Westbourne Grammar School v Sanget Pty Ltd
[2007] VSCA 39
•19 March 2007
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 3742 of 2006
| WESTBOURNE GRAMMAR SCHOOL (ACN 004 363 035) |
| v |
| SANGET PTY LTD (ACN 074 005 548) |
---
JUDGES: | BUCHANAN, NETTLE and ASHLEY JJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 1 March 2007 | |
DATE OF JUDGMENT: | 19 March 2007 | |
MEDIUM NEUTRAL CITATION: | [2007] VSCA 39 | |
---
Contract – Rental agreement – Whether evidence to support finding that named financier was the agent of an undisclosed principal – Whether evidence to support finding that terms and conditions of a master rental agreement were imported into rental agreement – Whether finding that rights of undisclosed principal were transmitted to another party was available – Whether absolute assignment by writing to plaintiff of rights of undisclosed principal – Section 134, Property Law Act 1958 (Vic).
---
| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr D G Collins, SC with Mrs S L Marks | Lander & Rogers |
| For the Respondent | Mr J W S Peters, SC with Mr J J Miller | Marshalls & Dent |
BUCHANAN JA:
I agree with Ashley JA. The respondent failed to establish either that there was an absolute assignment to the respondent of the rights of the State Bank of New South Wales under the agreement between Equico Corporation Finance Group Pty Ltd and the appellant or that notice of any assignment had been given by the assignee to the debtor. The appeal should be allowed, the judgment and orders made below set aside and in lieu thereof there should be judgment for the appellant.
NETTLE JA:
I have had the advantage of reading in draft the reasons for judgment of Ashley JA and I agree with his Honour for the reasons that he gives that the appeal should be allowed. I wish, however, to add two observations.
First, the respondent’s case below depended substantially upon it proving that it was the legal assignee of the rights of the State Bank of New South Wales (“State Bank”) under two agreements made between Equico Corporate Finance Group Pty Ltd and the appellant dated respectively 29 June 2000 (“the June 2000 Rental Agreement”) and 9 June 2001 (“the June 2001 Rental Agreement”).
To that end, the respondent relied upon clauses 2 and 3 of a Master Purchase Agreement made 29 June 1998 between State Bank and the respondent, the terms of which are set out in Ashley JA’s judgment. It contended, and the trial judge accepted, that the Master Purchase Agreement constituted an absolute assignment in writing for the purposes of s 134 of the Property Law Act 1958 of State Bank’s right title and interest in the two rental agreements. In my view the judge was wrong.
Section 134 does not does not prescribe any particular form of assignment for the purposes of the section. But it is clear that, in order to constitute an absolute assignment in writing, an instrument must be such that it would operate as an absolute assignment independently of s 134.[1] It follows that, in order to constitute
assignment for the purposes of the section, an instrument must expressly or necessarily imply a clear and unconditional intention to assign.[2] It follows, therefore, that an assignment which, according to its terms, only becomes operative or ceases to be operative upon the happening of an event is not an unconditional assignment for the purposes of the section.[3]
[1]Curran v Newpark Cinemas Ltd [1951] 1 All ER 295 at 299 (CA).
[2]Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 30-31.
[3]Durham Brothers v Robertson [1898] 1 QB 765 at 773; Hughes v Pump House Hotel Company [1902] 2 KB 190 at 196; Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 at 673, per Glass JA, cf at 679, per Samuels JA.
Clauses 2 and 3 of the Master Purchase Agreement are not in form or substance an unconditional assignment of the Rental Agreements. They are an executory agreement regulating relations between the parties to the agreement in respect of a continuous course of business of taking up residue positions and purchasing residue rights. They bespeak an intention that something remains to be done.
Of course, if the respondent took up a residue position in respect of either of the Rental Agreements and paid the residual amount for that Rental Agreement, there would be an equitable assignment of the Rental Agreement. But in those circumstances, it would not be clauses 2 and 3 of the Master Purchase Agreement which effected the assignment, but rather the individual transaction constituted of the respondent taking up the residual position and paying the residual amount. Neither the fact that the Master Agreement provided for the possibility of an assignment in the event of such a transaction taking place, nor the fact of the transaction itself, could turn the Master Purchase Agreement into an absolute assignment in writing.[4]
[4]Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1 at 32, per Dixon J.
Secondly, it is rudimentary that an assignment of a debt or other chose in action is not effective for the purposes of s 134 until notice of assignment has been given. Until then, an assignee does not have standing at law to sue to recover the
debt or other chose in action in the assignee’s own name.[5] There is also authority that the notice must be given before the action is brought.[6]
[5]Performing Right Society v London Theatre of Variety [1922] 2 KB 433, reversed on other grounds, [1924] AC 1.
[6]Re Westerton, Public Trustee v Gray [1919] 2 Ch 104 at 111; McIntosh v Shashoua (1931) 46 CLR 494 at 514-5; cf Holt v Heatherfield Trust Ltd [1942] 2 KB 1 at 4, and 5-6.
That does not mean that a proceeding begun before notice is a nullity. It may be cured by joinder of the assignor, and now, with the advent of Rule 13.08 of the Supreme Court (General Civil Procedure) Rules 2005 and cognate provisions in other jurisdictions, it may be that an assignee could cure its position by giving notice after the institution of the proceeding and amending its statement of claim to allege the fact of notice. But unless and until notice has been given or the assignor has been joined, a proceeding instituted in the name of the assignee cannot proceed to final judgment and it is liable to be stayed, even on appeal, until the formalities are in order.[7]
[7]Weddell v J A Pearce & Major (a firm) [1988] 2 Ch 26 at 39, Oshlack v Richmond River Council (1998) 193 CLR 72 at [41], Meagher, Heydon, Leeming, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies 4th Ed at [6-520].
