\ L053 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VG No. 137 of 1985 wee ew Between: VICTOR ALEXANDER HALE and BETTY Joy¥ HALE (Applicants) And: AGC (HOUSEHOLD FINANCE) LIMITED and CUSTOMTONE KITCHENS AUSTRALIA PTY. LTD. (Respondents) Judge Making Order: Smithers J. Date of Order: 5 December 1985 Where Made: Melbourne. MINUTE OF ORDER THE COURT ORDERS THAT: The application is dismissed. The cross-claim of AGC (Household Finance) Limited against Victor Alexander Hale and Betty Joy Hale and Customtone Kitchens Australia Pty. Ltd., is adjourned to a date to be fixed on the application of any party. Seer w mp rr tre eee as ge a ok pr pin reer eee te eras t NOTE: Victor Alexander Hale and Betty Joy Hale are to pay such costs as are reterable exclusively to their claim for relief under the Trade Practices Act 1974. Stay order No. 3 until further order. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. presen, rey ego type tern or peers ae en Tae es A 2 elt ee be IN THE PEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG No. 137 of 1985 GENERAL DIVISION Between: VICTOR ALEXANDER HALE and BETTY JO¥ HALE (Applicants) And: AGC (HOUSEHOLD FINANCE) LIMITED and CUSTOMIONE KITCHENS AUSTRALIA Pry. LTD. (Respondents) Coram: Smithers J. Date: 5 December 1985 REASONS FOR JUDGMENT Mr. and Mrs. Hale seek relief against the first respondent AGC (Household Finance) Limited (AGC) and the second respondent Customtone Kitchens Australia Ltd. (Customtone) on the ground that a transaction which they entered into with the second respondent (Customtone) on 4 January 1985 and that entered into with the first respondent (AGC) in March 1985 were entered into under the belief that the price of a Customtone kitchen comprising cabinets and other kitchen equipment to be installed by Customtone under the first mentioned agreement was five thousand dollars and Ser deaeed Aw Seah ee ter eazy tt pe ee af~ sat yy Pret vs Oo * ot "pon ao ere nr mee ee ore ene, wv otprmy- ' 4 Paeeeeeierad aed . os _ ahs ar, that the cost ot finance to be provided by AGC in respect of that agreement was $4,446 payable to AGC at the rate of $196.00 or $197.00 per month for four years. Shortly prior to 4 January 1985 Mr Hale rang Customtone and 1t was arranged that its representative would call. On 4 January, one Raymond Micaleff (RM), classified as an executive designer of Customtone, called at the home of Mr. and Mrs. Hale to negotiate, 1f possible, an arrangement for the installation of kitchen cabinets and other equipment by Customtone and if desired the provision by AGC of finance to the applicants in connection with any arrangement that was made. RM's interest was that of a salesman on commission. He was experlenced in negotiating kitchen installations by Customtone and appears to me to have an excellent knowledge of the detalls of what Customtone had to offer including the prices of the cabinets and other equipment that might be under discussion and of what had to be done by a customer to obtain finance from AGC in relation to any sales made. He took with him to the home ot the applicants various brochures and transparencies to assist in displaying what was available and how the various items would tit together. By his efforts the applicants were induced to look favourably upon a proposal which was, in effect, that a new kitchen 1n the sense of the installation by Customtone of a complete set of kitchen equipment, sink, stove, dishwasher, cabinets and other items was agreed upon. The applicants decided upon a set of equipment and lay out which appealed to them and decided they would purchase that kitchen ensemble. There was of course a pant TS ~ oe mre ne ee Ame rey — 3 question of price. It appears that when the approved items and layout were specified RM set down on a piece of paper or book for rough entries a list of the items agreed upon. From then on there 1s dispute as to what occurred. The applicants state in substance that RM having written down the items and costed them then said that the total was $4,960, or a figure in that vicinity, and added "near enough to $5,000". It 21s said that this was stated as being the actual price at which RM was offering the total installation. The applicants say they had a discussion between themselves, that during this conversation 1t was mentioned that $5,000 was a lot of money, that Mr. Hale said, however, that the money was going to provide a new kitchen and was acceptable and Mrs. Hale agreed. According to the applicants Mrs. Hale then asked what the full price would be with interest added on the basis that they would borrow money to pay for the kitchen. Mrs. Hale said that RM made a telephone call and then said that the cost of the interest would be $4,446 and that meant that the applicants would "be up for" $9,446. He wrote the figure ona piece of paper. At a stage which is not easy to identify there was a conversation between Mr. Hale and RM in which Mr. Hale stated he would accept finance arranged by Customtone. He said that RM asked him how long it would take him to pay off $9,446 and Mr. Hale said "four years" and