New South Wales Supreme Court CITATION : Tomlin & Ors v Ford Credit Australia [2005] NSWSC 540 HEARING DATE(S) : 14/2/05, 15/2/05, 16/2/05, 17/2/05, 18/2/05, 21/2/05, 22/2/05, 23/2/05, 24/2/05, 25/2/05, 28/2/05, 1/3/05, 2/3/05, 3/3/05, 4/3/05, 9/3/05, 10/3/05, 11/3/05, 29/3/05, 15/5/05, 16/5/05, 18/5/05 JUDGMENT DATE : 10 June 2005 JURISDICTION : Common Law Division JUDGMENT OF : McDougall J at 1 DECISION : See para [263] of judgment CATCHWORDS : CONTRACT - whether defendant failed correctly to calculate shortfall under Bailment Plan Agreements on 12 August and 2 September 1998 - whether any failure amounted to breach of agreements - whether defendant breached agreements by failing properly to calculate discounted wholesale value of stock on 2 September 1998 - whether defendant entitled to terminate agreements - whether defendant breached agreements by demanding about $650,000 - whether there was implied duty of good faith in agreements - what was the content of alleged duty of good faith - whether alleged duty of good faith breached - whether plaintiffs entitled to damages - TRADE PRACTICES - whether defendant breached s 51AC Trade Practices Act - whether defendant engaged in misleading or deceptive conduct - whether plaintiffs entitled to damages - TORT - whether defendant owed duty of care - what was the content of alleged duty - whether defendant breached alleged duty - whether Ford Credit made negligent misstatements on and after 2 September 1998 - whether plaintiffs entitled to damages LEGISLATION CITED : Trade Practices Act 1974 (Cth) Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 Astley v Austrust Ltd (1999) 197 CLR 1 Houghton v Immer [No 155] Pty Ltd (1997) 44 NSWLR 46 CASES CITED : Simms, Jones Ltd v Protochem Trading NZ Ltd [1993] 3 NZLR 369 Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 Mario Tomlin and Sonia Tomlin (First Plaintiff) Tomlin Motor Corporation Pty Limited (Second Plaintiff) PARTIES : Tomlin Corporation Pty Limited (Third Plaintiff) Ford Credit Australia Limited (Defendant) FILE NUMBER(S) : SC 10879/01 B H K Donovan QC/ R N Gye/ S Shepherd (Plaintiffs) COUNSEL : D R Pritchard/E C Muston (Defendant) Baker Love Wallsend (Plaintiffs) SOLICITORS : Corrs Chambers Westgarth (Defendant) LOWER COURT JURISDICTION : Tomlin & Ors v Ford Credit Australia [2005] NSWSC 540 Index to Judgment Para Background 2 Floor plan finance 9 Ford Credit extends its facility 16 The August audit and drawdown 19 The 2 September audit 24 Blue noting 26 The issues 31 The relevant contractual terms 33 Credibility 42 Mr Tomlin 43 Mr Buckton 52 Mr Chalker 53 Mr Butler 54 Mr Moores 55 Mr Bradstreet 57 Other witnesses for the plaintiffs 67 Mr Esh 68 Mr Turton 72 Mr Sultana 74 Mr Conlon 77 Mr Green 85 Other witnesses of fact for Ford Credit 89 Postscript on credit 93 The contractual issues 94 Clauses 5.7 and 5.8 95 Clause 10.6 109 Clause 19 110 Implied obligation of good faith 113 The alleged duty of care 123 The 12 August audit 133 The events of 17 and 18 August 1998 149 The 2 September audit 151 Bluenoting 174 Events up until 2 October 1998 179 The behaviour of Ford Credit's staff at the premises 181 The decision to take control of the car keys 182 Requirement for payment of proceeds of sale 184 Change in commercial arrangements 185 Termination of the bailment plan agreements 187 Chaining up the premises 190 The negotiations with Kloster Ford 192 Alleged failure to supply information 202 The deal with Mr Bradstreet 211 Valuation issues 219 Unconscionable conduct 230 Damages 232 Causation 234 No damage in any event 243 Conclusions on the issues 262 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION McDOUGALL J 10 June 2005 10879/01 MARIO TOMLIN & SONIA TOMLIN & ORS v FORD CREDIT AUSTRALIA LIMITED JUDGMENT 1 HIS HONOUR: The corporate plaintiffs (Tomlin Motor and Tomlin Corporation respectively) carried on business in Cessnock selling new motor vehicles and buying and selling used motor vehicles. The first plaintiff (Mr Tomlin) was the principal of that business. He controlled the companies. The defendant (Ford Credit) provided floor plan finance for that business. On 11 September 1998, it terminated the floor plan facilities and required the full outstanding balance to be repaid. The plaintiffs characterise those, and other, actions as wrongful; and they say that they have suffered very substantial loss as a result. In these proceedings, they seek to recover their alleged loss. Background 2 Mr Tomlin has worked in the motor vehicle sales industry for more than 20 years, mostly in the Hunter region. From about 1989, he carried on business, selling used vehicles, through Tomlin Motor. That company traded at Mayfield until 1992, when it moved to Toronto. 3 In 1995, Tomlin Motor bought from Messrs Wayne Roddy and David Chalker a motor vehicle dealership (the Vintage business) at Cessnock. The dealership sold new Ford and Hyundai vehicles under the trading names "Vintage Ford" and "Vintage Hyundai". It also sold used vehicles and provided service and mechanical facilities. It operated out of premises known as 246 Maitland Road, Cessnock (the premises). Those premises were leased from Felton Motors Pty Ltd. Later in 1995, Mr and Mrs Tomlin bought the reversion of the premises. 4 Australian Guarantee Corporation Ltd (AGC) provided floor plan finance for the Vintage business when it was operated by Messrs Roddy and Chalker. When Mr Tomlin, through Tomlin Motor, took over the business, AGC provided a floor plan facility for Tomlin Motor. 5 For the first year after purchase, Tomlin Motor operated two businesses, namely the used car business hitherto carried on by it at Toronto (and at Mayfield before then) and the Vintage business. After 30 June 1996 (when, apparently, the lease of the Toronto premises expired), the used car business was moved to the premises. 6 In late 1996, Ford Credit offered to take over the role of floor plan financier hitherto performed by AGC. Negotiations were finalised in mid 1996. Ford Credit paid out the AGC facility and provided floor plan finance to the business. 7 At the beginning of 1997, Tomlin Corporation acquired a business known as "Cessnock Nissan". That business was conducted from premises known as 258 Maitland Road, Cessnock (258 Maitland Road). Cessnock Nissan sold new Nissan motor vehicles and used vehicles. Floor plan finance was provided by Nissan Finance Corporation Ltd (Nissan Finance). 8 Not surprisingly, Mr Tomlin thought that economies could be achieved by combining all his businesses at the one site, with substantially common employees. Accordingly, in about April 1998, Tomlin Corporation transferred the Cessnock Nissan business to the premises. However, Nissan Finance continued to provide floor plan finance for that business. Floor plan finance 9 The floor plan finance provided by AGC and Nissan Finance was on a "note by note" basis. Every time the relevant entity acquired a motor vehicle (new or used), the purchase was funded in whole or in part by the floor plan financier. When the vehicle was sold, the amount advanced in respect of it was paid out. For new vehicles, the amount advanced was the full wholesale price. For used vehicles, the amount advanced was calculated as a percentage of its wholesale value. That wholesale value was determined by reference to a trade publication known as the "Red Book", which was published monthly. For vehicles no more than six (or later seven) years old, the financier would advance 90% of the wholesale value thus determined. For vehicles seven (or later eight) to ten years old, it would advance 60% of the amount so determined. Floor plan finance was not provided for vehicles more than ten years old. 10 The floor plan finance offered by Ford Credit was significantly different in one respect. The finance facility for used vehicles was a "come and go" facility, not dissimilar to a revolving credit facility. Tomlin Motor (which appears to have been the entity that operated the combined used car business) could draw funds up to the agreed limit for the purchase of motor vehicles. If, however, the scaled value of the motor vehicles (determined in the manner set out in the preceding paragraph) were less than the amount drawn under the come and go facility – a situation referred to as a "shortfall" – the balance had to be paid in cash. The facility offered by Ford Credit for new vehicles was essentially the same as that hitherto offered by AGC: on a note by note basis for the full wholesale value of the vehicle. 11 In substance, what happened was that Tomlin Motor, or Tomlin Corporation as the case may be, would acquire vehicles. Where a vehicle met the basic criteria for the applicable floor plan (ie, new vehicles or used vehicles no more than ten years old), it was acquired on behalf of the financier. The financier then bailed the vehicle to Tomlin Motor or Tomlin Corporation for the purpose of sale. When a vehicle that was individually financed (ie, on a note by note basis) was sold, the amount advanced in respect of it was required to be repaid within an agreed time. Where a vehicle acquired under the come and go facility was sold, the scaled wholesale value attributed to it was required to be repaid within an agreed time. In the latter case, however, the amount so paid was available to be redrawn. There were conditions attached to this, including that a current stock list, showing the vehicles to be paid for by a drawdown on the come and go facility, be supplied to Ford Credit. 12 After the Ford Credit floor plan facilities were put in place in mid 1996, representatives of Ford Credit conducted monthly "audits". The purposes of such audits included: (1) ensuring that the Tomlin companies had accounted to Ford Credit for the amounts owing on new and used vehicles sold by them; and (2) valuing the used vehicle stock that was subject to the floor plan finance facility and bailed by Ford Credit to Tomlin Motor. 13 In essence, the vehicles physically in stock were identified against a stock list. Used vehicles were then valued by reference to the current Red Book and the scaling process already described. Any shortfall was required to be paid forthwith. A shortfall could arise where a new or used vehicle had been sold and delivered prior to the audit, but the amount owing on it had not been remitted to Ford Credit at the time of the audit. It could also arise because the total scaled value of the used car stock was less than the amount drawn under the come and go facility. 14 From time to time, witnesses referred to vehicles that were "sold out of trust", and documents described such vehicles as "SOT". Apparently, in the industry, a vehicle that is subject to floor plan finance (ie, that is the property of the financier, but bailed to a dealer for the purposes of sale) is said to be "sold out of trust" if the dealer, having sold it to a customer, does not make payment to the financier, within the time agreed, of the amount owing in respect of the vehicle. I think that the concept is relevant only to note by note facilities, not to come and go facilities, but if there is a distinction, it is of no present relevance. 15 One of the allegations made by Ford Credit in these proceedings is that, on a number of occasions during audits, it was ascertained that the Tomlin companies had sold vehicles out of trust. As I understand it, that reflected a situation where sufficient time had elapsed between sale and delivery (payment being made on delivery) and the audit to enable the relevant company to account to Ford Credit for the proceeds of sale: ie, a vehicle would not be said to have been sold out of trust where (for example) delivery of the vehicle, following receipt of the sale price, had been effected the day before the audit. Ford Credit extends its facility 16 In June 1998, Ford Credit offered to take over the floor plan facility provided by Nissan Finance to the Cessnock Nissan business. Mr and Mrs Tomlin and their companies reached agreement on this with Ford Credit and the relevant documentation was executed in July 1998. In essence, the proposal was that Ford Credit would pay out the amount owing by Tomlin Corporation to Nissan Finance, extend note by note facilities for new Nissan vehicles, and increase the amount of the come and go facility for used vehicles. 17 What the parties called a "trial audit" was carried out on 23 July 1998, before Ford Credit took over the Nissan Finance facility. The auditor was Mr John Sultana. The come and go limit at the time was $1,600,000; and that facility was fully drawn. The total value of the used car stock was estimated at $1,743,140. Its scaled value was $1,568,826. The shortfall, of about $32,000, was paid that day. 18 The takeover then proceeded. The amount that Nissan Finance required to pay out its facility included an amount of $197,550 for used cars. I shall return to the detail of the events relevant to that amount. The August audit and drawdown 19 Ford Credit conducted an audit on 12 August 1998. The auditors were Messrs John Sultana and Peter Esh. The amount drawn under the Ford Credit facility was $1,568,000. In addition, Ford Credit claimed, there was a further amount to be added to that sum of $197,550 (the amount payable to Nissan Finance for used vehicles). Messrs Sultana and Esh calculated the scaled value of the used car stock at $1,433,427. Thus, they calculated a shortfall of $332,123. 20 Mr Tomlin protested vehemently at this. He spoke to his dealer account manager at Ford Credit, Mr Nicholas Turton. Mr Tomlin's position was that the scaled value of his used car stock was $1,714,971, and that there was other stock that was available for valuation if required. (The "other stock" was what was known as "reserved stock": stock earmarked for, or agreed to be sold to, others but for which payment had not been made.) The outcome was that on 13 August 1998, Tomlin Motor paid the amount claimed by Ford Credit. 21 On about 13 August 1998, Mr Tomlin wished to buy some used cars at auction. He rang Mr Turton to ensure that credit would be available under the come and go facility. The next day, 14 August 1998, he bought a number of vehicles at auction with a total value of $156,250. 22 On 17 August 1998, Mr Chalker (who by then was an employee of Tomlin Motor or Tomlin Corporation) faxed a request to Mr Turton for a drawdown under the come and go facility up to the then limit of $1,600,000. The request was supported by a current stock list and copies of the invoices for the vehicles bought at auction. 