Waste Stream Management Pty Ltd v Vitale
[2010] WADC 35
•22 MARCH 2010
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: WASTE STREAM MANAGEMENT PTY LTD -v- VITALE & ORS [2010] WADC 35
CORAM: REGISTRAR KINGSLEY
HEARD: 12 FEBRUARY 2010
DELIVERED : 22 MARCH 2010
FILE NO/S: CIV 2856 of 2009
BETWEEN: WASTE STREAM MANAGEMENT PTY LTD (ACN 069 513 346)
Plaintiff
AND
ANTONIO VITALE
MAURICE JOHN MILANA
MARISA PASQUALINA MILANA
Defendants
Catchwords:
Practice - Application pursuant to O 16 Rules of the Supreme Court - Estoppel by convention
Legislation:
Nil
Result:
Application dismissed
Representation:
Counsel:
Plaintiff: Mr J Kitto
Defendants: Mr J Hammond
Solicitors:
Plaintiff: Kitto & Kitto
Defendants: Hammond Legal
Case(s) referred to in judgment(s):
Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] QB 84
Con‑Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Forsayth NL v Northern Gold NL, unreported; FCt SCt of WA; Library No 940012; 20 January 1994
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641
K Lokumal & Sons (London) Ltd v Lotte Shipping Co Pte Ltd [1985] 2 Lloyd's Rep 28
Moratic Pty Ltd v Gordon (2007) Aust Contract R ¶90‑255
Republic of India v India Steamship Co Ltd (No 2) ("The Indian Grace") [1998] AC 878
REGISTRAR KINGSLEY: The defendants by an application dated 25 November 2009 have sought leave to enter judgment for the defendants pursuant to O 16 Rules of the Supreme Court 1971.
The plaintiff's action
The plaintiff pleads that it is a corporation and operates an industrial rubbish disposal facility where demolition contractors dump building rubble and waste. Payment for use of these facilities is based on the volume or weight of the rubbish dumped.
The plaintiff pleads that the defendants commenced trading as Demolition Works on 10 April 2001, and on 9 May 2001 applied to the plaintiff for a credit account whereby the plaintiff would render monthly invoices to the defendants' firm instead of charging each dumping on a cash basis. The plaintiff pleads that in making the application the defendants represented that they were the owners of the firm Demolition Works, and had the financial means to pay the monthly invoices. The plaintiff further pleads that it verified the defendants had the assets referred to in their application, and that on the basis of the representations granted the credit application.
The plaintiff pleads that in July 2002 the defendants ceased trading as Demolition Works and transferred the business to Global Products and Services Pty Ltd (Global). In April 2003 the defendants transferred the business to Milana Enterprises (WA) Pty Ltd (Milana Enterprises).
As the defendants did not inform the plaintiff they no longer traded as Demolition Works the plaintiff continued to grant credit to Demolition Works believing the business was still operated by the defendants. The plaintiff pleads it has incurred a loss of $188,714.60 being the monies owed to the plaintiff by Milana Enterprises. Because of these matters the plaintiff pleads the defendants are estopped from denying their joint and several liability to the plaintiff for the debts of Milana Enterprises.
Alternatively, by the credit application dated 9 May 2001 the defendants jointly and severally guaranteed to the plaintiff payment of the account of the business Demolition Works. In reliance on the guarantee the plaintiff continued to provide credit to Demolition Works.
The defendants' defence
In their defence the defendants admit commencing trading as Demolition Works in April 2001 and admit on 9 May 2001 applying to the plaintiff for a credit account. The defendants deny making the representations they were the owners of Demolition Works and had the financial means to pay the monthly invoices and deny that the plaintiff verified the defendants had the assets pleaded.
The defendants go on to plead that they ceased carrying on business under the business name Demolition Works on 1 July 2002. They deny they controlled Global and further deny the defendants transferred the business Demolition Works to Milana Enterprises. The defendants deny that they did not inform the plaintiff they no longer traded as Demolition Works. The defendants plead that Milana Enterprises through Maurice John Milana (Maurice) informed the plaintiff that Milana Enterprises traded as Demolition Works. Further the plaintiff received various cheques drawn against Milana Enterprises cheque account.
The defendants go on to plead that Milana Enterprises was placed into liquidation pursuant to a creditors' voluntary winding up. The plaintiff claimed as a creditor in the liquidation of Milana Enterprises in the amount of $197,898.42.
