MARSHALL v CBFC LTD [1999] NSWSC 188

New South Wales Supreme Court CITATION : MARSHALL v CBFC LTD [1999] NSWSC 188 CURRENT JURISDICTION : EQUITY FILE NUMBER(S) : 1269/98 HEARING DATE(S) : 8-11 February 1999 15-16 February 1999 JUDGMENT DATE : 12 March 1999

GARRY BRENT MARSHALL & KERRIE LYN MARSHALL PARTIES : v CBFC LIMITED & HAYDN IRELAND JUDGMENT OF : Bryson J at 1

PLAINTIFFS: MR D A SMALLBONE COUNSEL : FIRST DEFENDANT: MR A J MEAGHER SC/MR T M THAWLEY SECOND DEFENDANT & 2ND & 3RD CROSS-DEFENDANTS: MR A P COLEMAN FOURTH CROSS DEFENDANT: MR I R JONES PLAINTIFFS: MICHAEL P CARROLL & PETER S KNUDSEN SOLICITORS : FIRST DEFENDANT: L E TAYLOR SECOND DEFENDANT 2ND & 3RD CROSS-DEFENDANTS: COMMINS HENDRIKS FOURTH CROSS DEFENDANT: DIBBS CROWTHER OSBORNE CATCHWORDS : CONTRACT; hire-purchase; the plaintiffs' claim that the true terms of the transaction were not as recorded in the written hire-purchase agreement failed on the facts; claims and cross-claims against finance broker and vendor of truck failed because their breaches as proved were not causative of finance company's loss; decision on facts; no question of legal principle DECISION : SEE PARAGRAPHS 26-27

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BRYSON J

Friday 12 March 1999

1269/98 GARRY BRENT MARSHALL & KERRIE LYN MARSHALL v CBFC LIMITED & HAYDN IRELAND.