that RM said that AGC preterred a six year term. However, it is not made clear in the evidence of Mr. Hale whether the period of the finance agreed upon was four or six years. Mr. Hale said that when RM asked him how long it would take him to pay off the oe aes Pr ar hn wy ee ee ald ron oo ear te amount of $9,446, he said four years and RM said that the company preferred six years. But whatever 1t was understood to be, RM quoted the monthly payment as $196 or $197 per month. Mr. Hale said that at some stage a document called "work order and agreement" and another called "kitchen contract specification" were filled in by RM and he and Mrs. Hale signed them. The work order and agreement records a transaction or agreement to furnish the materials and services set forth in the specification for a price of $9,446, that a deposit of $1,446 had been paid and that the balance payable was $8,000 "on terms finance arranged with AGC". Mr. Hale says that in view of the statement by RM that the total price including interest was $9,446, he understood this document to reflect that situation. Accordingly, he took the $8,000 to be the balance payable after deducting the deposit, and similarly to aunclude the amount of all the instalments including principal and interest to be paid over the period of the finance. Mr. and Mrs. Hale then signed what was regarded by all as an application to AGC for the necessary loan. It is common ground that this document was taken by RM to Customtone that day and that no copy of it was left with Mr. and Mes. Hale. The so called application form was really an offer by the applicants to AGC to buy the new kitchen installation from it. They did not see a copy of it until 9 April when a copy arrived from AGC by mail. It was then, for the first time according to Mr. Hale, that he realised that the application provided for payment by him and his wife of seventy-two payments of $197 amounting in ail to $14,143.04. He immediately rang Customtone and said an error had occurred. wae te yee ee ee > wept yr me 3 . ae - on Thereafter there was correspondence between the solicitor for the applicants and Customtone and AGC. The evidence of RM is in direct conflict with that of the applicants in various respects. He said that in the course of the negotiations on the day there was not only no mention of $5,000 as the figure of the kitchen but no mention of that figure at all. He said that for the most part he knew by heart the prices of the items to be installed and that by checking prices where necessary from the price list which he had, he calculated the total price for the cabinets to be installed at a figure he cannot now state precisely, added $1,774 for appliances and he thinks $1,290 for plumbing, electrical services and administration and arrived at a total price of $10,196. He remembered that Customtone was currently giving a discount of $750 to purchasers of kitchens who contacted Customtone through certain retailers and he decided to enquire whether Customtone would extend the same discount to Mr. and Mrs. Hale. He rang his head office and received a favourable reply. By deducting $750 from $10,196 he arrived at the price to the Hales of $9,446 and so informed them. The reconstruction of the figure of $10,196 as well as he can at this stage indicates that that figure is in the range of what Might have been arrived at during the exercise he described. He can only say definitely that that was the figure he arrived at by adding $750 to the $9,446 which he quoted to the applicants. f£ accept his evidence with respect to the manner in which he came to quote the price of $9,446, RM said he took up the question of finance with Mr. and Mrs. Hale, and ween yeas Ea MUU Nene ca eee — perro oO they said they would take finance through AGC. RM obtained relevant details of age, occupation, income, and residence from Mr. Hale, and discovered Mr. Hale had a good credit rating because, inter alia, he had various credit cards. RM rang Customtone and gave the details to Mr. McDade of Customtone who arranged for a member of his staff to phone them to AGC forthwith. There 1s no doubt that most of the details now contained in the application (offer) form were in the possession of AGC by 12.15pm on 4 January. Clearly they had all been composed by RM before this time and recorded on paper. So far as the deposit was concerned RM said that as Mr. and Mrs. Hale were pressing urgently for al March installation he took the view that it would be advisable to present the transaction to Customtone that very day all complete with the deposit actually paid and finance approved. A bank cheque would have been as good as cash, but cash was asked for, and cash Mr. Hale went to his bank and obtained. According to RM this procedure ensured that the order by the applicants received the highest priority in the lists of Customtone's waiting customers. The points of evidentiary conflict are, whether the price for the kitchen was stated to be $5,000, whether $9,446 was stated as the total price including interest, and whether the application form was filled in when