23 On 18 August 1998, Ford Credit made a direct deposit of $364,123 into Tomlin Motor's account with the Colonial State Bank. Ford Credit claims that there was an overpayment of $197,550. It says that it had remitted that amount to Nissan Finance to pay out the used car facility hitherto provided by Nissan Finance, but that the payment had not been posted to the come and go account when the funds were transferred to Tomlin Motor. Thus, Ford Credit says, it thought that the amount available to be drawn under the come and go facility was $197,550 greater than was in fact the case. The 2 September audit 24 Messrs Sultana and Esh conducted a further audit on 2 September 1998. They claimed that there was a shortfall of, in round figures, $650,000. Again, Mr Tomlin protested vehemently. He spoke to Mr Turton. He also spoke to Mr Chalker and to Mr George Buckton, who had recently been appointed as Tomlin Motor's financial controller. Between them, Messrs Tomlin, Buckton or Chalker identified an amount of $434,810 that might be owing to Ford Credit. The balance was disputed. In substance, Ford Credit's position was that the balance was explained by the overpayment of $197,550 made on 18 August 1998. 25 Tomlin Motor paid the sum of $434,810. It could not, and did not, pay the balance. That was not done until 2 October 2000 when Mr T J "Boy" Bradstreet, a well known, substantial and successful motor vehicle dealer in the Hunter region, provided financial assistance to Tomlin Motor through a company controlled by him so that the balance then owing to Ford Credit could be paid out. Blue noting 26 On 3 September 1998, Ford Credit decided to cancel the come and go facility, and to finance the Tomlin companies' used vehicle stock on a note-by-note basis. That process involved what is called "blue noting". 27 Blue notes were documents styled "ACKNOWLEDGEMENT OF DELIVERY". They were prepared in duplicate and kept, serially numbered, in books. In form, a blue note was an acknowledgment addressed to Ford Credit by a dealer. The dealer acknowledged "to have received delivery of the goods described below which goods are to be held by me/us as bailee from you under the provisions of our Bailment Plan Agreement". 28 The blue note enabled the relevant identifying details of the vehicle to be stated. It provided also for statements of the vehicle's "Book Value" and "True Wholesale Value". The former is the relevant Red Book figure; the latter is the applicable (if any) scaled figure. 29 On 4 and 5 September 1998, Ford Credit employees blue noted the used vehicle stock of the Tomlin companies. They identified the vehicles that were held as bailee pursuant to the bailment plan agreement. The identifying details of each vehicle were entered onto a blue note. By reference to the Red Book, the "Book Value" was ascertained and entered. Where the vehicle was no more than 10 years old, the "True Wholesale Value" was, or should have been, stated as the relevant percentage of the "Book Value". Where the vehicle was more than 10 years old, the "True Wholesale Value" was, or should have been, stated at zero. 30 After the initial blue noting was completed, further used vehicles were blue noted as they were acquired by one or other of the Tomlin companies. That process continued until the debt to Ford Credit was paid out on 2 October 1998. The issues 31 The parties agreed upon the issues by which these proceedings were to be decided. I set out the issues so agreed: (1) Whether Ford Credit failed to correctly calculate the amount of shortfall owed to it (having regard to the discounted wholesale value of the stock) on 2 September 1998 as alleged at paragraph 158L of the Sixth Further Amended Statement of Claim (the "Claim"). (2) Whether the failure referred to in the above paragraph amounted to a breach by Ford Credit of the Bailment Agreements between Ford Credit and TMC and Ford Credit and TC. (3) Whether Ford Credit, in terminating the Bailment Agreements on 11 September 1998, was in breach thereof by reason if its failure to properly calculate the discounted wholesale value of the used car stock on 2 September 1998 (as alleged at paragraph 158K of the Claim). (4A) Whether Ford Credit, in the conduct of its audit of TMC and TC on 12 August 1998, failed to take into account the security comprised of used cars the subject of the NFC facility. (4B) Whether by reason of the matter referred to in paragraph 4A above, TMC/TC owed Ford Credit a shortfall in the amount of $197,550 with respect to used vehicles the subject of the NFC facility at the conclusion of the audit of 12 August 1998. (5) Whether the facts and circumstances alleged at paragraph 122 of the Claim amount to a contravention by Ford Credit of s 51AC of the Trade Practices Act . (6) Whether Ford Credit was entitled to terminate the Bailment Agreements on 11 December 1998 between it and TMC and TC. (7) Whether the termination of the Bailment Agreements was a breach of the agreements as alleged at paragraph 54A of the Claim. (8) Whether the demand for payment of "about" $650,000.00 constituted a breach of the Bailment Agreements with either or both TMC and TC. (9) Whether Ford Credit owed a duty of care to TMC/TC/Tomlin with respect to the conduct of the business of TMC/TC. (10) What was the content of that duty (if any)? (11) Whether (by reason of the matters alleged in paragraphs 151-154 of the Claim) Ford Credit acted in breach of the duty of care. (12) Whether there was an implied term in the Bailment Agreements that Ford Credit would act in good faith. (13) What was the content of the obligation arising out of the implied term (if any)? (14) Do any of the matters alleged at paragraphs 56 to 77 and 158A to 158B of the Claim amount to a breach of that duty? (15) Whether the representations by Ford Credit as to TMC's/TC's indebtedness on and after 2 September 1998 (as alleged at paragraphs 110(2), 110(5), 158L and 158Y of the Claim) were negligent misstatements. (16) Not pressed – 11/3/05. (17) Whether the alleged failure by Ford Credit to disclose to TMC/TC/Tomlin the discounted wholesale value of the vehicles blue noted by it exceeded the amount drawn down under the Facility (including, which is not admitted, the $197,550.00), was a contravention of s 52 of the Trade Practices Act (as alleged at paragraph 121I of the Claim). (18) Whether the Plaintiffs are entitled to damages including exemplary damages and, if so, which of the Plaintiffs and in what amounts. (19) Whether the Plaintiffs are entitled to recover damages for both capital loss and loss of profits (ie, is the issue of continuing damage one which gives rise to an entitlement to claim both). (20) Whether the Plaintiffs are entitled to damages pursuant to s 82 and/or s 87 of the Trade Practices Act. (21) Whether the Plaintiffs acted reasonably or foreseeably in entering into the arrangements they did with Mr Bradstreet (and entities associated with him) following the events of September 1998. 32 Before I turn to the factual disputes, I shall set out the relevant terms of the contracts between the plaintiffs and Ford Credit. I shall also deal, to the extent that it is necessary, with questions of credibility. The relevant contractual terms 33 The contracts principally relied upon were two "bailment plan agreements" made on, respectively, 8 May 1996 (the 1996 agreement) and 17 July 1998 (the 1998 agreement) between Ford Credit and Tomlin Motor. 34 Clause 5 of the 1996 agreement dealt with the purchase of motor vehicles and the rights and obligations of Tomlin Motor and Ford Credit in respect of vehicles purchased. Clause 6 set out the obligations of Tomlin Motor as bailee. Relevantly, those clauses provided: "5.1 All new Goods ordered in accordance with the approval granted by the Bailor shall be purchased from the manufacturer or wholesale distributor or other supplier by the Bailee as agent for the Bailor whom shall quote its Sales Tax Certificate as prescribed and pay for the goods; … 5.3 All used Goods (not being trade-ins) ordered in accordance with the approval granted by the Bailor shall be purchased by the Bailee from the owner thereof as agent for the Bailor (but without necessarily disclosing the fact of agency) and shall be paid for in the first instance by the Bailee as agent for the Bailor but the Bailor shall reimburse the Bailee in the manner and to the extent provided in subclause 5.6 hereof; 5.4 Every trade-in acquired by the Bailee shall (if covered by the limits of its authority hereunder from the Bailor existing at the time but not otherwise) be deemed to have been purchased by it as agent for the Bailor whether the Bailee discloses to the other party the fact of agency or not and the Bailee shall be deemed to have paid to the other party as agent for the Bailor an amount equal to the trade-in allowance and the Bailor shall reimburse the Bailee in the manner and to the extent provided in subclause 5.6 hereof; and 5.5 All used Goods (not being Goods purchased or acquired by the Bailee pursuant to subclauses 5.3 and 5.4 hereof) acquired by the Bailee from the owner thereof in the name of and by the Bailee as principal and which the Bailee subsequently elects to sell to the Bailor shall, subject to the approval of the Bailor, be purchased by the Bailor from the Bailee upon the Bailor paying to the Bailee or otherwise as directed by the Bailee the price paid or payable by the Bailee as principal for such Goods or the true wholesale value of such Goods whichever is the lesser. 5.6 As to used Goods purchased or acquired by the Bailee: 5.6.1 in respect of any used Goods other than trade-ins the Bailor shall subject to subclause 5.7 hereof reimburse the Bailee in respect of the expenditure incurred by the Bailee as its agent pursuant to subclause 5.3 hereof by paying to the Bailee the price (exclusive of freight and delivery costs) paid for such Goods or the true wholesale value of such Goods whichever is the lesser; 5.6.2 in respect of any used Goods which are trade-ins the Bailor shall subject to subclause 5.7 hereof reimburse the Bailee in respect of the expenditure incurred by the Bailee as its agent pursuant to subclause 5.4 hereof by paying to the Bailee an amount equal to the trade-in allowance allowed for such Goods or the true wholesale value of such Goods whichever is the lesser. 5.7 For the purpose of this clause 5 "the true wholesale value" of any Goods shall mean the sum fixed by the Bailor from time to time as being the true wholesale value (including sales tax, excise duty, goods and services tax and any similar tax if appropriate) of such Goods and the sum so fixed shall be final and conclusive between the parties hereto. 5.8 If the true wholesale value of any Goods shall be less than the price paid for the Goods and the Bailor shall have paid the higher amount the Bailee will upon request pay to the Bailor the difference between the amount paid by the Bailor and the true wholesale value. … 6.0 THE Bailee agrees in respect of any Goods held by it as Bailee hereunder; 6.1 To keep the Goods in its own possession at the Premises or such other place of display as is specifically approved in writing by the Bailor and keep them unaltered and in at least as good condition as when the Bailee received delivery thereof and to indemnify the Bailor against loss of or damage to the Goods (from whatever cause); 6.2 Not without the specific prior approval in writing of the Bailor to permit the Goods to be used, driven or operated for demonstration or trading purposes; 6.3 To permit the Bailor at any time to enter into or upon any premises where the Goods or any of them are or are believed to be to inspect and/or test the Goods; … " 35 Clause 10.2 dealt with the right to possession of the bailed Goods. It provided, relevantly, as follows: "10.2 The Bailee's right to possession of the Goods shall continue until the first to happen of the following events: 10.2.1 the Bailor electing to terminate the bailment at the expiration of the period from time to time fixed by the Bailor for the purposes of this clause (hereinafter called "the bailment period"); 10.2.2 the Bailor terminating the bailment following a default by the Bailee in making payment of any amount required to be paid to the Bailor under the terms of this or any other Agreement between the Bailor and the Bailee; … ". 36 Interest, somewhat obscurely described as "rent for display", was calculated pursuant to cl 10.3 at the rate from time to time notified by Ford Credit to Tomlin Motor on the amount outstanding under the agreement. 37 Clause 10.6 gave Ford Credit the right at any time to take possession of any bailed vehicle. It provided as follows: "10.6 The Bailor may at any time take possession of the Goods without notice and without demand and may for that purpose or in search of the Goods enter any premises of or controlled by the Bailee and as the act of the Bailee may enter the premises of any other person." 38 Clause 13 provided as follows: " Implied Conditions and Warranties : 13. THE Bailee acknowledges that all implied conditions and warranties on the part of the Bailor in relation to any Goods to be held by the Bailee hereunder are excluded to the maximum extent permitted by law." 39 Clause 16 provided as follows: " Evidence of Payments 16. A certificate signed by a Director, Secretary or Branch Manger (or any person acting as Branch Manager) of the Bailor that as at the date stated in such certificate any sums have been paid or received, or not paid or received, by either party hereto, or that any sums are payable or recoverable in respect of any Goods taken on display or as to any other act matter or thing arising hereunder (including that a form of record was duly produced from the electronic data system of the Bailor) shall in all Courts and at all times be prima facie evidence thereof." 40 Clause 19 provided as follows: " Termination of Agreement 19. THIS Agreement may be terminated at any time as to future transactions by either party giving notice in writing but this shall not affect the rights and liabilities of the parties hereunder in respect of transactions prior to such notices." 41 The relevant terms of the 1998 agreement were to the same effect. It is not necessary to set them out. Credibility 42 I turn now to the credibility of the principal witnesses for the plaintiffs and Ford Credit. Mr Tomlin 43 In assessing Mr Tomlin's evidence, it is necessary to bear in mind that he clearly feels very strongly that Ford Credit has wronged him. Indeed, when giving evidence of his decision in September 1998 to sell his business to a competitor, Kloster Ford (which did not then proceed), he broke down in tears. It is clear that he has persuaded himself that Ford Credit is responsible for what he sees as the failure, and subsequent sale, of his business. Whether or not that is the case (and, more importantly, whether it exposes Ford Credit to any legal liability) are matters with which I deal later in these reasons. The significance, for present purposes, is that I have formed the conclusion that Mr Tomlin's perception, that Ford Credit has wrongfully done him serious injury, has coloured his evidence to a very significant extent. 