In this case, the appellant made clear from the outset of the proceeding that it disputed the entitlement of the respondent to bring the proceeding in its own name, and the appellant made clear why the proceeding was incompetent. Yet the respondent continued obstinately throughout the proceeding and on appeal to insist that it was entitled to do what it has done. In those circumstances, in my view, even if the respondent had otherwise succeeded in proving its claim - and for the reasons given by Ashley JA it has not done so - it would be too late to allow the respondent to amend its procedural hand.
ASHLEY JA:
Westbourne Grammar School (Westbourne) appeals against judgment entered against it in the County Court on 16 May 2006 in proceedings brought by Sanget Pty Ltd (Sanget). The judgment was for damages of $178,823, damages in the nature of
interest of $14,753, delivery up of 63 notebook computers which were the subject-matter of Sanget’s claim, and costs. The costs order reflected a Calderbank offer which Sanget made shortly before trial.
Pertinent circumstances
In order to understand the issues raised by the grounds of appeal, it is necessary to set out some of the circumstances of the matter.
First, on 29 June 2000 Westbourne entered into a rental agreement with Equico (the first rental agreement) in respect of eight notebook computers. The initial period of the agreement was 36 months.
Second, on 9 June 2001 Westbourne entered into a rental agreement with Equico (the second rental agreement) in respect of 55 notebook computers. Again, the initial period of the agreement was 36 months.
Each of the rental agreements stated that it was a numbered annexure to a document described as “the 1998 Master Rental Agreement dated 2nd April 1998”. Each agreement also stated that Westbourne had agreed to rent specified equipment “subject to the Master Rental Agreement entered into between the financier and the renter and the Terms and Conditions set out in Schedule 1 to the Master Rental Agreement” - the “financier” being Equico Corporate Finance Group Ltd (Equico),[8] and the “renter” being Westbourne.
[8]I use this contraction to describe an Equico entity which was registered on 12 January 1999, the last three numbers of its ACN being 331. There had been at least one other Equico entity, registered on 14 June 1996. The last three numbers of its ACN were 599.
No master rental agreement dated 2 April 1998 was put in evidence. Indeed, there could not have been such a document, because Equico had not then been incorporated. At trial, counsel for Sanget described the references to a 1998 master rental agreement, at least so far as Equico - that is, the entity incorporated in 1999 – was allegedly a party to such agreement, as being an “error” and “a curiosity on the documents”. In this Court, senior counsel for Sanget repeated the contention, in effect, that the references to an April 1998 master rental agreement were a mistake. Pressed, he readily acknowledged that he could not say to what master rental agreement the first rental agreement referred. It could not have been the 2000 master rental agreement – as to which, see below - because that had been executed after the first rental agreement had been made.
Third, on 19 December 2000 Westbourne and Equico entered into a Master Rental Agreement (the 2000 master rental agreement) by which the parties agreed that from time to time Equico would rent equipment to Westbourne. By the agreement, on its face –
(1) The parties agreed that any rental agreement with respect to particular equipment would be subject to the terms and conditions set out in the master rental agreement and schedule 1 thereof.[9]
[9]Recital B and clause 3(2). See also the definition of “Terms and Conditions” in Schedule 1.
(2) Westbourne acknowledged that Equico may have entered into the master rental agreement, or any rental agreement, as the agent for another person; and that Westbourne was not entitled to object to that circumstance, whether the agency be disclosed or undisclosed.[10]
[10]Condition 39.
(3) Equico was entitled, without prior notice to Westbourne, to assign its interest in the master rental agreement, and in any rental agreement entered into in pursuance thereof, to another person, including a related entity, without affect upon Westbourne’s obligations.[11]
[11]Clause 8. See also the narrower right of assignment given by condition 26.
(4) At the expiration or earlier determination of a rental agreement, or upon the financier becoming entitled to possession of rental goods, the renter was obliged to make “delivery of [the goods] to the Financier at the Financier’s address, or at any place directed by the Financier in writing, in good order and repair.”[12]
[12]Condition 7(10).
(5) If Westbourne failed to deliver up equipment on expiration or termination of a rental agreement, it must pay Equico, by way of liquidated damages for detention, a monthly rent equivalent to the average monthly rent during the term of the particular agreement.[13]
[13]Condition 12, expressed to be subject to condition 23. The latter obliged return of equipment on expiry of the rental period, but also made provision for overholding. There was discussion on the appeal of other remedies available to a financier – see conditions 14(6), 15(3), 16, 17 and 18 – and how they interrelated with condition 12. As will be seen, questions which arose in that connection need not be decided in this case.
(6) Any rental agreements were to be interdependent. A breach of one would be a breach of all.[14]
[14]Clause 13. See also the broader application of condition 32.
(7) By clause 7 –
“(1) This Agreement and each Rental Agreement:
(a)contain the entire agreement and understanding between the parties and everything connected with the subject matter of them; and
(b)supersede any prior agreement or understanding on anything connected with that subject matter.”
(8) “Rental Agreement” was defined to mean –
“ …a rental agreement in the form or substantially in the form, of the rental agreement set out in Schedule 2 (which incorporates these Terms and Conditions) entered into between the Financier and the Renter under this Agreement”.[15]
(9)“Financier” was defined to mean Equico, and to include its successors and assigns.[16]
[15]Condition 42(2)(i).
[16]Condition 42(2)(d).
Fourth, assuming for the moment that the 2000 master rental agreement could have been relevant to Sanget’s claim, there was no Schedule 2 to the copy document which was exhibited at trial. Sanget did not attempt to adduce other evidence to show that the original of the master rental agreement contained such a schedule; or as to the content of any such schedule.