JUDGMENT

1 HIS HONOUR : The plaintiffs' claims arise out of a hire purchase transaction in a written Hire Purchase Agreement Exhibit 1 signed according to its terms by the plaintiffs on 20 February 1997 and by a representative of the first defendant CBFC Limited on 26 February 1997. The Hire Purchase Agreement related to a used 1992 Volvo prime-mover truck modified and equipped with a tray and other equipment to meet the plaintiffs' requirements for their bee-keeping business. The burden of the plaintiffs' case is that the Hire Purchase Agreement Exhibit 1 is not a true record of the contractual arrangements between them and CBFC. 2 The second defendant Mr Haydn Ireland is a finance broker who carries on business in Wagga Wagga. He put the plaintiffs' application for finance to CBFC with the object of enabling them to acquire the truck. 3 Arrangements about the modifications and equipment were made between the plaintiffs and CMV Truck and Bus Pty Ltd the fourth cross-defendant, in direct dealings between the plaintiffs and representatives of CMV, principally Mr Tony Sevidio. Negotiations and dealings with Mr Sevidio took place during January 1997 and led to a written offer by the plaintiffs to CMV dated 18 February 1997 in which, according to the terms of the offer document, they offered to purchase the truck with extra equipment for $115,000.00. 4 The transaction as recorded on paper appears to show that CMV sent CBFC an invoice dated 10 February 1997 which recorded a sale or proposed sale of the truck by CMV to CBFC for $115,000.00. The paper record, supplemented by some events which are undisputed, also shows that on 26 February 1997 CBFC paid CMV $115,000.00 being the price of the truck as so invoiced, and on the same day completed by written acceptance the plaintiffs' offer to enter into a Hire Purchase Agreement. Exhibit 1 among other things records particulars of the transaction in which the cash price of the goods was $115,000.00, there was to be a deposit of $23,000.00, the amount to be financed was $92,000.00 and there were also to be terms charges or interest of $23,443.36, so that the plaintiffs were to pay sixteen quarterly instalments of $7,215.21. A space for nominating the date of the first quarterly instalment was left uncompleted, and on a reasonable reading the first quarterly instalment was payable on 26 May 1997, at the end of the first quarter. 5 Before agreeing to enter into the Hire Purchase Agreement CBFC's officers required that the plaintiffs pay a deposit of $23,000.00 towards the purchase of the truck and also required that the $23,000.00 be paid to CBFC, with the obvious result that when CBFC paid $115,000.00 for the purchase of the truck, it was actually financing the purchase to the extent of $92,000.00. 6 The plaintiffs' case is that the true transaction was to the effect that it was established by dealings between them and CMV that CMV required to be paid $92,000.00 as the purchase price of the truck before CMV began to modify the vehicle and that CMV was to modify the vehicle for a further $13,000.00 to be paid by CBFC to CMV on delivery of the truck to the plaintiffs. The truck was to be registered when they received it from CMV, with registration charges paid by CMV. It was to be the obligation of CBFC to pay to CMV a further $13,000.00 on completion of the modifications in addition to the net financing of $92,000.00 which CBFC provided on 26 February. 7 The plaintiffs' Statement of Claim is founded then on allegations to the effect that it was the obligation of CBFC to ensure that the plaintiffs were put in possession of the truck and left in quiet possession of the truck from the time when the modifications were completed; that time was late in March or early in April 1997; that CBFC failed to ensure that the plaintiffs then obtained possession of the truck. The plaintiffs claim damages for this failure. The plaintiffs also base claims on the undoubted fact that on 26 May 1997 CBFC gave a direction to CMV not to deliver the truck to the plaintiffs. The plaintiffs claim that the Hire Purchase Agreement Exhibit 1 should be rectified to bring it in accordance with their view of what the true transaction was. 8 The plaintiffs did not give evidence of any direct communication between them and anyone representing CBFC which would establish their view of the true transaction. They claim that the substance of what they say was the true arrangement was made, or was explained, in a conversation between Mr Ireland and an officer of CBFC (and they name Mr Weston) on 10 or 12 February 1997, that they signed a blank form of offer to enter into a Hire Purchase Agreement in Mr Ireland's office with no particulars filled in, and that it was filled in or must have been filled in by someone representing CBFC in a manner which did not record the true arrangement. 9 The evidence offered by the plaintiffs did not include any substantial basis for a finding that anyone representing CBFC took part in any such communication as they described between Mr Ireland and a CBFC officer, whether Mr Weston or anyone else. (Plainly it was not Mr Weston). Mr Ireland denied firmly on oath that there had been any such conversation or arrangement, and adhered to his denial under challenge. The CBFC officers who were concerned in the management of the transaction gave evidence, and in no case would their evidence in any way tend to confirm that there had been such an arrangement. Evidence of Mr Ireland and CBFC officers establishes with overwhelming strength that the Hire Purchase Agreement was not blank but did contain the particulars which it now contains when the plaintiffs signed it and when it was forwarded to CBFC, and the plaintiffs' evidence on this subject has been wholly outweighed. Their account of what happened seemed to me to be very improbable, and witnesses in whom I have confidence established that it did not happen. 10 I am satisfied that the true contractual arrangement between the plaintiffs and CBFC is that recorded in Exhibit 1. Any supposed obligation of CBFC to ensure that the plaintiffs were put in possession of the truck by CMV would be directly contrary to the clear terms of Exhibit 1. 11 In fact and in accordance with its routine for such business CBFC did concern itself with whether the truck was delivered to the plaintiffs at the time when CBFC paid $115,000.00 to CMV on 26 February 1997. Mr Dilworth, a CBFC officer, satisfied himself that arrangements had been made to deliver the truck; on that day he telephoned Mr Ireland, and Mr Ireland told him that the plaintiffs were on their way to Melbourne to pick up the truck. In making this finding I accept Mr Dilworth's evidence notwithstanding the evidence to the contrary of Mr Ireland. I do not regard Mr Ireland's evidence on this subject as convincing. When directly challenged a few months later by CBFC with the fact that he told Mr Dilworth this Mr Ireland was unable to summon up a clear denial. I am satisfied that Mr Ireland was carrying out a scheme the exact details of which are not altogether clear but which was clearly directed at hoodwinking CBFC about important aspects of the transaction which were relevant to CBFC's view of how it was being handled. 