the applicants signed 1t. On these issues I look first at the probabilities. It is no doubt possible that a salesman wishing to bring off a ae eee soaps oem Gam ae .oor HB aac uate sale would underquote the price at which he intended to and did sign up the customers. He might do this just to procure the sale and make sure of his commission. In this case he might have had some sinister design to get a cash deposit and use the money for some purpose, presumably temporary, of his own. If one puts these theories aside there was certainly no reason for RM to cheat Mr and Mrs Hale. Having seen and heard RM as a witness I am quite satisfied that the notion that he wished to gain possession of the cash deposit for some purpose of his own is just not to be entertained. He has been a salesman for some years and 1s obviously dedicated to the Customtone business. He apparently makes many sales. His engagement with Customtone is something that he values and it seems most improbable that he would imperil his position by a blatant piece of fraud such as is suggested against him. Nothing to his discredit was suggested, and to me he appeared an honest witness. Indeed, Mr. Derham did not reject the possibility that perhaps he misled the applicants without meaning so to do. But RM calculated the finance required as in respect of $8,000 and not $3,554 or indeed $5,000. He quoted the monthly payment figure of $196 or $197. This was a figure given in the AGC table otf charges (Exhibit CK6) for six years in respect of a principal sum of $8,000. It is clear that RM knew that the real price was $9,446. He carried this as the price into the document of purchase as the price of the kitchen, deducted the deposit, and arrived at - the balance of $8,000 payable "on terms finance arranged with AGC". There is really no ambiguity in the terms of this document. They are not appropriate to reflect a transaction in which $9,446 includes the cost of interest on $9,446. To do that there should have been inserted alongside the price of $9,446, words such as, "including the interest on the money to be raised to finance this transaction". If Mr. Hale thought that this was what the document was meant to say it would perhaps not have been unreasonable for him to have said, "what about adding the words 'including interest'". But even then with the deduction of the $1,446 deposit the balance payable would have been less than $8,000 because the deposit would have reduced the amount on which interest would have been payable and the balance would not have been a round $8,000. The critical question as to whether $5,000 was quoted by RM and that $9,446 was the price with the cost of finance added depends on the evidence of Mr. and Mrs. Hale which RM denies. The question whether $9,446 included the interest depends on the passage in which it is Mrs. Hale who asks the question, in substance "what will the total price be with interest?" It is clear from the way RM gave his evidence that he is not the kind of man to misunderstand such a question. If he was asked that question he could only have answered it truthfully by working out figures appearing 1n Part III of the application for finance. The figure of $9,446 was his basic price for the kitchen. lt was a figure against which he intended to obtain a deposit and then arrange finance for the balance over six years. It would have lacked sense and been 17h and deahedeteeetetenn orate Te 7 On me ponte eee cnn. Pe a ati ae Y pr pean > Liye es Mp aoe cho Notes more eee sore tee ee le Fora asking for trouble as well as being a blatant fraud for RM to have misled Mr and Mrs Hale as is suggested. Mrs. Hale said that RM had said that the monthly repayments would be $196 or $197 and there is a strong probability that he did so say. It is a fact that 48 monthly payments over four years would total $4,956. But this does not explain how the $4,446 for the finance interest could have been arrived at by RM. To arrive at the correct figure for finance on $5,000 it would have been necessary for RM to remember that after deducting the deposit, the finance required was only for $3,554. Mr. Hale said that when the $197 per month figure was mentioned he multiplied this amount by 48 and arrived at $9,456 which was almost exactly the total sum payable for price and interest. But $9,446 would surely have been seen as a large sum to pay in respect of a loan of $3,554. This, on Mr. Hale's evidence, must be taken to have escaped his notice. If, as Mr. Hale said, the arrangement for payment of adeposit was not arranged until a late stage of the negotiations on 4 January, that circumstance could explain the oversight. But, this can not be so. The deposit was discussed and agreed upon before noon. Mr. McDade was told about ut. According to the applicants a document being an application to AGC tor a loan of $8,000 was signed by them. They say that it was signed at the request of RM made by him very shortly before he left their home. They say he explained that he could not fill in the details sought in parts 2 or 3 of the document because his electronic caluclator