Fifth, it was Sanget’s case that in entering into the two rental agreements Equico had acted as agent for an undisclosed principal - the State Bank of New South Wales (State Bank). By additional further and better particulars of its statement of claim, provided a month before trial, Sanget alleged that Equico had acted as agent of State Bank “by force of a written agency agreement”. Further according to those particulars, Sanget did not have a copy of the agency agreement. Assuming that such a document existed, its production at trial did not depend, of course, upon whether or not Sanget held a copy of it.
Sixth, on about 29 June 1998 Sanget and State Bank entered into a master purchase agreement by which State Bank agreed to assign its interest in certain rental agreements to Sanget. That agreement contemplated the making of residual purchase agreements between the two parties by which, in a particular case, Sanget would take up a so-called “residual position” in respect of a rental agreement and the equipment to which it related. It involved specification at the outset of a “residual amount” agreed between Sanget and State Bank. When the agreement had run its term, and assuming that no moneys were outstanding to State Bank, Sanget was obliged to buy the agreement and the equipment from State Bank for the residual amount.
Seventh, State Bank entered into residual purchase agreements with Sanget in respect of each of the first and second rental agreements. Each of the residual purchase agreements referred to a numbered attached invoice. The invoices were rental schedules relating to the first and second rentals. Their numbers matched the invoice numbers on the residual purchase agreements.
Eighth, on any view there could be no assignment until the residual amount was paid. At trial, evidence was belatedly adduced by Sanget at trial to establish that it had made payment of the respective residual amounts on 26 June 2003 and 15 June 2004 to a “Colonial Suspense Account”.
Ninth, the gist of Sanget’s case at trial was relevantly that CBA was the successor of State Bank, and that Sanget’s payment to it of the residual amounts had triggered assignment to Sanget of what had been State Bank’s right, title and interest in the two rental agreements and the equipment to which they related. For this to be the case, CBA must have acquired State Bank’s alleged interest in the rental agreements and the equipment, and payment by Sanget to it must have been the legal equivalent of payment to State Bank.
Although a court is not confined to consideration of the pleaded case if, without objection, the parties stray from it at trial, it was at least very desirable that Sanget should have raised pertinent allegations by its statement of claim. That was particularly so when it was clear that Westbourne was intent upon putting the plaintiff to its proofs. But the statement of claim was altogether silent concerning CBA. Only in further and better particulars of claim, dated 3 November 2005, was there any reference to that entity. The particulars alleged that -
“(b)y virtue of section 22 of the Financial Sector (Transfers of Business) Act 1999 (Cth), [CBA] is the successor in law of the State Bank …”
That allegation, however, did not avail Sanget. Counsel frankly and correctly conceded on the appeal that for his client to have relied upon the operative provisions of the legislation there must have been proof that the Australian Prudential Regulation Authority had given a pertinent certificate of transfer, and of the content of that certificate.
Tenth, on 18 May 2004 Sanget sent a letter to Westbourne in respect of the second rental agreement. It advised that the agreement would expire on 9 June that year, and that at that time “we will acquire all other party’s [sic] interests in the agreement”. The letter offered various options as to what might be done when the agreement expired. One of them was return of the goods, in connection with which a delivery location would be provided.
Eleventh, on 16 June Westbourne sent a letter to Sanget saying the equipment the subject of the second rental agreement was no longer required, and was available for collection or could be returned to a Melbourne location as had happened in the past with Equico.
Twelfth, on 17 June Sanget emailed Westbourne. It said that the equipment had to be delivered to Sydney. It relied upon clause 7(10) of the 2000 Master Rental Agreement. See [17](4) above.
Thirteenth, on 21 June CBA wrote to Westbourne, apparently at Sanget’s behest. Sanget had communicated by email with CBA on 17 June observing, inter alia, that Westbourne had said that it did not know who Sanget was. What CBA said about the respective positions of itself and Sanget need not be set out. The trial judge did not receive the letter in proof of the truth of its contents, and his Honour’s ruling was not challenged by Sanget.
Fourteenth, Westbourne did not return the equipment to Sydney.
Fifteenth, Sanget claimed that failure to return the equipment to Sydney, as demanded, breached the second rental agreement, which had a cascading effect upon the first rental agreement.[17] It sued Westbourne for damages and for return of the goods.
[17]It seems that, after the three year term of the first rental agreement ended in June 2003, Westbourne had retained the eight computers which were its subject-matter, and had continued to pay monthly rental thereon.
Sixteenth, Sanget made a Calderbank offer to Westbourne. The offer was faxed to Westbourne’s solicitors after 4pm on 4 April 2006. It was available for acceptance until noon on 5 April. The trial commenced on 6 April. Sanget offered to accept $125000 “all in”, Westbourne to have ownership of the computers.
The issues at trial
Westbourne –
· Denied that Equino had been an agent of State Bank at pertinent times.
· Admitted the making of the 2000 master rental agreement, and various of its terms. But put in issue the question whether that agreement had any application to the two rental agreements.
· On the assumption that the 2000 master rental agreement applied to the rental agreements, alleged that the condition therein which provided for payment of an amount as liquidated damages for detention[18] was void as a penalty.
[18]Condition 12.
· On the same assumption, pleaded that it was an implied term of the 2000 master rental agreement that the place to which equipment was to be returned was to be reasonably accessible within the jurisdiction.
· Again on the same assumption, alleged that it had at all times been ready, willing and able to deliver the equipment to Equino; and that Sanget had refused to accept delivery as it should have done.