In an affidavit sworn 9 December 2009 by Marisa Pasqualina Milana (Milana) Milana deposes that she, together with Antonio Vitale (Antonio) and Maurice, carried on business under the name Demolition Works until she ceased carrying on business on 1 July 2002. On 1 July 2002 Global commenced carrying on business as Demolition Works and on 1 April 2003 Milana Enterprises commenced carrying on business as Demolition Works. Milana deposes she was responsible for undertaking various bookkeeping tasks for both Global and Milana Enterprises.
Attached to Milana's affidavit is a copy of a template (MPM2) which Milana deposes she used for the purpose of facsimile transmittal and corresponding with the plaintiff and other creditors of Milana. Milana deposes the facsimile transmittal form was used on numerous occasions when corresponding with the plaintiff. MPM2 whilst headed Demolition Works has at the base "Milana Enterprises (WA) Pty Ltd ATF the Milana Family Trust T/A Demolition Works". For the plaintiff Michael Godfrey Harper, (Harper) in an affidavit affirmed 3 February 2010, and Joyce Williams, (Williams) in an affidavit affirmed 3 February 2010, both deny receiving any information whatsoever, whether in writing by telephone or other means, to the effect that the business Demolition Works was being conducted by anyone other than the defendants.
At pars 15 and 16 of Milana's affidavit Milana deposes that she telephoned Joyce Williams, the plaintiff's bookkeeper, and informed Williams that the defendants no longer traded as Demolition Works and that Williams indicated that she was aware Antonio was no longer an owner of Demolition Works. These are specifically denied by Williams in her affidavit.
Milana in her affidavit refers to a meeting on 9 December 2008 where she met with Harper and Williams and the question of monies owing by Demolition Works to the plaintiff was discussed. A payment regime was established and MPM3 is a contemporaneous note of the meeting and the repayment regime. Harper in his affidavit states that as at 9 December 2008 he still believed the business Demolition Works was being conducted by Maurice Milana and Antonio.
Legal principles
In relation to an application pursuant to O 16 Rules of the Supreme CourtDey v Victorian Railways Commissioners (1949) 78 CLR 62 is authority for the proposition that to justify the summary intervention of the courts to prevent the plaintiff submitting their case for determination, the case must be very clear indeed. Further once it appears there is a real question to be determined, whether of fact or law, and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.
The defendants' counsel cited Forsayth NL v Northern Gold NL, unreported; FCt SCt of WA; Library No 940012; 20 January 1994 where Franklyn J noted that the test under O 14 is substantially different to that under O 16. Franklyn J was of the opinion that the plaintiff determines what is his cause of action and the defendant then knows what case they have to meet. It is not for the court, on an O 16 application, to identify or accept some other cause of action not pleaded which the evidence before it might arguably support and which possibly for good reason, was not relied on by the plaintiff in their statement of claim. The action is as identified by the statement of claim, and if that action must fail it will be regarded as frivolous or vexatious. Thus the question to be determined is whether, on the available evidence, there is no serious question to be tried upon any cause of action raised by the plaintiff.
In this matter the two causes of action raised by the plaintiff are estoppel and the guarantee by Antonio, Maurice and Milana.
The guarantee
The document creating the guarantee is attached to the affidavit of Maurice sworn 25 November 2009. MJM6 is a credit application by Demolition Works and the names of the owners are Maurice, Antonio and Milana. At the base of the credit application under the heading "Certificate" are the words:
"In consideration of The Demolition & Construction Waste Recycling Company Pty Ltd allowing this firm jointly and severally agree that payment of the account I/We the undersigned, hereby jointly and severally agree that payment of the account will be made within Fourteen (14) days of the date of the Invoice. In the case of a company, the Director's signatures will serve as joint and several guarantees for payment within the credit terms stated. In the event of this account being placed in the hands of a collection agency/solicitor, I/We agree to pay all recovery and legal costs incurred. The above is for the purpose of obtaining credit and is warranted to be true and correct."
The credit application is dated 9 May 2001 and is signed by Maurice, Milana and Antonio.
The first issue is that the consideration flows from Demolition Works to the Demolition & Waste Recycling Company Pty Ltd not Waste Stream Management Pty Ltd.
The second issue is that as Demolition Works is a business Maurice, Milana and Antonio are agreeing that payment of the account will be made within 14 days of the date of the invoice. The first sentence under the heading "Certificate" cannot in my opinion be construed as a personal guarantee by Maurice, Milana or Antonio.