was not working due to flat batteries. Mr. Hale says that when he roe ome Ste tes, oa an a weep ypc i ye wer ee eg es —- wyotor wycpryers moss en me ae yer oan ete wa fee 10. demurred at signing an incomplete document RM said that there was "no risk" because the work order agreement signed earlier in the day set out the tull amount payable and contained a receipt for the deposit. RM said that his calculator batterles were in good order. But he did not need it to fill in parts II and III of the application form. All he needed was in the AGC table of charges (Exhibit CK6). RM stated that he had never left a customer's house with the application form not completed. I am satisfied that the form signed by the applicant was complete when signed by them. There was a conversation arising out of the fact that RM was unable to jeave with the applicants the application for finance. RM explained to them that although he was not leaving that document with them they were protected by the terms of the work record agreement which had on it a receipt for the $1,446 deposit. There was no conversation concerning Parts [II and III of the application for finance not being filled in. On the issue whether the applicants have established on a balance of probability that RM misled them as to the price of the kitchen to be installed, the general probabilities are all against RM having done so. Of course, he might have thrown all honesty to the wind for the purpose of making the sale for the sake of a commission. He might have wished to ensure that the applicants were put into a favourable mood to enable him to obtain $1,446 ain cash, for him to use between Friday mid-day until Monday. This latter notion is, I am quite sure, after seeing and hearing RM, not acceptable. The former also seems quite improbable. RM has been employed for ep sera er sone™ a oa voTy . re Sanaa ve Il. some years. fle has obviously mastered the limited role he plays in selling kitchens completely and appears dedicated to doing his work well and has a pride in so doing. He clearly envisages himself as a long term operator in this role. For him to have told a blatant lie to the applicants which as alleged would have imperiled his position with Customtone to enable him to make one commission is improbable. From what appeared in evidence he makes many commissions. In addition, the alleged fraud could have been exposed by one request to him to add to any of the documents some words such as "total price including interest" or "total amount payable including all instalments" either to the price statement of $9,446 in the work record agreement or the statement of the balance of $8,000 after the deduction of the $1,446. And of course if, as Mr. Hale asserts, he believed that the price without interest was $5,000 and the appropriate instalments were $196 or $197 per month, why he didnot question why, when the $1,446 reduced the balance outstanding to approximately $3,550, the rate of $196 or $197 per month was not reduced, or at least experience the feeling that $8,000 to repay $3,500 seemed rather high. In addition, the form of accounting in the work record of agreement was quite unsound if the sum of $9,446 was the total price of $5,000 plus $4,446 for a four or six year term of payment. Clearly, in that case, the $1,446 should have been deducted from $5,000 with a consequent reduction in the amount due in respect of the four or six year term which would make the $8,000 very high as the total balance. Mr. Hale said wrote TR ope < ow ao al toconeneeata a diliconeeinan ur samanane Foal aeedit ine iene 4 Pan . , 2%. 7.8 ue in pore ores goo coricae 12. he was not taking particular notice of the amount of interest charges because he anticipated paying off the finance before the arranged term expired, that he only wanted the finance to enable him to examine his finances at leisure and was quite willing to lose a year's penalty interest which he contemplated would be the cost of paying off the loan before the term expired. This could of course be true, but after all this was a fairly large transaction for the applicants to be undertaking and one would have thought that Mr. Hale would have wanted to have the price stated unambiguously and written into at least one of the several documents the applicants signed. He was quite experienced in using and completing documents. If one searches the evidence of Mr. and Mrs. Hale the only specific reference to the statement of a price including the interest is in the evidence of what was said to have been said by Mrs. Hale. Relevant passages from the evidence of Mrs. Hale are as follows: "What did he say, to the best of your memory? --- He was scribbling down on a scribble pad. He drew a circle - I was looking at the leaflets - he drewa circle and he said, $5000. I said it is a lot of money for a kitchen. I said to my husband: it is a lot of money, and he said: not really, because we will have a new kitchen out of it. I then said to Mr Micaleff: all up, how much would it cost and he telephoned and came back and he said: all up 1t 1s $9446. What recollection