44 I have concluded that I should not accept Mr Tomlin's evidence on significant factual issues unless it is corroborated by other acceptable evidence, or is consistent with what I regard as the probabilities objectively ascertained, or is against interest. There are a number of reasons for this: (1) On a number of occasions, Mr Tomlin prevaricated, or provided non responsive answers: particularly where, it was clear, he perceived the subject matter to be one of some difficulty to him and his case. (2) On a number of significant issues, his evidence was simply incapable of acceptance. (3) On other significant issues, his evidence was inconsistent with that of witnesses whom I have concluded were witnesses of truth. (4) On yet other significant occasions, Mr Tomlin's evidence was inconsistent with prior statements made by him and given to Ford Credit, apparently in an attempt to secure some settlement. (I should note that it was not suggested that privilege attached to those statements by reason of s 131 of the Evidence Act. ) (5) Making every allowance for the stress of litigation and Mr Tomlin's strong feelings, his demeanour in the witness box was less than impressive. 45 I do not propose to burden these reasons with excessive citations from the transcript in support of the characteristics that I have just noted. I will however give some brief references. In addition to the matters to which I have referred above, and to the instances of them that I give below, there are numerous other respects in which Mr Tomlin's evidence was unsatisfactory. I refer to some of those as I discuss the relevant events later in these reasons. I mention that to make it clear that my assessment of Mr Tomlin's credibility is based on my assessment of his evidence overall, and not just on the instances to which I refer below or to the characterisation of those instances that I have set out above. 46 As to the first category: I refer to Mr Tomlin's evidence as to: (1) his reading and understanding of the bailment plan agreements between his companies and Ford Credit (T 128.55-130.40) and his evidence as to what he wanted Ford Credit to do in the period 2 September to 2 October 1998 (T 130.45-131.10); (2) his handwritten note of the events of 12 August 1998, including the comment that "we valued all the cars" and that there was an undisputed shortfall of (in round figures) $332,000 (T 160.20-162.5); (3) the investigation of the security value of the used vehicles that were "blue noted" after 3 September 1998 (T 232.25-234.45); (4) the alleged non receipt of Ford Credit's letter of 18 September 1998 (T 249.35-250.55), noting that a copy of that letter was produced by the plaintiffs on discovery, and noting also the carefully phrased denial in para 57 of Mr Tomlin's affidavit sworn 18 October 2004; and (5) the cancelled electronic funds transfer from his companies to Ford Credit on 7 September 1998 (T 646.20-648.35). 47 As to the second category: I refer to the evidence referred to in para [46(2), (5)] above; and to his evidence as to: (1) the negotiations with Kloster Ford (T 244.35-247.50): noting, in particular, his assertion that the negotiations with Kloster Ford "weren't in good faith" (T 244.44, and see also T 244.50 and T 245.1, where he conceded that the want of good faith was bilateral); (2) his solicitors' letter of 23 September 1998 to Ford Credit, and in particular to the reference to a reconciliation being "finally provided" (T 252.45-254.10); and (3) Ford Credit's status summary (exhibited as MT 38 to his affidavit sworn 1 July 2003) (T 240.35-242.45). 48 As to the third category: I refer to Mr Tomlin's evidence as to his understanding of the drawdown of $364,123 on 18 August 1998. The value of the vehicles bought at auction totalled, as I have noted, $156,250. Since all were less than 8 years old, the amount available to be drawn was 90% of that value, namely $140,625. Mr Tomlin explained the difference between that amount and the amount in fact paid into his account as reflecting a revaluation of his used car stock that he believed Ford Credit had undertaken (between 12 August 1998, when the audit on that day was completed, and 18 August 1998, when the payment was made). That explanation in itself lacks credibility, given that the request for the drawdown (made by Mr Chalker at Mr Tomlin's direction) referred only to the purchase of the vehicles at auction. But it is also inconsistent with the evidence of Mr Buckton and Mr Chalker. 49 Mr Buckton said that he concluded that the drawdown involved a mistaken overpayment of, in round figures, $200,000, and that he told Mr Tomlin this at the time. Mr Chalker said that he expected the amount of the drawdown to be the scaled value of the purchases, and that he told Mr Tomlin this. Mr Chalker's understanding would reflect the direction given to him by Mr Tomlin. As I shall shortly indicate, I regard Messrs Buckton and Chalker as witnesses of truth, on whose evidence I could rely. Mr Chalker's evidence in this respect was supported by that of Miss Beverley Giggins, another witness whose evidence I have concluded is reliable. Their evidence is inconsistent with Mr Tomlin's evidence on this point; and I regard the inconsistency as reflecting adversely on his credibility. 50 As to the fourth category: I refer to his evidence from T 160.48 to 162.10 dealing with the words "we valued the cars" (words appearing in his diary that were completely at odds with his present position); to his evidence at T 176.37-177.41 (dealing with discrepancies between what was said in a prior statement and his present case); and to his evidence at T 215.41-216.51 (in which he sought to disclaim the words "and budgeting" in that statement, saying "I wish I never said the word budgeting … "). 51 As to the fifth point: I am conscious that the stress of litigation is great, and that different people react differently to stress. I am conscious, too, that demeanour is at best a fallible guide to veracity. Nonetheless, he did not, in the witness box, inspire me with any feeling that I could rely with confidence upon his evidence; and rereading his evidence has done nothing to change that assessment. Mr Buckton 52 Mr Buckton was employed as the financial controller of Tomlin Motor (and, I infer, more generally the Tomlin group) from mid July 1998 until February 2001. He gave his evidence clearly and precisely. He appeared to have a good recall of the events of which he gave evidence. He was not shaken in cross-examination. I formed the opinion that he was a witness of truth upon whose evidence I could rely. Mr Chalker 53 Mr Chalker's duties included stock control. He had responsibility for ensuring that the dealership kept accurate records of vehicles (new and used) acquired for the purposes of sale and sold. Perhaps not surprisingly, his recollection of detail was a little limited, and, I think, mostly dependent on such contemporaneous documents as existed. Nonetheless, and with that limitation, I formed the view that he was a witness of truth and that I could rely on the substance of his evidence. Mr Butler 54 Mr Kym Butler was an independent accountant retained by the plaintiffs in mid September 1998. I found his demeanour to be, at times, aggressive; and I found his evidence to be marked by what can only be described as partisan leanings towards the plaintiffs' cause. In particular, I formed the impression that he had a distinct feeling of hostility towards Ford Credit and its officers involved in the relevant events. I do not regard him as a satisfactory witness; in particular, I do not regard his evidence as providing acceptable corroboration for that of Mr Tomlin. Mr Moores 55 Mr John Moores and his wife were partners in a business known as Cessnock Car Detailing. That business provided a number of services to, among others, car dealers such as the Tomlin group; Mr Moores said that the Tomlin group was his biggest customer. 56 I did not find Mr Moores to be an impressive witness. He was, on occasions, argumentative and non responsive. Much of his evidence was vague. I concluded that he, like Mr Butler, was a partisan witness. As with Mr Butler, I conclude that he is not a witness whose evidence I could regard as satisfactory; and, in particular, that I could not regard it as providing corroboration for Mr Tomlin. Mr Bradstreet 57 I have not found the evidence of Mr Bradstreet of great assistance in resolving those factual disputes to which it is relevant. That is not because I think that Mr Bradstreet was seeking to be untruthful. It is simply because, I think, he had no more than a vague recollection of the events of which he spoke, so that his evidence is not reliable. 58 Further, one specific aspect of Mr Bradstreet's evidence was clearly contaminated. Mr Tomlin said that, on 12 September 1998, he heard a conversation between Mr Bradstreet and Mr Paul Conlon of Ford Credit which included words to the following effect: "Conlon: "You don't want to get involved in this business. It is unsalvageable." Bradstreet: "You leave that to me to decide." Conlon: "Mario's a dodgy operator." Bradstreet: "Don't talk to me like that about this young fellow. I've know him and his family for years." See para 144 of Mr Tomlin's affidavit sworn 1 July 2003. 59 Further, Mr Tomlin said, he heard Mr Conlon say to Mr Bradstreet on the same day words to the effect of: "Look Mr Bradstreet, this is just a disaster, you don't want to get involved in this". See para 145 of the same affidavit. 60 Mr Bradstreet acknowledged that, before he swore his affidavit, he had spoken to Mr Tomlin about this aspect of the evidence. He agreed that this was "to refresh [his] recollection of what was said" (T 546.5), and to "make sure that [he] got it right" (T 564.9). In fairness, he denied that his purpose was to "make sure [he was] saying the same thing" (T 564.12). 61 In his affidavit sworn 28 July 2003, Mr Bradstreet set out the relevant conversation as follows: "Conlon: "You don't want to get involved in that business. It is unsalvageable." Bradstreet: "You leave that to me to decide." Conlon: "Mario's [sic] a dodgy operator." Bradstreet: "Don't talk to me like that about this young fellow. I have known him and his family for years." 62 Further, in para 10, Mr Bradstreet attributed further words to Mr Conlon to the effect: "Look, Mr Bradstreet, Tomlin's a disaster. You don't want to be involved in this." 63 Mr Bradstreet was unable to explain in cross-examination the remarkable coincidence between his and Mr Tomlin's accounts of what Mr Conlon had said. It may be no more than an overenthusiastic application of the powers of word processing; or it may reflect a response to leading questions put in conference when the affidavit was drafted; or it may be capable of some other explanation. But it leaves me with a distinct feeling of unease as to the reliability of Mr Bradstreet's purported recollection. 64 It should also be noted that, having given the evidence of discussions with Mr Tomlin to which I have referred, Mr Bradstreet, when asked whether one of the things he discussed with Mr Tomlin was his recollection of what Mr Conlon had said, said "not really, no" and that he did not "think we discussed that in full" (T 565.5-.10). I do not regard that attempt to retract from what he had earlier said as credible. 65 Further, on this point, Mr Tomlin's evidence was that he had "heard" the relevant conversation. He was not, either on his account or on Mr Bradstreet's (if they be separate accounts), a party to the discussion; in substance, his evidence was that he had overheard it. Mr Bradstreet said that Mr Tomlin "wasn't present at this conversation [he] had with Mr Conlon" (T 565.15). When asked how it was that Mr Tomlin knew what was discussed, he said "We probably had a few discussions about it" (T 565.20). 66 I regard these matters as reflecting adversely not just on the reliability of the particular evidence, but on the reliability of the entirety of Mr Bradstreet's evidence. I do not think that he had any real recollection of the conversation. That is confirmed by his cross-examination as to its substance, in which he was unable to recall some of the salient points that featured in the account in his affidavit (T 561.20-562.40). These considerations, coupled with my impression that Mr Bradstreet had no real recall of any of the detail of the relevant events, has led to my conclusion that I do not accept his evidence as reliable; and, specifically, that I do not accept it as providing acceptable corroboration for Mr Tomlin. Other witnesses for the plaintiffs 67 I do not have any substantial criticisms of the other witnesses of fact called by the plaintiffs, although it must be said that (not surprisingly) many of them lacked a clear recollection of the relevant events. That having been said, I conclude in general that their evidence, so far as it went, represented their best and honest recollection of the relevant events. Mr Esh 68 Mr Esh was, at the relevant time, and remains, a wholesale auditor employed by Ford Credit. My assessment of the reliability of Mr Esh's evidence has been rendered difficult by the manner in which he gave it: including in this, but not limiting it to, his demeanour. At times, he gave the impression that he was reluctant to deal with questions put to him on their merits. On a number of occasions, he gave answers that appeared to be inconsistent with prior answers (or with his affidavit). From time to time, he gave answers that were on their face difficult to accept. On numerous occasions, he paused for a considerable period of time, frequently 30 seconds and on occasions up to 60 seconds, before giving an answer. 69 I think that a number of the characteristics exhibited by Mr Esh in the witness box, which might be thought to have demonstrated an unsatisfactory demeanour, were due principally to two things. The first is that, I thought, he had difficulty from time to time in understanding questions that were put to him. The second is that, so it seemed to me, Mr Esh is a man of extremely literal mind. On a number of occasions, that characteristic seemed to me to have led him to deny propositions to which, in substance, he might have been expected to assent, because there was a minor slip in the formulation of the questions. (For example, I have referred in para [9] above to the varying age at which the True Wholesale Value of a vehicle reflected 60 rather than 90 percent of its Red Book value. When Mr Esh was asked a question about events involving the scaling process, in which the actual detail of the scaling process was irrelevant, he gave what appeared to be an incorrect answer because the question had postulated 6 rather than 7 years as the age at which the percentage changed, even though on any view this difference was not material to the substance of the question or to the answer to be given. See T 686.20-687.05.) 