12 For about 10 weeks after 26 February CBFC received no information and nothing happened which would indicate to CBFC that the transaction was in any way untoward or was not proceeding as CBFC had expected, or that the plaintiffs had not received possession of the truck from CMV on 26 February 1997. In fact however a completely different course of events was actually being followed. On having payment of $115,000.00 from CBFC on 26 February 1997, CMV set about carrying out the modifications and completed them by late March or early April. In doing this CMV acted in accordance with the transaction as CMV understood it (and not strictly in accordance with the transaction as recorded in their invoice to CBFC or the later order from the plaintiffs dated 18 February 1997). 13 CBFC's purchase and payment for the truck on 26 February 1997 entitled CBFC to demand immediate possession of the truck, or to direct that possession be delivered to anyone it chose, including the plaintiffs. However no information came to CBFC which might possibly motivate it to act in that way. If it had its action would have come into a direct collision with CMV's understanding of its rights in which it was to complete work on the truck, and then deliver the truck to the plaintiffs, but only on payment of $13,000.00 and some other charges. The arrangements about the other charges were not clearly established, but my understanding is that the charges were either a further $10,000.00 to make a total of $115,000.00, or whatever charges were incurred at cost up to a further $10,000.00. 14 When CMV in fact was paid $13,000.00, which happened on 10 July 1997, it then delivered the truck to the plaintiffs, and forewent whatever claim it had to a further payment for sums which it incurred for the registration of the truck, and other sums relating to registration. Evidence of Mr Jackson its manager established in firm terms that without that payment CMV was not prepared to deliver up the truck. CMV was never actually put to the test of its intentions which would have been produced if it had received a demand from CBFC for delivery up of the truck without payment of the $13,000.00. Quite to the contrary, for part of the period of non-delivery of which the plaintiffs complained, that is from 26 May to 10 July 1997, CMV had before it a direction from CBFC not to deliver the truck to the plaintiffs. For that period there were two causes, each entirely sufficient of itself, for the truck not being available to the plaintiffs; one cause arose out of the arrangements the plaintiffs had made with CMV, and one arose out of their conflict with CBFC. 15 Although Mr Dilworth, the first CBFC officer to consider the plaintiffs' application for finance, had not imposed a requirement that the plaintiffs pay a deposit, and was prepared to support financing the acquisition of the truck for $115,000.00, his superior Mr Porter imposed a requirement that the plaintiffs pay $23,000.00 as a deposit towards the purchase of the truck, being 20% of $115,000.00; so that when CBFC offered finance it was for $92,000.00 and on condition that the plaintiffs were to pay the deposit of $23,000.00, and pay it to CBFC. The imposition of this condition was not motivated by concern about the value of the truck considered as a security; it is clear enough that as modified it was worth $115,000.00, if not more. However from a financier's point of view it is material to know and to require that the party obtaining finance has made a contribution to the asset. 16 The plaintiffs however had earlier told Mr Ireland that they wished to obtain finance for the full amount payable. I am satisfied that Mr Ireland overcame this apparent difficulty by constructing some nefarious arrangement, the manner and details of which have not been fully revealed by evidence, to the effect that the plaintiffs would give CBFC a cheque for $23,000.00 for the deposit, but that when CBFC paid CMV $115,000.00 for the truck, CMV would immediately pay the plaintiffs $23,000.00; CMV would then have received net $92,000.00, the figure at which they were prepared (not to deliver the truck but) to start work on the modifications; and they would do so. This would mean that the truck would not be available for delivery when CBFC paid for it, but it would only be available later after the modifications were made; and it would also mean that the plaintiffs were not fully financed by CBFC, but had to find another $13,000.00, and also some other amount according to whatever (and I cannot make a clear finding) their actual arrangements, as distinct from their arrangements on paper, with CMV were for paying the charges relating to registration. 17 The arrangements, whatever they exactly were, under which CMV was immediately and by an unusually rapid bank transfer to pay the plaintiffs 20% of the apparent price on its being paid by CBFC to CMV, were generally inconsistent with the arrangements recorded in CMV's invoice to CBFC, and overall they were so strange that it appears to me that CMV could well have suspected that some manipulation of the terms on which finance was available was being carried on. The arrangements meant that the invoice which CMV issued to CBFC, and passed on to CBFC through Mr Ireland, became misleading, but CMV did nothing to point out these further circumstances to CBFC. 18 Mr Ireland also did not pass any information about the arrangements on to CBFC, and as he was the source of all CBFC's knowledge about the terms of dealing, and as he was proceeding by manoeuvre to avoid the effect of CBFC's requirement that the plaintiffs pay a deposit of $23,000.00, his behaviour was deceptive and reprehensible. The false statement which he made to Mr Dilworth on 26 February giving Mr Dilworth to understand that the plaintiffs were about to take possession of the truck was an especially reprehensible aspect of his reprehensible behaviour. He embarked on a course of deception, mainly by omission but in that respect by false statement; there was no arrangement for the plaintiffs to go to Melbourne on 26 February to pick up the truck, Mr Ireland had no reason to think that there was, and he must have known that there was not. 19 The plaintiffs' evidence about their part in the arrangement for them to pay $23,000.00 to CBFC and immediately to receive it back from CMV (which is what actually happened) was not credible. They gave explanations to the effect that Mr Ireland told