do you have as to the order of events? --- I know he quoted the $5000, he phoned up on the telephone, he got off the phone and he said: all up with your finance it will be $9446. He then asked with my husband how would we Like to pay, how long it would take and what not. verre men se oon ee — . - we pee ma, Tow es peere se Spe cae prey mayer eee pe > _ cig 13. So that was the order of events? --- To the best of my knowledge, yes." In evidence in chief of Mr. Hale the passage relevant to the critical matter is as follows: "We agreed to have the kitchen. Then we asked, or actually, I believe the wife asked, what actually would it cost us for the kitchen. He said it would be $5000 but then there would be charges on top of that in relation to hire purchase. He asked me did I want to get the finance for it or did we want him to arrange it as they could arrange the finance. What was the response? --- I said seeing that we are getting everything done through him, that would he arrange the finance, which he agreed to do. Did you then discuss the cost of the finance with Mr. Micaleff? ~-- What occurred was he said 1t was $5000. Then he said, when we made the discussion about the finance, I said yes, we will take it through you people; we will do the Lot through you. He did some calculations. Then he wrote 9446 on this paper that he had. It was like a notepad, circled it and said that is what you are up for. That is what you are up for. At this point - was this before or after he had telephoned his office concerning the finance question? --- I believe that is after he telephoned - used our telephone. He rang somebody but I could not say exactly who he spoke to but he did use our telephone. It was after he had made the telephone call." It may be observed that RM had no need to ring his office to find out what the instalments to the finance company would be on an advance of $5,000 or of any amount. He carried a booklet of the first respondent, being the AGC table of charges, setting out in great detail the relevant information with respect to any amount repayable over any period. But for 125 0 ae ane es re Pee Ye 14. RM to inform the applicants that $9,446 was the total price of the kitchen he did need to contact his head office. He said that the total amount at which he calculated the actual price for cabinets and the other items such as electricity, plumbing and administration came to $10,196 but that he desired to get approval to allow to the applicants the $750 discount which currently was being allowed for to people who bought through retail stores. In scrutinizing the evidence of Mr. and Mrs. Hale there was nothing in their demeanour which would suggest that they were concious of departing from the truth. And yet I am satisfied that the critical statement that RM said the price was $5,000 and the price with interest was $9,446 does not reflect the facts. One wonders how two persons of truthful demeanour and good character could swear so erroneously, and not only about the price but also about the finance application not being filled in when signed by them. It may be that Mr. and Mrs. Hale did not examine the details of the application (offer) for finance. They did not see that document agazn until 9 April or thereabouts. In the meantime they had had a very disappointing and distressing experience with Customtone. There were many delays and broken promises and the kitchen was most unsatisfactory. I am forced to think it possible that on seeing the total amount in excess of $14,000 they were surprised that it was so high, began to go over the conversations they had had with RM and persuaded themselves that RM had said that the $9,446 was not what was the total price of the kitchen including interest. This could ron ed rs . tiny _ ppt eee eee i as ACY We sete oe eet i gS wee enees ' fe! ar 7 .t . at epee my 15. well be a product of their distress due to the difficulties they endured. They are, however, in unfortunate error and the application seeking relief from the respondents in respect of misleading and deceptive conduct must be dismissed. There are cross-claims of AGC to be considered. There 1S no cross-claim by Customtone. This 1s not surprising. Clause 11 of the work order and agreement is in the following terms: "The Clients are desirous of obtaining the work and materials on credit sales agreement and will offer to enter aunto such an agreement with AGC (Household Finance) Ltd. Upon acceptance of the Clients' offer by AGC (Household Finance) Ltd. the Contractor may proceed with the work on their behalf and this instrument shall on such acceptance be replaced and determined." Customtone has been paid $8,000 by AGC and no doubt assumes that AGC has accepted the offer by the applicants to buy the kitchen from it. There is no claim by the applicants against Customtone in respect of the matters outstanding to complete the installations of the kitchen according to the agreement between them and Customtone. AGC cross-claims against Customtone for relief in respect of loss suffered by it in the event of the applicants socom never eer emane