Further, it is common ground that no company was in existence at the time. Accordingly, the second sentence under the heading "Certificate" has no effect.
Accordingly, in my opinion the evidence does not disclose cause of action under a guarantee and this cause of action is frivolous and vexatious.
The estoppel argument
The plaintiff's argument is that Antonio, Maurice and Milana represented themselves to be the persons trading as Demolitions Works. Notwithstanding the subsequent two changes in ownership Antonio Maurice and Milana did not give to the plaintiff any actual or constructive notice they had transferred the business.
The plaintiff's pleading in this regard is that the defendants ceased trading as Demolition Works and transferred the business to Global Products and Services Pty Ltd, firstly, and then to Milana Enterprises, secondly. The defendants did not inform the plaintiff they no longed traded as Demolition Works, and the plaintiff continued to provide credit to Demolition Works believing the business was still operated by the defendants and relying on the representation Antonio, Maurice and Milana were owners of the firm Demolition Works.
The basic purpose of estoppel is to prevent the injustice which results from a person repudiating the foundation of a belief or a function which he or she induced, when repudiation will cause harm to the person holding that belief or acting upon that assumption ("Equity and Trusts in Australia and New Zealand", Dal Pont and Chalmers, 285). Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674 commented:
"The principle upon which estoppel is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. This is, of course, a very general statement. But it is the basis of the rules governing estoppel. … The justice of an estoppel is not established by the fact in itself that a state of affairs has been assumed as the basis of action or inaction and that a departure from the assumption would turn the action or inaction into a detrimental change of position. It depends also on the manner in which the assumption has been occasioned or induced. Before anyone can be estopped, he must have played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it."
In K Lokumal & Sons (London) Ltd v Lotte Shipping Co Pte Ltd [1985] 2 Lloyd's Rep 28 at 34 Kerr LJ commented:
"All estoppels must involve some statement or conduct by the party alleged to be estopped on which the alleged representee was entitled to rely and did rely. In this sense all estoppels may be regarded as requiring some manifest representation which crosses the line between representor and representee, either by statement or conduct. … Similarly, in cases of so‑called estoppel by convention, there must be some mutually manifest conduct by the parties which is based on a common but mistaken assumption. The alleged representor's participation in this conduct can then be relied upon by the representee as a basis for this form of estoppel."
Con‑Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244 is authority for the proposition that estoppel by convention is a form of estoppel founded upon an assumed state of affairs by the parties, whether as to a matter of fact or a matter of legal effect, both of which would be estopped from denying. It is true that the majority of cases in relation to estoppel by convention are based on an assumed state of affairs which takes as a given the terms of a contract as known and understood by the parties but from which the parties have departed for the purposes of their furtherance of their relationship under the contract (see Grundt, Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] QB 84.
In Republic of India v India Steamship Co Ltd (No 2) ("The Indian Grace") [1998] AC 878 Lord Steyne at 913 stated:
"… an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared … or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption …"
In Moratic Pty Ltd v Gordon (2007) Aust Contract R ¶90‑255 Brereton J noted that the doctrine of conventional estoppel precluded either party to a contract from denying an assumption which has formed the conventional basis of the relationship between them. Accordingly it is necessary to determine whether the parties have in fact adopted such an assumption as the conventional basis of their relationship.
Conclusion
In this matter the plaintiff and Maurice, Antonio and Milana trading as Demolition Works have entered into a trading relationship. Subsequently Demolition Works was acquired by Global and subsequently by Milana Enterprises. However, it would appear that notwithstanding the change of ownership the plaintiff has continued dealing with Demolition Works on the assumption that it was still in the hands of Antonio, Maurice or Milana. It is the plaintiff's contention that those parties did not disabuse the plaintiff of that assumption. As a result of that assumption the plaintiff continued dealing with Demolition Works as if it were a firm, and has acted to its detriment. There is evidence from Harper and Williams that they were not informed of the change in ownership. This, of course, is denied by Antonio Maurice and Milana. However, if the evidence of Harper and Williams is accepted then it is open for the tryer of fact to find that the plaintiff has acted on an assumed state of facts which has been acquiesced by the defendants.
In my opinion, on the pleaded case put forward by the plaintiff, an estoppel by convention could be found.
Accordingly for these reasons I dismiss the defendants' application.
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