· Admitted that it was a term of the master purchase agreement that on payment by Sanget to State Bank of the residual amount, all State Bank’s interest in the rental agreements and the equipment would pass to Sanget, but denied that State Bank made any such assignment.[19] Further pleaded that the purported assignment by State Bank to Sanget was unenforceable against it because it had not been given notice of the assignment, as required by statute;[20] and because it was ineffective as a purported assignment of future property.
· Denied breach of agreement, and that, if there had been breach, Sanget had thereby suffered loss and damage.
[19]This raised the question, inter alia, whether State Bank’s rights had been assumed by CBA.
[20]Reference was made to s 134 of the Property Law Act 1958, and to s 12 of the Conveyancing Act 1919 (NSW).
The course of events at trial
Sanget called one witness viva voce – Mr Geoffrey Gray, a director of the company, and active in its affairs. He was both examined and cross-examined. Other than that, a number of documents were put in evidence. Objection was taken to admission of some of them; but nothing need be said for the moment about that debate.
Sanget then closed its case. Counsel for Westbourne indicated that she wished to make a no-case submission. She was put to her election. She protested, but the protest was arid, for she conceded that she did not intend to go into evidence in any event.
Partway through submissions, Sanget sought and obtained leave to re-open its case in order to remedy a supposed defect in its proofs. It adduced documentary evidence that it had paid the residual amounts, and to whom.[21]
[21]Mr Gray had given evidence in re-examination, by leave, that the residual amounts had been paid to CBA.
Subject to the matter just mentioned, the trial proceeded as if, as was de facto the situation, counsel were making closing addresses.
Resolution of issues at trial
Although the learned judge made some remarks in his written reasons which suggested that he had approached the matter entirely as if he was dealing with a no-case submission,[22] I think that he should be taken to have resolved the matter on all the evidence as at trial’s end[23] - although the difference in approach between consideration of a no-case submission and consideration of all the evidence at trial’s end has been said to be largely illusory in a judge-only trial.[24] Resolving the matter as at trial’s end permitted his Honour, of course, to draw available inferences, and to apply, in appropriate circumstances, the rule in Jones v Dunkel[25] - a rule which both parties called in aid in different ways.
[22]Reasons at trial, [3].
[23]Recognizing that too much should not be made of a judge’s remark in course of argument, I think that his Honour made clear his recognition that he needed to consider the matter at two levels. The issue was taken up by Westbourne’s counsel in her closing submissions.
[24]That is so at least where a defendant has been put to its election, or has not in any event adduced evidence. See James and Ors v Australia and New Zealand Banking Group Ltd and Ors (No 2) (1985) 6 FCR 448 at 451–452. See also, though subject to criticisms made in Naxakis v Western General Hospital and Anor (1999) 197 CLR 269 as to formulation of the test in the context of a no-case submission, Protean (Holdings) Ltd (Receivers and Managers appointed) v American Home Assurance Co [1985] VR 187. The situation in a case of trial by judge alone may be contrasted with the position in criminal cases - see May v O’Sullivan (1955) 92 CLR 654 at 658–659, and Zanetti v Hill (1962) 108 CLR 433 at 442–443 per Kitto J; and with the position in a civil jury matter – see Naxakis per Gleeson CJ at [16]–[17], and per Kirby J at [82] –[83]. (The references to Naxakis are illustrative, not exhaustive).
[25](1959) 101 CLR 298.
The learned judge found, inter alia, that –
· Equico had acted as agent for State Bank, the latter being an undisclosed principal, in entering into the two rental agreements. There was no evidence that CBA had been the undisclosed principal.
· The terms and conditions of the 2000 master rental agreement governed those agreements.
· The liquidated damages condition in the 2000 master rental agreement did not amount to a penalty.
· Residual purchase agreements were entered into between State Bank and Sanget in relation to the two rental agreements, assignment not to be effectual until residual amounts payable were paid by Sanget to State Bank.
· Residual payments had been made by Sanget to CBA, this being effective to pass right title and interest in the two rental agreements, and the equipment, to Sanget.
· Westbourne’s conduct in communicating with Sanget concerning the handing-over of the equipment constituted an admission that Sanget was the owner when return was due, and so was entitled to enforce rights that would have been enjoyed by the original financier. Effectively, this finding concluded, quantification of damages apart, the range of liability issues which had been agitated
· Sufficient notice of the assignment had been given; and, in any event, Westbourne’s counsel had made a concession as to notice.
As for costs, the judge gave effect to the Calderbank letter. In his opinion, the policy behind such offers, which was to encourage settlement negotiations at any stage in the course of a trial, held good right up to the end of a trial. The penalty for an offeror delaying in making such an offer was that the benefit of indemnity costs would likely be comparatively trifling.
Questions arising on the appeal
On the hearing of the appeal, counsel for Westbourne advanced seven broad submissions. One, the first, was a response to an issue raised by Sanget. The submissions were these:
1.The tests on nonsuit, relied upon by Sanget, were irrelevant. The judge had made his findings on consideration all the evidence as at trial’s end.
2.There was no evidence that Equico was the undisclosed agent of State Bank at the time Equico entered the rental agreements.
3.There was no evidence that CBA had acquired State Bank’s rights, if any, under the rental agreements or the residual purchase agreements.
4.The 2000 master rental agreement did not govern the relationship between the parties to the June 2000 and June 2001 rental agreements.
5. Sanget had not established that there had been an assignment to it of rights under the rental agreements which satisfied s 134 of the Property Law Act.
6.Contrary to the judge’s conclusion, condition 12 of the 2000 master rental agreement, if it applied, was in the nature of a penalty.
7.The judge’s exercise of the costs discretion, with respect to the Calderbank offer, had miscarried.
One aspect of the second, third, fourth and fifth submissions was the contention that the judge had been wrong to conclude that Westbourne’s communications with Sanget concerning the return of the equipment constituted an admission that Sanget was then the owner thereof.