70 Nonetheless, and making every allowance for the difficulties that Mr Esh appeared to face in the witness box, I did not find his evidence to be persuasive. It is marred by a number of inconsistencies and other problems, some reference to which I shall give. That, when combined with what, after making all allowances, was an unsatisfactory demeanour (particularly, the habit of pausing for very lengthy periods before answering questions – particularly in what might be thought to have been "difficult" areas) has led to my conclusion. Having said this, in general I prefer the evidence of Mr Esh to that of Mr Tomlin where the two are in conflict, and where the conflict cannot otherwise be resolved. 71 Again, I do not propose to burden these reasons with excessive citations from the transcript. I therefore give, by way of example only, the following references to inconsistencies in the evidence of Mr Esh: (1) The description given by Mr Esh of the process of blue noting that was conducted on 4 and 5 September 1998 was, to put it neutrally, confused. He said in chief at T 652.50-653.10 that he completed the blue notes with the description of the vehicle, the Red Book value and the scaled value (doing this in conjunction with Mr Chalker) and then calculated the total of the scaled values to arrive at the value of the vehicles for security purposes. He then said during cross-examination (in answer to questions from me) that his practice was to fill out the identification details of a particular vehicle "individually as you go along, to complete those forms"; the clear inference from this and his subsequent answers was that the details of each vehicle were completed when he saw it and, by checking the stock list, satisfied himself that it was one to be blue noted (T 662.55-662.25). He said that the value of the vehicles was inserted later, in the office, using the Red Book – after "standing beside the vehicle having noted down its details" (T 662.40-.50). Further, Mr Esh said, he then calculated the True Wholesale Value by applying the appropriate scaling; and after this was done, he gave the blue notes individually to Mr Chalker (or perhaps, on some occasions, Mr Tomlin) to sign (T 662.40-664.15). Subsequently, however, Mr Esh said that he filled in the details of the vehicles from the stock list in the office, having satisfied himself by inspection that a particular vehicle shown on the stock list was in the yard (T 659.10, 661.15,662.40-664.20). Further, it became clear subsequently in the cross-examination that Mr Esh did not, in most if not all cases, fill in the "True Wholesale Value" when he first filled out the blue notes. That is apparently because most, if not all, of the blue notes completed on 4 and 5 September 1998 show the same figure (the Red Book value) for "Book Value" and "True Wholesale Value". This was the first occasion on which Mr Esh had undertaken the process of blue noting . Although he purported to give evidence by reference to his usual practice rather than individual memory (T 661.15, .50; T 662.15, .40) – something for which he can hardly be criticised, having regard to the lapse of time and the fact that he has carried out many audits since September 1998 – the reality is that, when he blue noted the Tomlin companies' used car stock on 4 and 5 September 1998, he had no established or usual practice. (2) Mr Esh said in chief that the first occasion of which he knew when an allegation was made that Mr Tomlin had sold a vehicle out of trust occurred on 11 September 1998. That was in relation to a green Lexus, which was the subject of a blue note and which, therefore, Ford Credit regarded as its property. Mr Esh said that another dealer came to the yard on 11 September 1998, claimed (and showed to the satisfaction of Mr Esh) that the vehicle was his, and took it away. Mr Esh said that this vehicle was used personally by Mr Tomlin (see T 655.10-656.15). Thus, the evidence-in-chief created the impression (as I am satisfied Mr Esh intended it should) that Mr Tomlin had been guilty of sharp practice by purporting to "sell" it to Ford Credit when he knew that it was the property of another. However, in cross-examination, Mr Esh agreed that this was not at all a case of a vehicle being sold out of trust (T 659.45). Further, he agreed, the vehicle "had inadvertently been blue noted by" him (T 659.50). Mr Esh then agreed that neither Mr Tomlin nor Mr Chalker was with him when he blue noted the vehicle (T 659.60-660.1); an answer that he immediately after recanted (T 660.5-.25). I am satisfied that his first answer was correct and that his second answer was not. Although the blue note was signed by Mr Tomlin, I am satisfied (as I indicate later in these reasons) that the blue notes were presented in bulk to Mr Tomlin and Mr Chalker to sign, and that they did not check them individually. Although I have formed an adverse view of Mr Tomlin's credibility as a witness, I do not believe that he would knowingly have permitted Mr Esh to blue note a vehicle that Mr Tomlin knew was the property of another and not available as security. (3) In his evidence-in-chief, Mr Esh said that after he had completed the blue noting process, he added up the total of the scaled values, told Messrs Tomlin and Chalker the result, and told them that there was a shortfall of $66,023 (T 653.5-.25). For the reasons that I have given, Mr Esh in fact could not have done so, because he did not at first calculate the scaled values; if he did tell them of the scaled values, it must have been after the mistake had been pointed out to him and he had carried out the necessary calculations. Further, in cross-examination, Mr Esh gave evidence precisely to the contrary. He was asked "You did not tell them of the scaled value; did you" and "You did not tell them on the 5th of the short full [sic]", to both of which questions he answered "No" (T 669.45-.53). Further, in chief, Mr Esh said that when he gave the shortfall figure to Mr Tomlin and Mr Chalker, Mr Tomlin said he could give him a cheque for the shortfall straight away (T 653.30). In cross-examination, when it was put to Mr Esh that "Mr Tomlin said nothing about paying you a cheque on the Saturday", Mr Esh answered "No": ie, he agreed with the proposition. Further, Mr Esh said in chief, he rang Mr Jamie Melville of Ford Credit after calculating the shortfall, telling Messrs Tomlin and Chalker, and receiving Mr Tomlin's offer to provide a company cheque; and Mr Esh said that he did this in the presence of Messrs Tomlin and Chalker (T 653.45-.55). In cross-examination, Mr Esh recanted this, and agreed that Messrs Tomlin and Chalker were not present when he spoke to Mr Melville (T 670.5-.10; as will be seen, the question at .10, with which Mr Esh agreed, should read "I say they were not present; do you agree with me?"). Later in his cross-examination, Mr Esh volunteered that he had made a mistake when he had agreed that Mr Tomlin was not present during the telephone conversation with Mr Melville (T 677.15-.30). However, Mr Esh did not then seek to recant the other answers given by him in cross-examination, as to the events leading up to that telephone conversation. In re-examination, Mr Esh affirmed that Messrs Tomlin and Chalker had been present when he rang Mr Melville after the completion of the bluenoting process. He identified the conversation as occurring "once we had calculated – once we'd looked at the Red Book value, then scaled that Red Book value of the blue notes and it came back to a figure of $66,023." (T 751-.49, -.52). He then said that "Me and David worked out the short – the shortfall which was $66,023 to – which I told Mario and he was very excited and wanted to give me a company cheque for the shortage to discharge us off the premises because that was his paramount – that was his paramount thing; to get Ford Credit off the premises." (T 752.8, -13). To complete the picture of confusion, Mr Esh was further cross-examined by leave on this evidence. The relevant question and answer read as follows: "Q. I put it to you this way: you did not tell Mr Tomlin that the shortfall was $66,000 on 5 September because you did not blue note the final car in that calculation until the 7th September; that's so, isn't it? A. I don't – I don't recall." (T 752.47-.51). (4) One of the allegations made by Mr Tomlin in his affidavit sworn 1 July 2003 was that Mr Esh (and other employees of Ford Credit) stood near sales staff and customers during negotiations for the sale of a vehicle, and that customers appeared to be intimidated by this (para 115). Mr Esh, in his affidavit, denied that he "ever deliberately stood near a salesman and a customer during a negotiation process" (para 122). In cross-examination, Mr Esh agreed that he regularly stood in the sales area in a position where he could overhear what was happening between customers and sales staff. When asked "Was that so you could overhear what was going on?", he said "Yes" (T 728.5-.15). If Mr Esh stood near sales staff and customers so that he could overhear what was going on, it must follow that he stood near them deliberately, contrary to his denial. Mr Turton 72 Mr Nicholas Turton was, in September 1998, a dealer account manager employed by Ford Credit. He is now engaged on his own account in the motor vehicle sales industry. As dealer account manager, Mr Turton's role was to look after the dealers within his geographical area (which extended from Sydney northwest to Tamworth and Narromine) and to seek to increase both wholesale and retail finance within that area. 73 Mr Turton gave evidence in a clear and straightforward way. He appeared to me to have a good recall of the relevant events, and to have no desire to speculate beyond the limits of his recall. He was not shaken in cross-examination. I formed the opinion that he was a witness of truth on whose evidence I could rely. Mr Sultana 74 Mr John Sultana is presently a dealer account manager employed by Ford Credit. At the relevant time, he was a wholesale auditor employed by Ford Credit. He conducted the "trial audit" of 23 July 1998; he was not involved in the audit of 12 August 1998; but, in conjunction with Mr Esh, he conducted the audit of 2 September 1998. 75 Mr Sultana did not appear to have any clear recollection of the events of 2 September 1998. It became apparent, in cross-examination, that Mr Sultana was looking at his affidavit to assist him in answering questions (T 818.45). In this regard, the uncertainty of his evidence in cross-examination (T 818.40-.55) stands in marked contrast with the apparent certainty of para 49 of his affidavit sworn 4 May 2004. Further, Mr Sultana had no recollection of Mr Tomlin's having in substance acknowledged liability for (in round figures) $434,000, or of having proffered a cheque for $434,810.29 accordingly, although Messrs Buckton and Chalker corroborate Mr Tomlin's evidence that these things occurred; and Mr Melville in Sydney recalled that the cheque had been proffered. 76 Thus, whilst I do not find that Mr Sultana was seeking to do other than give evidence to the best of his ability, I am satisfied that his actual recollection is minimal, and that this adversely affects the reliability of his evidence of the relevant events. Specifically, I do not regard Mr Sultana's evidence of events in 1998 as providing acceptable corroboration for the evidence of Mr Esh. Mr Conlon 77 From 1997 until 1999, Mr Conlon was the Branch Manager of Ford Credit's Sydney office; it appears that his position had the alternative title, State Manager for New South Wales and the Australian Capital Territory. He appears still to be employed within the Ford group, but since 1999 he has been working in different positions within what he calls "Ford Financial" in the United Kingdom. 78 I do not regard Mr Conlon as a witness on whose uncorroborated evidence I could rely. His demeanour was less than satisfactory: for example, from time to time, he subjected cross-examining counsel and the Court to non responsive monologues that were clearly designed to justify his response to a particular question. 79 Thus, it was put to him that he had said to Mr Bradstreet "Tomlin's a disaster. You don't want to be involved in this". He denied that, and then delivered a lengthy but non responsive reason (T 846.45-.55). A little while later, he provided a further non responsive but justificatory explanation, involving this time not his own reasoning process but that of other employees of the Ford organisation (T 847.10-.20). 80 However, my greatest problem with his evidence concerns not his demeanour but what, increasingly, appeared to be a total lack of actual recall of the events about which he was cross-examined. I observed on numerous occasions that, when questioned on a particular topic, he would refer to what he had said (if anything) in his affidavit on that topic before replying. I observed further that, during intervals between questions, he would continue to read through his affidavit. It became apparent that the answers that he gave were prompted by what was in his affidavit. 81 Eventually, when he was cross-examined whilst his affidavit was kept closed, his absence of recollection was exposed. He was cross-examined about the contents of para 77 of his affidavit, which reads as follows: "On 11 September 1998, I attended a meeting between Mario Tomlin and directors of Kloster Ford being Peter Robinson and Trevor Reading. During that meeting, words were said to the following effect: Reading/Robinson: "We will pay you $300,000 for the goodwill of the business including buying out Vintage Ford's parts debt of $100,000 and we will buy your used car inventory based on our own valuation." Tomlin: "No I am not prepared to accept that."" 82 When questioned about the meeting of which para 77 speaks, Mr Conlon, without the assistance of reading what he had said, denied repeatedly that any offer was made in his presence by Mr Reading or Mr Robinson to Mr Tomlin; or that Mr Tomlin in his presence said to Mr Reading or Mr Robinson that he was not prepared to accept what they offered (T 880.40-881.20). 83 Mr Conlon was then invited to look at para 77. Eventually, he decided to adhere to what he had said in his affidavit, rather than to what he had said in cross-examination (T 881.25-882.5). 84 Thus, whilst I do not think that Mr Conlon sought consciously to mislead the Court, I do not regard his evidence as reliable. Specifically, I do not regard Mr Conlon's evidence as capable of providing acceptable corroboration for Mr Esh. Mr Green 85 Mr Green was at the time the Managing Director of Ford Credit. He now holds a senior position with a Ford affiliate in Japan. 