them that the $23,000.00 which they paid to CBFC was to cover $13,000.00 for the modifications, to pay the first 3 payments (meaning payments for the first three months or the first quarter) under the Hire purchase Agreement, and to pay Mr Ireland's commission. According to their explanation, they thus expected that CBFC would pay CMV the $13,000.00 required on completion of the further work, and that they would not have to pay a quarterly instalment in May 1997. I am unable to see any logical thread which connects all of their explanations together; I cannot see how they could think that the purchase of the truck was fully financed, that they also had put CBFC in funds to pay another $13,000.00 and to pay a quarterly instalment, and to pay Mr Ireland's commission; yet they were to receive $23,000.00 back. 20 The plaintiffs have not satisfied me, on the balance of probabilities, that they made any such arrangement with Mr Ireland. Mr Ireland denies what they say about this; according to his evidence he left it with the plaintiffs to raise the $13,000.00 or whatever other money was necessary to obtain possession of the truck on completion of the further work, and Mr Marshall said to the effect that this was difficult but that he could do it. It is not unusual for a Court to be told differing accounts of an arrangement which of itself was dishonest. Notwithstanding that Mr Ireland's credibility is adversely affected by his behaviour in this transaction overall, I am satisfied that the probabilities favour his evidence about this part of the facts, and that I should not find that the plaintiffs were given to understand by Mr Ireland that they could look to CBFC to pay any further money to CMV to obtain possession of the truck or on any account whatever. Of course there is no basis on which it could be found that they were so given to understand by CBFC. 21 It follows from my view of the facts that the plaintiffs' depiction of themselves as being aggrieved against Mr Ireland and CBFC in respect of their not having funds available from CBFC to pay to CMV so as to take possession of the truck when it was available is completely untrue, and that the complaints which Mr Marshall levelled against CBFC when he could not obtain possession of the truck were quite insincere. On the facts as they were, he must have understood that it was for the plaintiffs and for no one else to clear away any claims that CMV placed between the plaintiffs and possession of the truck. The plaintiffs' difficulties in getting possession of the truck were not caused by any failure of any obligation owed to them by CBFC, or by Mr Ireland; they were caused by their failure to produce money for payment to CMV which their own arrangements with CMV required them to pay before CMV would give them the truck, and they were overcome when the plaintiffs actually did produce the money for the first time on 10 July 1997. 22 Upon these findings I will give judgment for the defendants on the plaintiffs' claim. 23 The Cross-claim against CMV is based on CMV's misleading and deceptive conduct to which I referred earlier. I do not find it possible to see that CMV's conduct in this respect has caused CBFC any loss of sufficient substance to warrant directing an inquiry to ascertain its money amount. I am not satisfied that the probabilities are that if CMV had told CBFC that in addition to the arrangement recorded in the sales invoice there were arrangements under which possession was to be withheld until the modifications were completed, that $23,000.00 of the amount advanced was to be returned to the plaintiffs and that the plaintiffs were later to pay $13,000.00 for the work, and possibly some other sum, the plaintiff would not have entered into the transaction. It seems to me to be at least equally probable, and on the whole somewhat more probable that CBFC would have insisted on the business being conducted in accordance with its condition for the plaintiffs to provide the deposit and on some arrangement which would ensure that the works were done, and that the transaction would then have gone ahead with net finance of $92,000.00. CBFC has not satisfied me that it is probable that it would have turned away good business on a truck with plenty of value in it, after giving studied consideration to the proposal; the probabilities are, in a line of business which is not very fastidious, that CBFC would have insisted on its conditions being met, and that they would have been met. 24 An endeavour to trace the effect in terms of loss to CBFC caused by CMV's misleading and deceptive conduct meets a very distinct turning point on 10 July 1997. On that day CBFC withdrew its prohibition against CMV giving the truck to the Marshalls, and required that the truck be delivered to the Marshalls. CBFC then acted inconsistently with the right, conferred on it by the general law and also by express terms of the Hire Purchase Agreement, to rescind or terminate the Hire Purchase Agreement on the basis of the deception which had been practised on it. Its readiness to do this is part of the reasons for which I have referred to the unfastidious nature of their line of business. CBFC also acted inconsistently with reliance on the plaintiffs' failure to pay the instalment which had fallen due on 26 May 1997. CBFC made an arrangement with Mr Marshall, established clearly by the evidence of Mr Weston (and denied by Mr Marshall, whose evidence on this subject I reject) under which the plaintiffs were to make up the default by an increased scale of payments over the future and the plaintiffs were to have possession of the truck. Thereafter the contractual relationship between the plaintiffs and CBFC continued subject to those modifications, and encountered a continuing series of disasters, as the plaintiffs did not pay the modified scale of instalments, denied the modification, did not pay other instalments, withheld re-delivery of the truck and embarked on this litigation. As I discern them, the causative effects of CMV's breaches on these events were exhausted by 10 July 1997, and the later contractual difficulties, loss trouble inconvenience and legal costs which CBFC have incurred have been caused by the behaviour of the plaintiffs. Endeavouring to appraise the causation of the later events by a commonsense test I see the effect of CMV's conduct as exhausted on 10 July 1997. In these circumstances I am not prepared to direct an inquiry to ascertain the amount of damages which CBFC may recover from CMV on its Cross-claim. 25 I see the Cross-claim against Mr Ireland differently. Mr Ireland's misleading and deceptive conduct, indeed his fraud, made a much greater contribution to the outcome; but its causative affects too were exhausted on 10 July before CBFC had incurred any significant loss, and I reach a similar conclusion.