et Bye fhe OY 16. successtully defending the cross-claim against it. The cross-claim of AGC against the applicants seeks judgment for $14,234.04 or alternatively damages tor breach of agreement. The breach of agreement alleged 1s not particularised. There are no pleadings in these proceedings. It was acknowledged that any defences open on the facts are available to the applicants. I make the following observations concerning matters of potential defence. It is conceded by AGC that as no copy of the applicant's offer of 4 January 1985 was left with the applicants after being signed by them. The provisions of the Credit Act 1984 of the State of Victoria operate to deprive it of entitlement to recover interest on the amount paid by it to Customtone,. It is to be observed also that as the original application has never been signed on behalf of AGC there may well be an issue as to whether AGC ever accepted the applicant's offer to buy the kitchen from it. If it was accepted the original agreement between Customtone and the applicants was "determined and replaced". If it was not accepted that that agreement is in force then the question of the extent of any liability of the applicants to Customtone and any claim of the applicants against Customtone would remain outstanding. There would be an issue also as to the entitlement of AGC to recover the $8,000 paid by 1t to Customtone. 17. There is also a question arising under the arrangement between the applicants and AGC as to whether it is not void for uncertainty. Perhaps inan effort to shorten the hearing most of these issues were not argued before me, or were inadequately argued. But they appear to call for argument or settlement. It may facilitate each of these eventualities if I intimate that I accept the evidence of Mr. Keating in all respects. [ find as a fact that inno sense can it be contended by AGC that it has complied with the request of the applicants, in consideration of compliance with which, the applicants' obligations under the applicants' offer to buy depend. I find also that Customtone has failed to perform the obligations which its agreement with the applicants would impose upon it. I find also that the conduct of Customtone in relation to the installation of the kitchen was grossly inefficient, that it displayed an attitude of complete indifference to the faithful supply and installation of the kitchen for which their agreement provided. In view of the conduct and the attitude of Customtone to its responsibilities in relation to the supply of the kitchen it would be quite justifiable on the part of the applicants to terminate their agreement with Customtone and to refuse to permit 1t to perform any further supply or work relating to the installation of the kitchen. Significant in relation to the inefficiency and attitude of Customtone was the installation of a dishwasher too large for the space provided with the result that 1t cannot be removed, Sr rs mera wots ve . 18. the supply of the wrong sized refrigerator with the result that the installation extends into the family room, and the installation of the wrong sized or shaped sink. In connection with the failure of the installation to measure up. to the requirements of the applicants' original agreement with Customtone and to be reasonably fit for the purpose for which it was intended, conditions arising under Part V of the Trade Practices Act 1974 with respect to the contract of sale between AGC and the applicants, if any, require consideration under its cross-claim. Nothing has been made of it in this case but I cannot refrain from observing that the exercise of Customtone on its own behalf and on behalf of AGC of purporting to carry out what was called "arranging finance" in respect of its transaction with the Hales was ill described as such. It was to arrange for the cancellation of all its obligations as soon as AGC accepted the "application" for the finance. That acceptance brought into existence a sale by AGC to the Hales on terms designed to relieve AGC from liability to the Hales in respect of what was being sold to them so far as legal ingenuity could ensure. If a customer failed to realise that this provision of finance released Customtone from its liabilities and substituted a new vendor and one with the least possible liability it would not be surprising. What was done, inthe name of arranging finance, was to change the nature of the transaction and possibly to reduce substantially the rights of the Hales in respect of the installation of the kitchen. Sem ey anes 7 7 ~ «arr rn 7 . 19. So far as costs are concerned the applicants must pay such costs as are referrable exclusively to the issues arising under its claim for relief under the Trade Practices Act 1974 and I so order. I adjourn the cross-claim of AGC against the applicants and against Customtone to a date to be fixed on the application of any party. I certify that this and the preceding eighteen (18) pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Smithers. TOBIS A Lr Lb Associate Date: 5 December 1985 — ane 4% Sen ee ear ey P ee mF ama =r