86 Mr Green's involvement in the relevant events was peripheral. Perhaps for that reason, he appeared to have no real recollection. He, like Mr Conlon, would read his affidavit to see what he had said on a particular topic before answering a question directed to that topic. Thus, when counsel was putting to Mr Green Mr Tomlin's account of a particular conversation, Mr Green's response, when asked whether he had said the words in question was "I'll check" – followed by a perusal of his affidavit (T 905.45). He then asked "Where does that come from"; when pressed, he said "I don't recall" (T 905.50). Later, when asked whether a denial of particular words was "a definite no now" he responded "yes, because my statement doesn't say that"; and then agreed with the proposition that he wanted "to change [his] evidence to accord with [his] statement" (T 906.10-.20). The reference to a "statement" was a reference to his affidavit sworn 11 June 2004 read at trial. 87 Further, I gained the impression that Mr Green thought that he was doing the Court a favour by attending to give evidence. His manner was offhand and abrupt, and gave me the impression that he had some adverse view of Mr Tomlin and his operations. 88 Partly because of the considerations of demeanour to which I have referred, but principally because of the apparent lack of independent recollection, I did not find Mr Green's evidence reliable. It does not, except tangentially, go to any issue on which Mr Esh gave evidence; but to the extent that it does, I do not regard it as providing acceptable corroboration for Mr Esh. Other witness of fact for Ford Credit 89 A number of the witnesses of fact for Ford Credit were not required for cross-examination on their affidavits. It follows that I accept, so far as it goes, the evidence given by them in their affidavits. 90 Likewise, of the remaining witnesses who were cross-examined, I accept their evidence, so far as it goes, as reliable. 91 Without wanting to be seen as casting any adverse reflection on the evidence of others, I refer in particular to the evidence of Mr Melville. He was at the time the Commercial Credit Supervisor in Ford Credit's Sydney office. His duties included overseeing the day-to-day process of dealer audits and other matters relating to the supply of credit. Mr Melville is no longer employed within the Ford organisation. 92 Mr Melville gave his evidence in a clear and straightforward way. He gave me the impression that he had a good recall of the events of which he gave evidence. I accept his evidence as reliable. In a number of significant respects, it corroborates the evidence of Messrs Esh and Conlon and I regard it as providing strong support in those circumstances. Postscript on credit 93 The hearing was adjourned, after completion of evidence and submissions on all issues but the valuation of the used car stock as at 12 August and 2 September 1998 and damages, to enable the parties to deal with the detail of what they perceived to be the relevant valuation issues. Both Mr Tomlin and Mr Esh gave further evidence, dealing with the question of valuation. The parties had made detailed submissions on all issues but valuation (including submissions on credit) and accepted that I would commence the preparation of these reasons after those submissions had been put and before the valuation and expert evidence was given, and submissions were put thereon. Both Mr Tomlin and Mr Esh gave evidence on the question of valuation. It is sufficient to say that nothing in that further evidence gave me any reason to question – indeed, it confirmed – the views that I had by then formed, and that are summarised above. The contractual issues 94 The parties devoted a great deal of time, both in evidence and in submissions, to the events of 12 August and the events of 2 September and following. However, I think, the resolution of a great many of the issues (including the dispositive issues) turns not on detailed analysis of the facts, but on an understanding and application of the relevant provisions of the bailment plan agreements. Accordingly, it is to those questions that I now turn. Clauses 5.7 and 5.8 95 The effect of cl 5 of the bailment plan agreements, in so far as they related to used vehicles, was that if Ford Credit bought used vehicles from one or other of the Tomlin companies, it was obliged to pay no more than the lesser of the price paid or payable by that company and the true wholesale value of the vehicle. In practice, no question could arise unless the obligation was to pay the true wholesale value. 96 Clause 5.7 made it clear that "the true wholesale value" of any used vehicle, wherever that expression occurred in cl 5, was the amount fixed by Ford Credit as its true wholesale value (on the basis set out in cl 5.7); and that the sum so fixed was "final and conclusive". 97 It must follow that, at least in the absence of any suggestion of want of honesty or want of good faith, a determination by Ford Credit of the true wholesale value of any used vehicle was binding on the Tomlin companies. There was a dispute as to the implication of a duty to act in good faith. I shall return to that. 98 Under cl 5.8, Ford Credit was entitled at any time to require the Tomlin companies to repay to it the difference between the amount paid by Ford Credit for used vehicles and their true wholesale value. Again, subject to the question of want of good faith, that clause must mean what it says. Indeed, the practice of the parties, of conducting monthly audits and requiring any shortfall to be paid, suggests that they so understood it. 99 The parties understood that the process of attributing a true wholesale value to any used vehicle would be carried out through the monthly audit process. There is nothing in cl 5.7 to suggest that any attribution of value made by Ford Credit must be made without negligence; or, to put it conversely, that the final and conclusive nature of that determination was subject to some implied exception that it be not made negligently. 100 The plaintiffs submitted that cl 5.7 operated only for the purposes of cls 5.6 and 5.8. They submitted further that cl 5.7 "does not … apply to the calculation of the true wholesale value of used car stock for the purpose of the calculation of a shortfall, if any, owing under the Come and Go Facility. The audit process did not involve the payment of moneys by Ford Credit to TMC and TC by way of reimbursement of the expenditure incurred by them as bailees; see Clauses 5.3 and 5.6.1." (written submissions Part 2, "Contractual Claims", pp 2 to 3). 101 Thus, the plaintiffs submitted, cl 5.8 was only applicable where, in respect of a particular used vehicle, Ford Credit had paid one or other of the Tomlin companies more than its true wholesale value. They submitted that cl 5.8 had no relevance to these proceedings, where the claims in respect of the come and go facility were based on shortfalls of stock rather than issues as to the proper valuation of particular vehicles (ibid, p 3). 102 I do not accept those submissions. Clause 5.7 fixed the meaning of the words "true wholesale value" for the purposes of all the sub clauses of cl 5. Those sub clauses include (as the plaintiffs acknowledged) cl 5.8. The question of a shortfall between amount paid and true wholesale value was something to be considered (apart from any other occasion) during monthly audits. It was the monthly audit that enabled Ford Credit not only to ensure that vehicles purportedly sold to it were in stock (or that their absence was explained) but also to assess the condition of those vehicles and Mr Tomlin's (or Mr Chalker's) assertion of their true wholesale values. 103 At any given monthly audit, Ford Credit had: (1) A stock list of the Tomlin companies showing (among other things) all vehicles bailed to it in respect of which payment had been made out of the come and go facility; and (2) Knowledge of the amount then owing in respect of used vehicles under the come and go facility. 104 The purpose of the audit was to ascertain the true wholesale value of the vehicles bailed by the Tomlin companies to Ford Credit. That process involved two elements. The first was physically identifying each bailed vehicle. The second was determining, by scaling the appropriate Red Book figure, the true wholesale value of each vehicle so identified. The result was a determination of the true wholesale value of all bailed vehicles that were physically identified. Where that true wholesale value exceeded the amount paid under the come and go facility, the balance was due and payable. I do not think that it matters, for the purposes of cl 5.8, that the amount to be repaid was global rather than individual. 105 Clause 5.8 applies to "the true wholesale value of any Goods". By cl 1, "Goods" is defined to mean "any Vehicles or other Goods supplied to the Bailee under or in connection with this Agreement by the Bailor … ". Thus, I think, on its ordinary meaning cl 5.8 is capable of operating on "Goods" (or "Vehicles") collectively as well as individually. That follows from the use of the adjective "any" (both in the definition of Goods and in cl 5.8 itself) which, when used in conjunction with plural noun forms, is clearly capable of indicating a number more than one; and which in any event may indicate either singular or plural numbers. 106 A construction that enabled cl 5.8 to operate singularly in respect of individual vehicles from time to time in stock and bailed to the Tomlin companies, but not collectively on the totality of those vehicles so bailed, would be an obvious absurdity, in circumstances where (as I have said more than once) the parties contemplated that the process of determination of the true wholesale value of the bailed vehicles would be undertaken through the process of audit. 107 Further, given that the value of vehicles may depreciate over time (and the evidence of the Red Books, limited though it was, confirms that this is so), there is no basis for confining the operation of cl 5.7, in respect of audits, to the first (or any other specific) audit carried out after a used vehicle had been taken into stock and sold to Ford Credit. 108 I therefore conclude that, apart from any consideration of want of good faith, it was open to Ford Credit to do as it did after the 12 August and 2 September audits, and require the Tomlin companies to pay the shortfall disclosed. It follows also, on the same basis, that the Tomlin companies were obliged to pay the shortfall so disclosed. Clause 10.6 109 By cl 10.6, Ford Credit was empowered to retake possession of bailed vehicles at any time, and for that purpose to enter onto the premises of or controlled by the Tomlin companies. That right is not one which is conditional upon breach or upon some other act or state of affairs. In practice, the parties regarded it (understandably) as a right of last resort. This it may have been; but, again perhaps subject to any consideration of want of good faith, Ford Credit was entitled to exercise the right given by cl 10.6 at any time upon whatever basis seemed to it at that time to be appropriate. Clause 19 110 Clause 19 gives either party a relevantly unfettered right to terminate the agreement at any time as to future transactions. If that happens then Ford Credit has no continuing obligation to buy used vehicles from, and bail them back to, the Tomlin companies; nor does it have any obligation to finance the acquisition of new vehicles by the Tomlin companies. The saving in relation to "rights and liabilities … in respect of transactions prior to" termination simply reflects the fact that the existing arrangements must be unwound. Of itself, the giving of a notice under cl 19 might not terminate an existing bailment; but it could undoubtedly provide a reason, or basis, for Ford Credit taking other action to terminate existing bailments. 111 This is consistent with cl 10.2.1, whereby the bailee's right to possession of bailed vehicles continued until Ford Credit elected "to terminate the bailment at the expiration of the period from time to time fixed by [it] for the purposes of this clause". The evidence does not disclose that any bailment period was fixed for the purposes of cl 10.2.1. It must follow that the bailee's right of possession was capable of determination at any time by notice. 112 The Tomlin parties did not submit otherwise as to the proper construction of cls 10.2.1 and 19; their case was that the exercise of the right to terminate was controlled by an implied obligation of good faith. Implied obligation of good faith 113 The plaintiffs submitted that there was to be implied into the bailment plan agreements a term that Ford Credit would exercise the powers given to it by those agreements in good faith. As I understand it, the submission was that the obligation of good faith would qualify not only the determination of true wholesale value pursuant to cl 5.7 but also the decision to terminate the agreement. 114 Ford Credit submitted that the implication of such a duty was inconsistent with the nature of the broad discretionary powers available to it under the terms of the bailment agreements; alternatively, that the content of the obligation had to be determined having regard to the nature and extent of those powers. 115 It is no doubt correct to say that, absent some express provision to the contrary, a requirement to act in good faith will be implied into many contracts: see, for example, the discussion of this question by Sheller JA (with whom Powell and Beazley JJA agreed) in Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 363 and following. His Honour's conclusion at 369 was that "in New South Wales a duty of good faith, both in performing obligations and exercising rights, may by implication be imposed upon parties as part of a contract" (emphasis supplied). Neither that decision nor any other to which I was referred means that a duty of good faith is implied into all forms of contract. 116 Sheller JA in Alcatel referred at 367 to the analysis of Sir Anthony Mason in his 1993 Cambridge Lecture. That analysis suggested that three related concepts were embraced within the idea of good faith: (1) An obligation to co-operate in achieving the objects of the contract; (2) Compliance with honest standards of conduct; and (3) Compliance with "reasonable" standards of conduct, with the concept of reasonableness having regard to the several interests of the parties. If this analysis is accepted, then, relevantly for present purposes, any implied obligation of good faith could be said to be an obligation to act honestly and reasonably, and to co-operate in seeking to achieve the objects of the contract. 