Resolution of the appeal
Whilst most of Westbourne’s submissions, to varying extent, raised legal as well as factual issues, at the heart of a number of the issues which it agitated was the proposition that there had been no evidence to support findings made in Sanget’s favour by the judge. The no-evidence point, in this case, was real. It was not simply a weight of evidence point masquerading under another name. The reality of the issue was underlined by the frank observation of senior counsel for Sanget that the proofs had been “thin”; and by his concession that, if certain evidence adduced at trial should be confined by application of hearsay principles, then Sanget had not made out its proofs.
It is of course true that Sanget was not a party either to the 2000 master rental agreement or to the two rental agreements. Further, it would not have been expected to have direct knowledge of any 1998 master rental agreement, or to have been able to cast light on the reference to such a document in the rental agreements.[26] Again, proof of transmission of rights between State Bank and CBA was surely outside Sanget’s personal evidentiary capacity.
[26]Had the matter been investigated, it may be that a question of rectification would have arisen.
That said, I think it is somewhat remarkable, particularly in a case where Sanget was on notice that it was being put to its proof, and where by its Calderbank offer it ridiculed issues raised by Westbourne, that matters susceptible of proof along well-recognized lines were not addressed in a conventional way. The fact that this did not happen is not, of course, the end of the story. Had Sanget adduced evidence probative of the various issues, though in an unconventional way, it was entitled to succeed. But in my opinion the proofs offered were deficient in a number of respects.
I need not add to what I have already said at [37] concerning Westbourne’s first submission. Further, it is unnecessary for me to reach any concluded opinion concerning Westbourne’s sixth and seventh submissions. Concerning those submissions I express only the tentative opinion that condition 12 of the 2000 master rental agreement, if it applied, was not in the nature of a penalty; and that the judge’s exercise of discretion with respect to the award of costs miscarried.
Agency; and Westbourne’s admission of Sanget’s ownership
I turn to the submission that there was no evidence that Equico was the agent for State Bank when it entered into the June 2000 and June 2001 rental agreements. In that connection it is appropriate to consider the judge’s conclusion that Westbourne’s conduct constituted a clear and unequivocal admission that Sanget was the owner of the equipment when its return was due.
The alleged written agency agreement, as I have said, was not adduced in evidence. What did get into evidence were the residual purchase agreements, to which were attached invoices in the form of rental schedules. The residual purchase agreements described State Bank as owner of the equipment and Westbourne as the renter. The rental schedules described the parties as Equico, financier, and Westbourne, renter. In one instance, the dates of the residual purchase agreement and the rental agreement were identical. In the other instance, there was a readily explicable variation in the dates on the two documents.
Also in evidence was the master purchase agreement, which contemplated the purchase by Sanget of rental agreements and rented equipment from State Bank; and which defined rental agreements to mean agreements entered into between State Bank and “end-users”.
The circumstances, in short, were these: at or about the time that Equico, as “the financier”, entered into the rental agreements, State Bank was asserting to Sanget, in substance, that its business included financing equipment by way of rental agreements, and that it had entered into the agreements with the end-user – which logically was Westbourne. Further, in each instance it appended a copy of the rental invoice to the residual purchase agreement, this demonstrating its possession of a copy of an agreement to which, on it face, it was not a party.
Documents apart, counsel for Sanget relied upon evidence given by Mr Gray. In examination in chief, the witness -
·Said that in 1998 Sanget entered into a master purchase agreement with State Bank to provide residual values “on equipment or deals introduced by a company called Equico and other companies as well”.
·Described Equico and the other companies as “the brokers” of State Bank; and also spoke of dealing with “the agent”.
·Said, referring to the residual purchase agreement in respect of the equipment first rented, that it “would have been provided by the broker, the agent and financier”; and added that, after execution by Sanget, “(t)he original is then returned to the agent who in turn passes it on to the State Bank …”
·Said, shown a copy of a master rental agreement dated May 1999, apparently between Westbourne and another Equico entity, that it was an agreement which “would have been” executed by those parties; and that it was not a document a copy of which was received by Sanget in the ordinary course of events.
·Said that he had received copies of the May 1999 and (December) 2000 master rental agreements from CBA in response to his request.
·Identified a series of emails which had passed between Sanget and CBA, CBA and Westbourne, and Sanget and Westbourne, in the period 9 to 17 June 2004. They went into evidence. The tender, as I understand it, was subject to objection.[27]
[27]The objection was at least that a document did not become part of “business records” simply because it had been received by Sanget and then filed.
The relevance, as it was said, of the emails last-mentioned was explained by counsel for Sanget in his closing submissions as follows. The documents were relevant in three ways. First, some of them constituted notice of assignment by CBA of its rights under the rental agreements sufficient to satisfy s 134 of the Property Law Act 1958. Second, CBA’s participation in the correspondence showed that it must have succeeded to State Bank’s rights under the rental agreements. Third, Westbourne’s dealings with Sanget constituted an admission by it that Sanget was the owner of the equipment.
In cross-examination, Mr Gray said that he “believed” that Equico acted as an agent for State Bank. Pressed whether that belief was founded upon something that he had been told, he said, in a non-responsive answer, that he “was aware” that Equico acted as an agent for CBA. Belief and awareness aside, his answer had to do with CBA, not State Bank.
Mr Gray then gave evidence that Equico was “always for the State Bank”[28] - although he conceded had never seen an agency agreement. But almost immediately he said that he was “aware” that another company had an undisclosed principal and agency agreement with Equico.
[28]By which he meant, apparently, that Equico acted as agent for State Bank, but not for other principals.
