect had to be proved strictly, relying on a case brought to the attention of the parties by the Court, Marks v Hunt Brothers(Sydney) Pty Ltd (1958) 58 SR (NSW) 380 at 384.
It was submitted that the description given to the car was of a kind or species, not a matter of quality. Tsoutsouras was not applicable because it did not involve any representation of genuineness. Mr Sell had represented the car was genuine, albeit not in original condition.
Consideration
Trade or commerce issue and the issue of federal jurisdiction
It is convenient to address first the issue of whether the sale of the car was in trade or commerce because that is one of the applicable gateways to considering Mr Walker’s cause of action under s 18 of the Australian Consumer Law. For reasons considered further below, the correct description of the legislation relied upon was s 18 of the Australian Consumer Law (Victoria).
Supplementary post-hearing written submissions on the question of whether the sale of the car was in trade or commerce were provided by the parties with leave of the Court. The parties agreed that it is the conduct involved that determines whether the transaction meets that description, rather than on the range of activities otherwise engaged in by the party against whom the case is brought: Hearn v O’Rourke [2003] FCAFC 78; (2003) 129 FCR 64. Where the parties differed was in the characterisation of what occurred.
Mr Emmett argued that the transaction had a commercial character in the sense in which that phrase was used in Re Ku-ring-gai Co-operative Building Society (No 12) (1978) 22 ALR 621 at 648-9 and Concrete Constructions (NSW) Pty Limited v Nelson (1990) 169 CLR 594 at 604. He pointed to the following factors:
(1)the advertisement for sale on Gumtree was equivalent to an open market;
(2)the transaction was at arm’s length between strangers;
(3)the presence of commercial terms such as payment by instalments and Mr Walker to meet registration and insurance costs until he took possession;
(4)the dominant purpose of the sale was to raise funds;
(5)the car was an asset that was not usually owned purely for pleasure or convenience but rather having substantial value;
(6)the car was sold with a letter from Ford as a commercial manufacturer confirming authenticity;
(7)the use of the car for hire as a wedding vehicle (albeit in a minor way); and
(8)the critical conduct being a representation as to value.
Mr Emmett relied on Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 in which the sale of an asset by a business that was not engaged in selling such assets was found to be in trade or commerce, albeit that the asset being sold was being used for a business activity.
In reply to those submissions, Mr Chandrasegaran argued that the passage from Ku-ring-gai Co-operative Building Society relied upon concerned whether or not a transaction has to be arm’s length to be in trade or commerce. That point is well-taken. Immediately following the passage relied upon by Mr Emmett, the Full Court made it clear that what mattered was the commercial or business nature of the dealings, even if they fell outside the mainstream of ordinary commercial activities and even if they had an element of altruism to them. The key concepts concern commerce or business, as the words trade or commerce in ordinary parlance would imply.
The solicitor for Mr Walker filed four pages of written submissions again in line with the primary judge’s comments, although not in affidavit form. In summary, those submissions asserted that the costs sought were excessive, pointing in particular to the departure from Parts 1 and 2 of Schedule 1 of the Federal Circuit Court Rules 2001 (Cth), as applied unless a contrary order is made under r 21.10. The submissions applied those provisions to arrive at a figure of $14,162.17, and argued for further deductions from that figure based on actual claimed expenditure by the respondent. The submission also argued that even outside Schedule 1 the costs sought were excessive, referring to a lack of information in relation to the incurring of said costs.
The primary judge adopted the amount permitted by Schedule 1 identified in Mr Walker’s submissions and ordered him to pay Mr Sell $14,162.17. It was open to his Honour to reach that conclusion, and to do so irrespective of any further material that might have been placed before his Honour.
In seeking to overturn the primary judge on costs, written submissions for Mr Sell contended that he did not have an opportunity to resubmit an application for costs in the correct form in the Court below and as such was denied procedural fairness. Reliance was placed on s 172 of the Legal Profession Uniform Law (NSW). Reference was made to the additional evidence sought to be relied upon, and in particular upon a letter of compromise dated 1 July 2015, noting also that rr 1.32, 1.34 and 1.35 of the Federal Court Rules 2011 (Cth) allowed this Court to make any order it believes to be in the interests of justice, to waive compliance with any of the Rules and to make an order inconsistent with those Rules. It was submitted that it was in the interests of justice to waive formalities and to encourage parties to settle proceedings, especially at an early time to reduce costs. In the alternative, it was submitted that a later offer of compromise of 30 July 2015 should be applied.
Written submissions for Mr Walker pointed out that Mr Sell was seeking to rely on evidence and arguments that were not advanced in the Court below. Mr Emmett submitted orally for Mr Walker that the application for fresh evidence was not relevant for the cross-appeal, because it was not material before the primary judge and therefore cannot have been any basis for error on the part of his Honour. Put simply, there cannot be any error in the exercise of discretion as to costs when the material his Honour was effectively said to have disregarded was not before him. Mr Emmett relied on Sobey v Nicol and Davies [2007] FCAFC 136; (2007) 245 ALR 389 at 403-4 [68]-[72], which states the principle limiting the use of fresh evidence on appeal, and Li Pei Ye v Crown Limited [2004] FCAFC 8 at [157]-[158] to the effect that further evidence should not be admitted on appeal if it was available or could reasonably have been obtained at the time of hearing. Mr Emmett submitted that the restrictions imposed by the primary judge did not in any event preclude placing the offer of compromise before his Honour.
In response, Mr Chandrasegaran orally submitted that the cases relied upon above were distinguishable because in those cases there had been an opportunity to tender the evidence in question. However he quite properly conceded that the primary judge had not expressly forbidden furnishing the offer of compromise. It is not at all clear that this would necessarily have made any difference in any event.
It does not appear to me that the genuineness of the costs and expenses incurred was truly in issue, rather than a proper basis being advanced for the extent of those outlays being paid by Mr Walker as being in excess of the ordinary scale. It is unfortunate that the restrictions imposed by way of a preference expressed by the primary judge, not reflected in the formal orders made, led to the offer of compromise in particular not being before his Honour. However, that was available at the time, it was not before his Honour and accordingly there cannot be any error in failing to have regard to it, let alone any certainty that it would have produced a different result. I am unable to discern any error in the exercise of the discretion by his Honour in the determination of Mr Sell’s costs application.
It follows that the interlocutory application to adduce further evidence in support of the cross-appeal must be dismissed; and the cross-appeal must be dismissed, both with costs.
Conclusion
The appeal is dismissed with costs. The respondent/cross-claimant’s interlocutory application and cross-appeal are dismissed with costs.
I certify that the preceding one hundred and thirty-eight (138) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromwich. Associate:
Dated: 27 October 2016
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