117 That there is no general implication of such a duty was confirmed by Giles JA (with whom Sheller and Ipp JJA agreed) in Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15. At para [191], his Honour stated that "the law has not yet gone so far as to say that commercial contracts are a class of contracts carrying the implied term [to act reasonably or in good faith] as a legal incident". 118 In the present case, there are at least two indications that a term of the kind for which the Tomlin parties contended should not be implied into the bailment plan agreements. The first is cl 13, which I have set out in para [38] above. Giles JA in Vodafone at paras [198] to [200] regarded the presence of a "whole of agreement" clause as inconsistent with the implication of an obligation to act reasonably in good faith. 119 The second is that the powers in question – specifically, in this context, the power to determine the true wholesale value under cl 5.7 and the power to decide to terminate the bailment plan agreement – are given to Ford Credit for the protection of its legitimate commercial interests. It is self evident (and if it were not, the facts of this case would in any event demonstrate) that there may be a difference of opinion as to the value of secondhand motor vehicles. In the context of the bailment plan agreements, that means that it is self evident that there might from time to time be a difference of opinion as to the value of security held by the floor plan financier for advances made. The parties were entitled to agree that there would be no relevant difference of opinion (or alternatively, that any difference of opinion would be resolved) because of the conclusive power given to one of them to determine the point of difference. In those circumstances, where a power is given to one party to be exercised in its sole discretion so as to bind the other, the terms of the contract are inconsistent with a constraint on the exercise of that power by considerations of reasonableness or good faith: see Giles JA in Vodafone at paras [194] to [197]. 120 It may be that an exercise of a power such as that conferred by cl 5.7 will be vitiated by the existence of actual bad faith. For example, it may be that an exercise of the clause 5.7 power not for the purposes for which it was given but for some ulterior and impermissible purpose may be no exercise at all. Considerations akin to the doctrine of fraud on a power may be relevant. That doctrine is of broad application, and is certainly not limited to the exercise of fiduciary powers: see, for example, Houghton v Immer [No 155] Pty Ltd (1997) 44 NSWLR 46 at 52-53 (Handley JA, with whom Mason P and Beazley JA agreed). 121 If it were necessary to do so, I would conclude that: (1) There is no implied obligation, constraining the relevant powers (to determine the true wholesale value of used motor vehicles and to terminate the bailment plan agreement), to act reasonably or in good faith before, or in the course of, exercising the powers; but (2) An exercise of the powers may be vitiated by conscious bad faith – more appropriately, perhaps, a purported exercise of those powers undertaken in conscious bad faith may be no exercise at all. 122 Having regard to the factual conclusions to which I have come (and which are set out later in these reasons), it is not necessary for me to express a concluded view. Further, as to the "conscious bad faith" point, I should note that no case of conscious bad faith was pleaded. At most, on this point, the plaintiffs' case could be that an exercise of the powers undertaken without good faith was an exercise in bad faith; but, again, it is not necessary to express a concluded view on this. The alleged duty of care 123 The plaintiffs alleged that Ford Credit owed them duties of care in respect of its exercise of powers available to it under the bailment plan agreements: particularly in relation to the determination of value of used motor vehicles under cl 5.7, and in relation to going upon the Tomlin companies' premises pursuant to its contractual rights to do so. 124 I do not see how the (relevantly) uncontrolled nature of the power to determine true wholesale value can be constrained by a common law duty of care (the qualification introduced by the parenthesised word "relevantly" is intended to refer to the possible, but presently irrelevant, vitiating effect of conscious bad faith). Where the parties have agreed that a particular thing under the contract may be done by one of them in its uncontrolled discretion, the law should be slow to remake their bargain by imposing a duty of care the effect of which would be to fetter that contractually uncontrolled discretion. 125 In Astley v Austrust Ltd (1999) 197 CLR 1, the majority (Gleeson CJ, McHugh, Gummow and Hayne JJ) dealt with the question of concurrent liability in tort and contract at 20 [44] and following. The context in which their Honours spoke was, of course, one of a contract for the provision of professional services. Implied into such contracts is a term that the service provider will exercise reasonable care in the provision of the services. That is part of the consideration given by the service provider in return for the express or implied promise of the promisee to pay for the services. It is something that the parties can bargain away or limit, by the terms of their contract. In that context their Honours said at 22 [47]: "Rather than ask why the law should imply such a term in a contract for professional services, it might be more appropriate to ask why should the law of negligence have any say at all in regulating the relationship of the parties to the contract? The contract defines the relationship of the parties. Statute, criminal law and public policy apart, there is no reason why the contract should not declare completely and exclusively what are the legal rights and obligations of the parties in relation to their contractual dealings." 126 A similar point was made by the Privy Council in Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80, 107. Speaking through Lord Scarman, their Lordships said that they did not "believe that there is anything to the advantage of the law's development in searching for a liability in tort where the parties are in a contractual relationship. This is particularly so in a commercial relationship." 127 That statement was adopted by Tipping J in Simms, Jones Ltd v Protochem Trading NZ Ltd [1993] 3 NZLR 369 at 377. His Honour said that the parties to a contract should be taken to intend their relationship to be governed by the terms of that contract: "Where parties are in a contractual relationship, it will, in the absence of special circumstances be a normal, natural and reasonable inference that they intend and expect their relationship to be governed solely by the contract and the law relating to contractual obligations. If an asserted obligation does not arise under the express terms or by clear and necessary implication, a party to the contract can reasonably expect the Court to take the view that there is no such obligation. If the obligation does arise expressly or by implication there is no need to rely on the suggestion that some concurrent or coexistent obligation of the same kind also arises in tort." 128 I understand his Honour's reference to "clear and necessary implication" to encompass the various bases (including implication in fact and implication in law) upon which a term may be implied into a contract; with that qualification (if it be one) I agree with what his Honour said. 129 In this case, it was open to the parties to negotiate the terms of their relationship. Although the documents in which they expressed their contractual relationship appear to be in a standard form, and were no doubt propounded by Ford Credit, there was no case made that Mr Tomlin's will was overborne in the negotiations or that his, and his companies', assent to those documents was anything other than informed and voluntary. Consistent with the principles to which I have referred, I think that the legal obligations of the parties in respect of the relationships created by those contracts should be determined by the terms, express or implied, of those contracts, and not by some superadded obligations imposed dehors the contracts. Specifically, I do not think that it is appropriate to restrict or qualify the contractual rights given by reference to extra-contractual obligations, except to the extent that such restrictions or qualifications may be implied as terms of the contracts in accordance with established principle. 130 Likewise, the power to terminate the agreement as to future transactions is not relevantly fettered. Nor, particularly where it is a power given to each party, is there a basis for fettering it by the imposition of a duty of care. Each party is entitled to act under that clause according to its perception of where its interests lie. 131 The other powers, the exercise of which is said to give rise to a duty of care, depend either mediately or immediately for their exercise upon a determination of value under cl 5.7. If, as I have said, that determination is not fettered by a duty of care, then it must follow that the powers that depend on, or flow from, it are likewise relevantly unfettered. 132 If it were necessary to do so, I would conclude that there is no relevant duty of care. However, since I have come to the view that the valuation exercises conducted on 12 August and 2 September 2001, and the blue noting exercises conducted thereafter, were not conducted negligently, it is unnecessary for me to express a concluded view on whether, in principle, Ford Credit owed the plaintiffs duties of care of the kinds alleged. The 12 August audit 133 Mr Esh conducted this audit. He was given a stocklist. He identified the vehicles on it (to the extent that he was able to locate them) and valued them by reference to the Red Book. He determined that there was a shortfall of $332,123. Mr Tomlin obtained a bank cheque for that amount and gave it to Mr Esh on 13 August 1998. 134 The shortfall included an amount of $197,550 in relation to the Nissan Finance used car facility and a shortfall of $134,573 on the Ford Credit come and go facility. The audit was conducted as part of Ford Credit's takeover of the Nissan Finance facility. 135 One of the complaints made by Mr Tomlin is that Mr Esh failed to identify and value some 12 vehicles. For that complaint to succeed, I must accept that the 12 vehicles were on the premises (or otherwise available to be inspected and valued by Mr Esh). The only basis for such a finding is Mr Tomlin's evidence. For the reasons that I have given in paras [43] to [51] above, I would not make such a finding (or any finding that is not against the interests of the plaintiffs) on the unsupported evidence of Mr Tomlin. That is enough to dispose of this complaint. 136 However, when the evidence is analysed, it is apparent that the vehicles in question were either in fact valued or, if not, were not actually on the premises; or at least, not available to be valued. Mr Tomlin's own evidence was that the vehicles that he identified (by putting an asterisk on the stocklist) were so identified by him "late in the afternoon of 12 August" (T 186.49-187.1), and after Mr Tomlin had spoken to Mr Turton about the amount demanded, which in turn was after Mr Esh had completed his audit (T 191.31-.38). It was put to Mr Tomlin that he gave no document (included the allegedly asterisked stocklist) to Ford Credit showing the vehicles that, he said, were available to be valued by Mr Esh but which were not; although he prevaricated on this (T 191.40-192.6), no such document was produced and I am satisfied that he did not. This, in itself, tells against his assertion that Mr Esh omitted to value a number of vehicles. (I should make it clear that there was a dispute as to whether Mr Tomlin had so marked the stocklist late the afternoon of 12 August, or at any time reasonably contemporaneous with the 12 August audit. I do not need to resolve that issue; it is sufficient, for present purposes, to take this evidence of Mr Tomlin's at face value.) 137 Mr Tomlin's evidence on this point is inconsistent with that of Mr Chalker. Mr Chalker said that it was part of his job to consult with auditors in relation to valuations that they had made. He did this by considering the stocklists that the auditors had marked up. If he observed that a vehicle had not been given a value, he would consider whether it was available to be valued and, if it were, inform the auditors. He said that he did this at every audit including those conducted on 12 August and 2 September 1998 (see generally T 446.29-448.5). 138 On 12 August, Mr Chalker followed this process. He was given a copy of the stocklist marked up by Mr Esh and reviewed it. After that process was completed, Mr Chalker was asked to, and did, review Mr Esh's work for the purpose of ascertaining the amount properly payable to Ford Credit (T 451.28-.35). There is no suggestion that Mr Chalker questioned the calculation of the shortfall. The clear inference is that Mr Chalker was satisfied, as a result of his involvement in and review of the audit, that Mr Esh had valued (and properly valued) all vehicles available as security. 139 Mr Sultana carried out an analysis of the plaintiffs' documents relating to the allegedly nonvalued vehicles. He concluded from the plaintiffs' records that four of those vehicles were disposed of prior to 12 August 1998, that six of the others were on the 12 August stocklist and that five of those six were valued by Mr Esh (see his affidavits sworn 15 and 28 February 2005). Mr Sultana was not challenged on this evidence and I accept it, notwithstanding my reservation as to the reliability of his recollection of the relevant events in 1998 in which he was involved. 140 Mr Tomlin's evidence on this point is also inconsistent with that of Ms Giggins (whom, as I have said, I accept as a witness of truth). She said that there was a single used car stocklist provided to the Ford Credit auditors on 12 August 1998, which included all used vehicles, both those bailed from Ford Credit and those bailed from Nissan Finance (and which also included those that, because of their age, were not bailed at all) (T 481.1-.11). She understood that the shortfall related to "the used vehicles and any Nissan vehicles that had previously been paid out. Cheques had not been received by the finance company at that stage."; and that the shortfall "related solely to Nissan finance vehicles" (T 479.27-.42). Whilst her understanding was incorrect, to the extent that (as I have found) part only of the shortfall arose in relation to Nissan Finance vehicles and part arose in relation to the Ford Credit come and go facility, it indicates that the alleged failure to value Nissan Finance vehicles is likely to have reflected the simple fact that those vehicles were not on the premises because they had been sold. 141 However, perhaps the most telling evidence in rebuttal of this complaint comes from Mr Tomlin's diary entry for 12 August 1998, to which I have already referred in the context of my assessment of his credibility. That entry reads: "Ford Credit carried out a full audit of my stock for Nissan Takeover we valued all the cars and had a shortfall of $332,123 " (emphasis added). 