In argument in this Court submissions were made as to the use which could properly have been made of hearsay evidence given by Mr Gray on the question of agency. Counsel for Sanget submitted that, absent objection to the receipt of such evidence, the court was entitled to act on it. He cited Re Miller[29] and DPP v Spencer.[30] Counsel for Westbourne did not dispute that use may be made of hearsay evidence in a civil proceeding. But the use to which it can be put, he submitted, depends upon the extent to which the right to object to its receipt is waived at trial. He cited Ritz Hotel Ltd v Charles of the Ritz Ltd and Anor.[31]In the present case, he submitted, much of the relevant evidence in chief had been no more than description in narrative form. Cross-examination was more difficult for Westbourne. But its real purpose had been to expose Mr Gray’s want of relevant knowledge. All it showed, in any event, was the witness’s belief that Equico had acted as agent for State Bank, amongst others, from time to time.
[29][1979] VR 381 at 383. The issue was scarcely touched upon.
[30][1999] VSC 301 at [46]. The remarks of Eames J, as his Honour then was, were obiter dicta.
[31](1988) 15 NSWLR 158 at 169F–172F.
This is not the occasion for an excursus into the law so far as it concerns the use which may be made of evidence received in a civil trial where objection might have been taken, but was not. In reality, the parties were not much apart in their submissions as to the use to which a court may use such evidence. In Re Lilley,[32] one of the authorities cited in Spencer, Smith J explained when and why such evidence may be taken into account. What his Honour said is not inconsistent with the observations of McLellan J in Charles of the Ritz.
[32][1953] VLR 98 at 101–102.
Mr Gray gave evidence in examination in chief concerning Equico and State Bank which was almost useless. It was inconsistent in language, was conclusionary, made liberal use of the “would have” formulation, and was for the most part unrelated to the rental agreements here in issue. His cross-examination relevantly revealed, at best for Sanget, a belief or awareness that Equico acted for principals including State Bank when entering into rental agreements. But although one point of the cross-examination was to show that Mr Gray had no more than an insubstantially grounded belief that there was a connection between Equico and State Bank, counsel for Westbourne sought to rely upon his evidence in her closing address in another way. His evidence showed, she submitted, that Equico had acted as agent for a number of entities, of which State Bank was only one. The intended point of the submission, as I understand it, was that it had not been sufficiently established that Equico had acted as agent for State Bank when entering into the two rental agreements with Westbourne.
Westbourne having adduced and then sought to rely upon evidence given by Mr Gray, notwithstanding the hearsay character of all or most of it, I think that it would be wrong to deny the evidence whatever probative worth it might have in another connection. But that does not take Sanget far. At most, I consider, the evidence permits a conclusion that Equico acted as an agent for State Bank, amongst others, in entering into rental agreements over a period of time.
Considering the documentary evidence, and also the limited impact of Mr Gray’s evidence, I provisionally conclude that Equico did act as agent for State Bank in entering into the two rental agreements. I say “provisionally” because, on the view I take, the matter need not be finally decided. Sanget’s claim fails for other reasons.
I recognize that my provisional conclusion involves attributing truth to a hearsay allegation made by State Bank in the residual purchase agreements. I recognize also that there is less reason to conclude that Equico acted as agent for an undisclosed principal when, as I later conclude, the 2000 master rental agreement did not apply to the two rental agreements. I further recognize that, if the 2000 master rental agreement had applied, there could have been another explanation for State Bank describing itself as the owner of the goods in the residual purchase agreements. But none of those problems, singly or in combination, persuade me against the provisional conclusion which I have expressed.
In reaching that conclusion, I have not been assisted by Mr Gray’s evidence. For reasons described, I think that its probative worth was very small.
Neither have I been assisted in coming to my conclusion by the admission, which his Honour discerned out of Westbourne’s conduct in communicating with Sanget, that the latter was the owner of the equipment[33] when “the return was due”. I agree with the submission for Westbourne that, at best for Sanget, such conduct revealed Westbourne’s state of mind based upon assertions for the most part made by Sanget. Moreover, it would be far too long a bow to conclude that acceptance of ownership made good a chain of events which began with Equico acting as agent for a particular undisclosed principal.
[33]The subject of the later rental agreement.
Did the 2000 master rental agreement apply to the two rental agreements?
In my opinion, Sanget did not prove that the 2000 master rental agreement applied to the two rental agreements. It follows, inter alia, that no express provision was made for assignment by Equico or State Bank of right, title and interest in the equipment; and that the damages claimed and recovered by Sanget against Westbourne, reliant upon the provisions of the master rental agreement, were deprived of foundation.
The rental schedules referred, as I have already noted, to a master rental agreement dated 2 April 1998, made between Equico and Westbourne. It was that agreement, and the terms and conditions which were set out in its schedule 1, which were made applicable to the two rental agreements.
No such agreement was proved. No such agreement could have been proved, for the relevant Equico entity did not exist in April 1998.
The first rental agreement could not have imported a master agreement that was an impossibility. Neither could it have imported the 2000 master rental agreement, which had not then been made. Neither again did it claim to import the May 1999 master rental agreement, which was made between Westbourne and a different Equico entity. Counsel for Sanget was no doubt correct in conceding that he could not say to what master rental agreement the first rental agreement referred.
Much the same observations may be made about the second rental agreement. In terms, it imported a master agreement which was an impossibility. If there ever was a master rental agreement dated 2 April 1998 – albeit an agreement to which a different Equico entity was a party – such agreement was not in evidence. Again, whilst the 2000 master rental agreement was in operation when the second rental agreement was made, that master agreement was not, in terms, imported into the rental agreement.