142 That entry illustrates a number of points: (1) Mr Tomlin, or his companies' employees, participated in the audit process. (2) The audit was complete ("full audit"). (3) Mr Tomlin, or his companies' employees, participated in the valuation process. (4) The shortfall was demonstrated without any indication of dissent. 143 It is consistent with Mr Chalker's evidence of his involvement and his lack of complaint (see paras [137] and [138] above). 144 Mr Tomlin's evidence in relation to that diary entry was as follows: "Q. Will you read to the court please the words you have recorded next to 12 August 1998? A. Ford carried out a full audit of my stock for the Nissan take over. We valued the cars and have a shortfall of 332,000. A cheque was given to Ford Credit and demand for the Nissan finance took place. Q. I think there is a word, "Bank cheque" been put in by a little carat, do you see that, in the second sentence - the last sentence? A. I think it may be, yes. HIS HONOUR: Q. In the second sentence I think it says, "We valued all the cars", does it not? A. Sorry your Honour. I cannot - - Q. The second line, "We valued", do you have that? A. Yes, "all the cars". HIS HONOUR: I think you left that out? PRITCHARD: I am sorry your Honour. It is your handwriting? A. Yes. Q. Records your recollection of what occurred on 12 August 1998? A. I started making - - Q. Does it record your recollection of what occurred on 12 August 1998? A. These notes were made on about 4 September. Q. Will you answer my question please, Mr Tomlin? A. Sorry. Q. Do those notes record your recollection of the events of 12 August 1998? A. Basically, yes. Q. There is no doubt in your mind that on 12 August 1998 that there was no dispute in relation to the valuation, that is the scale valuation of your stock - there is no dispute about what you owed for credit and there is no dispute about the shortfall of $332,000? A. That is not the case. HIS HONOUR: Q. When did you say you made that note, Mr Tomlin? A. On about 4 September your Honour. After - - Q. 1998? A. Yes. Do you want me to qualify it any further or that is it? Q. I just want to know the answer given? A. OK. Q. What did you mean by the phrase, "We valued all the cars"? A. The phrase is wrong. It should have wrote [sic]: the cars were valued, and that is how much they made a demand on me for. PRITCHARD: Q. The answer you just gave to his Honour was to your knowledge nonsense? A. I beg your pardon. Q. The answer you just gave to his Honour was a nonsense? A. I never valued the cars at that figure. The notation should have made the cars valued. I was trying to make references. I knew this day would come. I wanted to make a notation as best I could the cars were valued and the shortfall was 332 grand. Q. This is your business, your livelihood you say? A. Yes. Q. You participated in the valuation process? A. Not at that time. I did not. Q. Your practice in audits, as you have revealed in the inscription of that process, is that you participate in that process of that valuation, assisting in the audit of the vehicles and the process? A. At the end of the process, yes. Q. At the end of the process there was a joint valuation in your mind of the scale, the value of your stock on 12 August 1998 which resulted in the shortfall of $332,000 on the facility? A. I have to disagree, Mr Pritchard. Q. To be fair I put to you you may be confusing your anxiety and concern about the events of 2 September with what occurred on 12 August? A. Absolutely not, Mr Pritchard. Q. There was no drama, I put to you, in the way you say in your affidavit in resorting to extreme language as you set out in your affidavit on 12 August? A. Yes there was. Q. That would have been memorable I take it? A. I beg your pardon? Q. You say it was a memorable event, 12 August? A. Yes, it was. Q. Not recorded in this note you made in respect to 12 August? A. To me the critical point was how much Ford Credit valued the cars at and how much the demand on me for money was. That was the critical thing I wanted to record, what started the process. Q. Do you recall writing, Mr Tomlin, to Ford Motor Vehicle Company on 28 July 2000? A. I do not, Mr Pritchard, no. Q. Do you recall providing to that company a document entitled, "Mario Tomlin's statement"? A. I do not recall but I do not dispute that. Q. Are you aware that Ford Motor Company has produced that document in answer to a subpoena for production of documents addressed to them in these proceedings? A. I was not aware but I do not dispute that that is the case. Q. I show you that document. (shown). (Mr Pritchard gave an undertaking to formally prove the above.) Q. Do you recognise that document Mr Tomlin? A. I do. Q. Do you recognise that as the document that you forwarded at some stage to the best of your recollection to the Ford Motor Company? A. Yes. Q. Does it assist that process occurring about the end of July 2000, is that right? A. Yes, I think Ford Motor Company - we won't stand on issues. Yes. Q. And you provided it to them freely and voluntarily? A. Yes. Q. Can you please turn to the entry for Wednesday 12 August 1998 and tell me when you have read that entry? A. Yes. Q. You agree with me, don't you sir that in that document you make no reference whatsoever to any dispute in relation to the assessment of a shortfall of $332,000? A. I do not here, no. Q. This is a document you were sending to Ford Motor vehicle company as you understood it to give them as much information about your, as you believe it to be on your case, the facts in respect of the dispute with Ford Credit? A. It was the background, yes. Q. And in it you wanted it to be accurate and set out matters you thought appropriate? A. I did not set out every single matter, no. I just did what I thought to be appropriate for the purposes of that exercise." (T 160.48-162.45). 145 Further, in a complaint made by Mr Tomlin to Ford Motor Company on 28 July 2000, Mr Tomlin made no reference to any dispute as to the shortfall of $332,123 derived from the audit of 12 August 1998, although that letter canvassed the events of that day and was intended to set out "the background" and what Mr Tomlin "thought to be appropriate for the purposes of that exercise" (T 162.47-163.49). 146 Quite apart from my general view on Mr Tomlin's credibility, the inconsistency between his evidence in these proceedings and his prior statements makes it impossible to accept the former on this point. 147 I therefore conclude that the attack on the 12 August audit, based on the alleged failure of Mr Esh to identify and value all available vehicles, fails. 148 To the extent that the plaintiffs pressed their case based on individual valuation discrepancies, I deal with this below under the heading "Valuation issues". The events of 17 and 18 August 1998 149 I have adverted to these in paras [21] to [23] above. For the reasons that I give there, I am satisfied that, although Ford Credit made a mistake in overpaying the Tomlin companies by $197,550, Mr Tomlin was well aware of this (as, of course, were Messrs Buckton and Chalker) but chose, nonetheless, to spend that amount in defraying expenses of the Tomlin companies. 150 Mr Tomlin asserted that, nonetheless, he was entitled to do so because Mr Turton had undertaken to "revalue" the plaintiffs' stock. Mr Turton denied that he gave such an undertaking. Consistent with my acceptance of him as a witness of truth, and my views on the credibility of Mr Tomlin's evidence, I find that Mr Turton gave no such undertaking. The 2 September audit 151 The audit was conducted by Mr Sultana, who was joined by Mr Esh late on the afternoon of 2 September. Mr Esh dealt with used cars. The result of the audit, as disclosed to Mr Tomlin, was a shortfall of about $650,000. (I put it thus because the precise amount of the shortfall that was said to have been demonstrated by this audit has not been proved.) That shortfall was made up substantially of $434,810 in respect of new and used vehicles and the amount of $197,550 relating to the takeover of the Nissan Finance facilities. The balance, of approximately $27,000, is not explained; presumably some interest had accrued on the amount paid to Nissan Finance, but it would be unlikely to explain the whole of the apparent discrepancy. 152 Mr Tomlin said that he understood that the shortfall in relation to vehicles was $126,079 for used cars and $308,731 for new cars. 153 One aspect of the plaintiffs' attack on the 2 September audit relates to the component of the shortfall arising from the Nissan Finance takeover: $197,550. Another (perhaps related, or overlapping) relates to the alleged failure of Mr Esh to value all available vehicles. It is more than a little difficult to understand what other attacks are made, apart from those that I deal with below relating to valuation issues. 154 Nor is it easy to understand Mr Tomlin's evidence as to his attitude to the result of the 2 September audit. In his affidavit sworn 1 July 2003, Mr Tomlin said at para 93 that Mr Sultana advised him of a shortfall of $650,000, which Mr Tomlin regarded as "some sort of mistake; something [t]hat just can't be right." 155 Mr Tomlin said (para 94) that he spoke to Messrs Buckton and Chalker and asked "what do we owe them". Messrs Buckton and Chalker "then examined the sales contracts and the vehicle log" and said "Mario, this is what we owe, $434,810.29". This, Mr Tomlin said, he reported to Mr Sultana, who said that he would have to speak to his superiors in Sydney. 156 Mr Tomlin said (para 96) that he had a discussion with Mr Turton in which Mr Turton agreed that the amount owing was $434,000 (in round figures) and told Mr Tomlin to "[d]raw a cheque for that amount and give it to Sultana". Mr Tomlin said (para 97) that he instructed Mr Buckton to draw a cheque "for what we owe Ford Credit", that Mr Buckton gave him a cheque in favour of Ford Credit for $434,810.29, and that Mr Tomlin signed the cheque. 157 That evidence would establish that: (1) A reconciliation and analysis of the Tomlin companies' records showed that Ford Credit was owed $434,810.29 by reason of discrepancies between stock-on-hand and the amount owing under the Ford Credit facilities; and (2) Mr Tomlin accepted this, and was prepared to pay it. 158 At this point, there is no basis for any conclusion that the audit had been conducted negligently, or that the valuation of used cars forming part of the audit process was incomplete or wrong. The dispute appears in substance to be as to the difference between the apparently agreed indebtedness of $434,810.29, and the amount said to have been claimed by Ford Credit. In substance, as I have indicated, that discrepancy related to the payment of $197,550 made by Ford Credit to Nissan Finance and also included by mistake in the 18 August drawdown. 159 Mr Tomlin said (para 98) that later on the afternoon of 2 September, he had a conversation with Messrs Sultana and Esh. In that conversation, he says, Mr Esh informed him: "Sydney office has been onto Melbourne. We seemed [sic] to have sorted it out. There was an error of $197,550 which had not properly been adjusted from the Nissan settlement. They had mistakenly given that to you as a credit and that formed part of the $365,000 that was paid on 18 August 1998 to your account." 160 Mr Tomlin says that he told Mr Sultana that he could "settle the $450,000 or a bit more", but that the balance "is your mistake and I need a few days to pay that." 161 After the conversation with Messrs Sultana and Esh, Mr Tomlin said (para 99) that he spoke once more with Mr Turton, who told him "[j]ust pay the $434,000 and we will sort it out later". This, Mr Tomlin said (para 100), he sought to do, but Mr Sultana said "we are going to have to stay here until we sort this problem out." 162 On that analysis, the only dispute of substance (leaving aside the unexplained balance of about $27,000) was as to the amount of $197,550 which had been in effect double paid: once to Nissan Finance, in discharge of the indebtedness of Tomlin Corporation, and once to the Tomlin companies, as part of the 18 August drawdown. I have already found that Mr Tomlin was aware of this overpayment on or shortly after 18 August 1998, and that he decided to use the money to pay creditors. It follows, and I find, that the explanation given to him by Mr Sultana can hardly have come as a surprise. 163 It also follows that Mr Turton, had he made investigations, is unlikely to have responded as Mr Tomlin said he did. In fact, Mr Turton denied that he used the words attributed to him by Mr Tomlin. He said (affidavit sworn 2 July 2004, para 43) that, having made investigations after the initial telephone call from Mr Tomlin on 2 September 1998, he "learned that an amount of $197,550" had been in substance double paid. He says that he had a conversation with Mr Tomlin to the following effect: "Turton: You don't dispute that you owe $434,810.29 following the audit. Tomlin: No I don't dispute that, but what about the other $200,000? Turton: Well you actually owe more than $434,000 because when you requested a draw down a few weeks ago, the settlement of the Nissan takeover had not been entered on our system. As a result, we had not debited your account for the $197,550 which we paid to Nissan Finance when we took over the facility. That was an amount that you owed to Nissan Finance and then became a debt owing to us. Your Come and Go account had not been debited for that amount and so on the day you requested a draw down, there appeared to be more funds available than what there should have been. Pay the $434,000 because you don't dispute that. You still owe the balance of $200,000 because you don't have the stock to support it. Tomlin: Ok, I'll pay the $434,000.00 today and let me know about the extra $200,000." 164 For reasons that I have given, I accept Mr Turton's evidence that there was such a conversation. Further, and unlike Mr Tomlin's account of his conversations, the account given by Mr Turton is consistent with the known facts, including the shortfall as ascertained by Messrs Buckton and Chalkers and explained to Mr Tomlin (see para [155] above). 