Assuming that the references to a master agreement of 2 April 1998 were an error, Sanget made no attempt to explain what the error was, or seek rectification. Rather, it relied upon clause 7(1) of the 2000 master rental agreement, set out at [17](7) above, to submit that such agreement applied to all rental agreements concluded between Equico[34] and Westbourne, whenever struck. In my opinion, however, that submission should not be accepted.
[34]“Equico” was apparently given an extended meaning in Sanget’s submissions in this connection. See [70].
The essence of Sanget’s submission was that sub-clause (b) of clause 7(1) had the effect of importing the provisions of the 2000 master rental agreement into a rental agreement in lieu of a master agreement previously applying to that rental agreement. Indeed, I understood Sanget to submit that sub-clause (1)(b) would be stripped of meaning if it was not given such operation. But the obvious application of the sub-clause was to ensure that the terms and conditions of a particular rental agreement were to be found in the master rental agreement itself; an issue further addressed by sub-clause (2). Such a construction, it might be added, is entirely consistent with the heading to clause 7. But in light of condition 42(3)(f), and in the absence of argument, I have not taken that matter into account.
I consider also that the definition of “rental agreement”– see [17](8) above – is opposed to the construction advanced by Sanget. Both the definition, and the provision made for execution of rental agreements, show that such agreements are conceived of as being prospective to the making of the master agreement.
The definition of “financier” – see [17](9) above - tends to the same conclusion. As I understand it, Sanget submitted that the 2000 master rental agreement would apply to a rental agreement previously entered into with any Equico entity. At trial, Sanget apparently argued that this was so because “financier” included a “related corporation”. Under the 2000 master rental agreement, that is so in several connections.[35] But “financier” itself is not so defined.
[35]See conditions 32 and 33.
There is another problem with Sanget’s submission arising from the definition of “rental agreement”. The definition says that it means an agreement “in the form, or substantially in the form, of the rental agreement set out in schedule 2.” But, as I have already said, there was no schedule 2 to the copy of the 2000 master rental agreement which was admitted at trial.
Finally, this may be noted. The second rental agreement post-dated the making of the 2000 master rental agreement. In terms it imported another master rental agreement. The fact that the other agreement was an impossibility, and that it had allegedly been made before 2000, would not seem to me to yield the result that the second rental agreement fell within the operation of clause 7(1)(b) for which Sanget contended.
Did CBA acquire State Bank’s rights, if any, under the rental agreements or the residual purchase agreements?
Taking as a starting point my provisional conclusion that Equico was agent for State Bank in entering into the rental agreements, was there evidence upon which it could be found that State Bank’s rights under those agreements, the master purchase agreement and the residual purchase agreements were transmitted to CBA? In my opinion, that question should be answered no.
First, it is not in doubt that Sanget could not call in aid s 22 of the Financial Sector (Transfers of Business) Act 1999 (Cth) in support of its unpleaded case that State Bank’s rights under the contracts were transmitted to CBA.
Second, no other legislation was relied upon, or document put in evidence, to show transmission of rights under any of the contracts to CBA.
Third, the judge concluded that he could not take judicial notice of the “takeover” of State Bank by CBA. Sanget did not challenge that conclusion.
Fourth, the admission which his Honour discerned out of Westbourne’s behaviour at most bespoke its state of mind, and did not stand in proof of a fact which Sanget sought to prove. Further, an admission that in mid June 2004 Sanget owned the equipment the subject of the later rental agreement, even if made, did not establish from whom Sanget had acquired ownership.
Fifth, CBA’s letter of 21 June 2004 to Westbourne was not admitted in proof of the truth of its contents – which is not to imply that, had it been so admitted, it would have made out Sanget’s case on the issue now under consideration.
Sixth, Mr Gray gave evidence that the residual amounts were paid to CBA. He was not cross-examined about that assertion. But Sanget’s electronic transfer requests, tendered on behalf of Sanget, identified State Bank, not CBA, as the transferee; whilst confirmation reports indicated that funds had been transferred into a ”Colonial Suspense Account”. Whether Sanget had paid CBA, and, if so, whether there had been a sound legal basis for doing so, was scarcely resolved by that body of evidence.
Seventh, in the end Sanget’s submissions reduced to this: that Mr Gray, and the CBA employees who had engaged in emails in June 2004, could not sensibly have been mistaken. Their dealings and representations grounded an inference that in some way CBA had lawfully acquired State Bank’s assumed interest in the various agreements and the equipment.
An inference might be drawn out of the contents of those June 2004 emails of which CBA employees were nominally the authors that CBA was asserting ownership of the equipment the subject of the second rental agreement. That inference might be drawn although Westbourne was not a party to most of the communications, and although there was a substantial implicit hearsay content therein. But it is another question whether CBA in fact had lawful ownership of the equipment.[36] In my opinion that could not legitimately be inferred in all the circumstances.
[36]That is, as owner under the rental agreements.
Nor could Mr Gray’s presumed state of mind, which showed only that he thought that he should deal with CBA, ground the inference which Sanget asked the Court to draw. His evidence showed that his understanding of legal relationships lacked precision.
Assignment by CBA?
It is strictly unnecessary to consider and reach a concluded view upon the question whether Sanget proved an assignment in writing to it of the rental agreements which satisfied s 134 of the Property Law Act 1958. That is so because it was common ground that any assignment could not be characterized as absolute until the residual amount had been paid to the lawful recipient. According to the master purchase agreement and the residual purchase agreements, the prospective recipient and assignor was State Bank. But the import of Sanget’s case was that CBA was the owner when residual payments had to be made. According to Mr Gray’s evidence - which did not sit comfortably with documentary evidence adduced by Sanget - payment had been made to CBA. I have concluded that Sanget did not establish that State Bank’s rights had been acquired by CBA at a relevant time. It follows that, on Sanget’s case, there had been no payment of residual amounts to the party entitled thereto, as would trigger assignment.
There is another practical issue. If there was assignment in either case, it was of the putative rights and interest in the rental agreement and the equipment of State Bank, or of CBA as its successor. What rights went with the rental agreement depended upon the terms and conditions of rental. But I have concluded that the master rental agreement upon which Sanget relied did not attach to either rental agreement. If, then, there was an assignment of the kind dealt with by s 134, and if Westbourne was given notice complying with that section, it may be that Sanget could have sought, in its own name, to recover the equipment. But that seems very likely to have been the limit of its rights.
Notwithstanding what I have thus far said, I think it is desirable to note the ambit of the dispute concerning s 134, the unsatisfactory resolution of the issue at trial, and to express some conclusions as to the merits of the conceptual argument.
As to the first of those matters, Westbourne submitted that the judge erred in finding that s 134 of the Property Law Act was satisfied when no assignment in writing was alleged in the pleadings or was proved. It abandoned a submission, pressed at trial, that a notice of assignment must state the date of the assignment. It accepted, assuming CBA had become the owner of the rental agreements, and assuming CBA had been paid the residual amount in each case, that there had been an equitable assignment of rights to Sanget – the consequence of which was that CBA must also have been a party to the proceeding. In the event, had assignment been a live issue – not doomed to irrelevance by other conclusions adverse to Sanget - success by Westbourne would likely have consigned the matter to a re-trial, with an added party, in which re-trial Sanget sought different relief.
Then, as to the second of the matters which I mentioned a moment ago, the judge decided that there had been an assignment conforming with s 134 essentially in reliance upon what he said was the concession by Westbourne’s counsel that sufficient notice had been conveyed by the statement of claim. I have studied the relevant submission. Counsel did concede that a pleading may constitute sufficient notice. But she then submitted that the statement of claim in this case was relevantly insufficient. In the event, his Honour’s reliance upon counsel’s concession involved a misapprehension as to its extent.
That takes me to the third matter which must be addressed. The gist of Westbourne’s argument in this Court was that the statement of claim did not contain allegations of an assignment by writing to Sanget and did not give notice of such assignment. Sanget challenged those submissions. Further according to Westbourne, the master purchase agreement and residual purchase agreements were not absolute assignments by writing – that is, assignments of the character of which notice may be given under s 134 in order to attract its benefits. They were agreements to assign on payment of residual amounts. On that analysis, there was no absolute assignment by writing which could be the subject of notice. Sanget’s answer was that the master and residual purchase agreements did constitute an absolute assignment by writing of CBA’s interest in the rental agreements. True it was that in each instance payment of the residual amount was required before there was assignment. But once payment was made the assignment was absolute and not executory.
The first issue, logically, is whether the master and residual purchase agreements did constitute an absolute assignment by writing of CBA’s assumed interest in the rental agreements.[37] In my opinion, they did not do so. It follows that, if the statement of claim fully pleaded the relevant parts of those documents, and assuming that a pleading could stand as the giving of notice under s 134, nonetheless such pleading could not constitute good notice of a relevant assignment.
[37]A matter made clear, if the statute did not do so, by Dixon and Evatt JJ in Consolidated Trust Company Limited v Naylor (1936) 55 CLR 423 at 439.
The master purchase agreement relevantly provided that in every case where Sanget took up a residual position in respect of a rental agreement and the equipment subject thereto, and the agreement ran its term and all rental had been paid, then Sanget must buy the agreement and the equipment for the residual amount agreed between State Bank and Sanget. Such amount must be paid immediately upon expiry of the rental agreement. Then, by clause 3.3 -
“Immediately upon payment by Sanget to [State Bank] of the residual amount … all right, title and interest of [State Bank] in:
(a) the Rental Agreement;
(b) the Equipment:
will automatically pass to Sanget and [State Bank] must … promptly execute all documents and do all things that Sanget reasonably requires of it to effect, perfect or complete the transfer of all that right, title and interest.”
The residual purchase agreements were the necessary identification of arrangements made under the master purchase agreement in particular instances. They identified the rental agreement in question, the renter, the equipment, and the agreed residual amount. They added flesh to the bones of the master purchase agreement, but added nothing to the conceptual nature of the assignment set out in that agreement.
In my opinion, clause 3.3 was not an absolute assignment in writing of State Bank’s interest in any rental agreement/equipment which was thereafter the subject of a residual purchase agreement. Rather, it was an agreement to assign such interest in the event that, in given circumstances, Sanget paid the residual amount. Counsel for Sanget was correct in submitting that, when such amount was paid, assignment of interest was to take place. But that did not convert what was a written agreement to assign into an absolute assignment in writing. Rather, when payment was made, the documents plus payment meant that there was an assignment in equity.
I consider that, payment having been made in a particular case, Sanget might have required State Bank to provide an absolute assignment in writing. That would seem to fall within the scope of the final portion of clause 3.3. If that be correct, it would highlight the different character of all that preceded it in the clause.
In the circumstances, nothing need be said upon the question whether the statement of claim fully pleaded the relevant parts of the documents upon which Sanget relied. I add only, for sake of completeness, that I would wish to reserve my opinion whether a pleading could itself constitute notice of a relevant assignment.
Orders
In my opinion, the appeal should be allowed, the orders below set aside, and an order be made in lieu thereof that the proceeding be dismissed. Sanget’s claim fails, in my opinion, for want of proof of fundamental matters. There is no occasion to remit the matter for retrial. Nor could it be said that, on the proofs offered, Sanget was entitled to any relief – that is, including return of the equipment.
4