165 However, it appeared in the course of Mr Tomlin's cross-examination that he was seeking to suggest that he had not been told that there was a problem with insufficient stock (or insufficiently valued stock). On a number of occasions, he suggested that if the shortfall had been put to him as related to stock shortage, he could have identified and resolved the problem very quickly: "A. Esh wasn't looking for them, we had only looked for cars marked stock. We had a big service department, if I thought we were short or there was an issue we would then walk around and look for reserve cars, if they were still physically sitting on the lot, if I needed them. Q. So I understand this aspect, you say if you thought there was an issue in relation to stocktake you would have gone around and got more vehicles up, found more vehicles, is that right? A. Yes. Q. You didn't do that with Esh on the 12th, did you? A. No, I didn't. Q. Because there was no issue-- A. There was because we were over by the 300 grand and there was the Nissan thing, I wanted to talk to Turton to understand. I knew we had enough stock to cover Ford and Nissan. I couldn't understand why-- Q. Do you say you didn't do this because you were overwhelmed, is that right? A. Shocked, because we thought we would go through the audit without spending any money. We knew we had the stock covered." (T198.37-199.4). 166 Mr Tomlin expanded on this approach: "Q. So you did believe on the day [2 September 1998] that you did not have the stock to support the $200,000 difference? A. I accepted at the time their valuation shortfall. We were more concerned and more focused with this $200,000 Nissan stuff up. I was not smart enough at the time to get my list, get the money. It was just panic to sort the stuff up out, and given the amount of confusion that took place that day - I know it sounds simple, but there was really a lot of confusion that day, both parties. Q. This is your job? A. Yes. Q. You were doing it a number of years? A. Yes. Q. You had these finance arrangements in place for a significant period? A. Yes. Q. You knew how it worked? A. Yes. Q. It is all a matter of whether you had the scaled stock on hand to meet the indebtedness? A. Yes. Q. And that is what you knew on 2 September, isn't it? A. Yes. Q. And on 2 September you just did not have the scaled stock to support that additional $200,000, did you? A. Mr Pritchard, if it was put to me it was a stock difference, I could have sorted it out in five minutes. If it is a stock issue - it was an accounting error. It was put to me as an accounting stuff up. We have this 200 grand. There was a lot of confusion. Ford Credit had me convinced that was the case. I said: Okay, I will find the money. I said: I am going to need a day or two to find the money. It was okay at the end of the day. Give us a day or two, I'll find the money. Q. You must have thought back to the events of 17 August when this money appeared in your account, only a couple of weeks prior to 2 September when you were considering what happened on 2 September, isn't that right? A. Yes. Q. You say your version of events, as I understand it, is that you thought this extra $200,000 in your account was the result of a revaluation of your stock? A. Yes. Q. On 2 September you are told, in effect, you did not have the vehicles on hand to support your indebtedness? A. No, that is not what I was told. I was told there was a stuff up with the Nissan takeover and 200 grand had not been applied to my account. I probably look like a dickhead now. It was put to me - it was the stuff up of the Nissan takeover, not a stock issue. If I was told it was a stock issue, I could have probably identified the problem at the time but I did not. Once again, my apologies to the Court and yourself. I do not mean to--- Q. But your dealings with Ford Credit in this facility were driven by stock levels and debt, weren't they? A. Yes. Q. A moment's reflection on 2 September would have caused you to appreciate it was a stock issue? A. It was the first takeover stock audit. It was a takeover of a finance company where moneys had not been debited and credited properly. That is where I got kneecapped. Okay. Q. A takeover issue is just, as you understood it, a process whereby Ford Credit assumed all your stock, right? A. Yes. Q. And assuming all your stock; they regard it as scaled value of the stock? A. Yes. Q. And compare that against the recorded debt? A. Yes. Q. And that process continues, as you understood it, on 2 September, irrespective as to what had occurred, whether it be a takeover or any other movement in relation to your dealings with your finances? A. If it was put to me as a stock problem, I would have done what I had done in every other audit, got a stock list, looked at valuations, found cars, found the money. It was not put to me as a stock issue, otherwise I would have done what I have always done. It was not put to me as a stock issue. There was no accounting stuff up. It was a takeover stuff up." (T 209.36-211.16). 167 The contrast with the recognition, in the account given in Mr Tomlin's affidavit, that a substantial part of the problem related to insufficiency of stock and had to be dealt with by payment, is clear. It shows, yet again, that Mr Tomlin is prepared to distort his account of events to advance what he sees to be his interest. The "stuff up of the Nissan takeover" to which Mr Tomlin referred in this passage would explain, in round figures, $200,000 of the shortfall; and his evidence conveniently overlooks the fact that he was aware of, and decided to take advantage of, that "stuff up" when he took the benefit of, and spent, the overpayment that to his knowledge was comprised in the 18 August drawdown. 168 The account given by Mr Tomlin in his affidavit, and his action in drawing and seeking to hand over the cheque for $434,810.29, are consistent with an understanding on this part that there was a stock shortfall that he could not then rectify. I do not accept his attempt in cross-examination to rewrite history on this aspect of the dispute. 169 Again, Mr Chalker's evidence of his involvement in the 2 September audit (which I have summarised in para [138] above), leading as it did (in conjunction with Mr Buckton's work) to the establishment of the "stock related" shortfall of $434,810.29, is quite inconsistent with Mr Tomlin's evidence in cross-examination, and entirely consistent with the proposition that there was such a shortfall. I accept Mr Chalker's evidence. I am satisfied that, as part of his duties on that day, he would have satisfied himself, in accordance with his normal practice, that Mr Esh had valued (and properly valued) every used vehicle that was available as security. 170 It follows necessarily that the major components of the shortfall advised to Mr Tomlin on 2 September 1998 were due and owing by his companies to Ford Credit. It was not suggested for the plaintiffs that the apparent discrepancy of about $27,000 between the sum of those components and the total of "about $650,000" was material. It therefore follows that the plaintiffs' attack on the outcome of the 2 September audit fails. 171 That conclusion means that Ford Credit was entitled to act as it did, in relation to the Tomlin businesses, in the days following 2 September 1998. Indeed, it was not put that those actions were relevantly wrongful even if the indebtedness established by the 2 September audit were substantially correct. 172 In relation to the actions of Ford Credit after 2 September 1998 (excluding the bluenoting process, with which I deal separately), the consistent theme advanced by Mr Tomlin was that it was unreasonable, if not wrong, for Ford Credit to act as it did because it was a "change [of] my deal" or "a problem that you've created with this crediting of $200,000" (affidavit sworn 1 July 2003, paras 104 – an alleged conversation with Mr Turton – and 105 – an alleged conversation with Mr Conlon). In other words, the case that Mr Tomlin sought to advance at a factual level was that there had been a mistake by Ford Credit, for which he was not responsible, and of which he was ignorant; and that, in those circumstances, it was unreasonable of Ford Credit to act as it did. 173 It may be accepted that there was a mistake by Ford Credit in relation to the $197,550; and that Mr Tomlin was not responsible for that mistake. However, as I have found, he was aware of it as soon as, or shortly after, it was made; and instead of seeking to correct it, he took advantage of it and spent the money. It can hardly have come as a surprise to Mr Tomlin that, in addition to any shortfall relating to vehicle values established by an audit, there would be an additional shortfall relating to the double payment of $197,550. Thus, I find, his attempts to blame Ford Credit alone for the mistake, and to portray himself as the innocent victim, should not be accepted. I think the reality is that Mr Tomlin was aware that the day of reckoning, in relating to the overpayment had come; but that he dishonestly sought to postpone that reckoning by portraying himself as the innocent and unknowing victim. Bluenoting 174 The plaintiffs' attacks on the bluenoting process related to alleged failures to locate and value vehicles, and alleged errors in valuation. I deal with those attacks below when I consider valuation issues. 175 After the bluenoting process was completed, Mr Esh's calculations showed that there was a shortfall on the come and go facility of $66,023. For the reasons that I have given in para [71(1), (3)] above, it is likely that the dollar value of the shortfall was not quantified until 7 September 1998 (a Monday). Mr Esh said that he had a conversation with Mr Tomlin when the shortfall was calculated, in which Mr Tomlin agreed to pay that shortfall. Because Mr Tomlin offered to pay by bank cheque, and because Mr Esh needed to speak to Mr Melville about this, it is likely that the conversation occurred on Monday 7 September. Mr Esh said that if Mr Tomlin had provided cleared funds in the sum of $66,023 after the bluenoting process was completed and the shortfall calculated, the shortfall would have been discharged and Ford Credit's employees would have left the premises (T 676.46-677.6); and that he told Mr Tomlin this. 176 The sequence of events is somewhat confused, not least because of the inconsistencies in Mr Esh's evidence on this point to which I have referred in para [71] above. However, what is clear is that on Monday 7 September 1998, Mr Tomlin initiated a payment of $66,023 to Ford Credit by electronic funds transfer. I have no doubt that he did this because (as Mr Esh says, and as was put to Mr Tomlin in cross-examination), Mr Esh had told Mr Tomlin that this was the balance outstanding and that payment of that amount in cleared funds would procure the departure of Ford Credit's employees from the premises. Mr Tomlin denied that this was so (T 646.19-.38), but was unable to give any credible reason why he initiated that EFT payment (T 648.9-.26). Nor is any other reason apparent. It would be an extraordinary coincidence if there had been some other debt of exactly $66,023 owing by the Tomlin companies to Ford Credit on that day. Apart from the suggestion of Mr Tomlin to which I refer in the next paragraph (that the amount related to vehicles sold where the funds had been electronically transferred into the dealership's bank account, and not paid to Ford Credit), there is no evidence of any other debt; and, on analysis, the matter to which Mr Tomlin referred is likely to be an explanation of the shortfall rather than a separate obligation owed to Ford Credit. 177 Mr Tomlin stopped the EFT payment. He claims that he did so because of a demand for other money "over 3 or maybe 400,000" (T 648.298-.37). However, this was inconsistent with his explanation of the purpose of the payment of the $66,023, as the following evidence shows: "HIS HONOUR: Q. Mr Tomlin, you said a little while ago that you thought the EFT payment was $66,023 being in relation to the vehicles that had been sold where the funds had not been received by your company by bank cheque but had been transferred directly into its account? A. Yes. Q. If that is the case, it was money owing not [sic: obviously to] Ford Credit? A. Yes. Q. Why did you stop the payments? A. I understood the money was being payable to Ford Credit. Q. On this basis, why did you stop the payment because of the extraneous allegation? A. Because, your Honour, the alleged money that I owed them had jumped about another 2 or 300,000. Q. Why is that a reason to stop the payment being made? A. I had these people trying to get me out of there, they'd being lying to me. I thought I'm not going to give me - give you one - another dollar until we can reconcile what the true debt was. Q. On your evidence you knew you owed that money because you had started the transfer process. A. That's right. Q. Why would you stop that process? A. As I said, Ford Credit was being dishonest with me. I decided I am not going to give them another cent until they established what the truth of this debt is." (T 649.51-650.26). 178 Mr Tomlin was unable to give any satisfactory reason why he cancelled the EFT payment. However, I think, the likelihood is that he discovered that the payment would clear only the shortfall at that time on the used car stock; and that there was a separate shortfall relating to new cars. Mr Esh's understanding (that payment of $66,023 in cleared funds would cause Ford Credit's staff to depart the premises) was wrong, because it took no account of a shortfall on new cars. I think the likelihood is that when Mr Tomlin learnt that he could not procure the removal of Ford Credit's staff by paying the sum of $66,023, he decided to cancel the payment. Events up until 2 October 1998 179 The salient events over the period 2 September to 2 October 1998 of which Mr Tomlin complains include: (1) The decision of Ford Credit to leave its employees at the premises until the entire shortfall was paid. (2) The decision of Ford Credit to take control of the bailed vehicles by taking control of the keys. (3) Ford Credit's requirement that all vehicle sales proceeds be paid directly to it, in reduction of the debt. (4) The change in the commercial arrangements between the Tomlin companies and Ford Credit relating to the basis on which new vehicles would be released. (5) The termination of the bailment agreements on 11 September 1998, and the "chaining" of the yard on that day. (6) The negotiation with Kloster Ford for that company to buy out Mr Tomlin's interest in the Vintage Ford and Vintage Hyundai businesses, and the provision of information by Ford Credit to Kloster Ford. 180 The simple answer to many of these complaints is that the matters now complained of occurred with the concurrence of Mr Tomlin. Thus: (1) Mr Tomlin knew that it was in his interest, as well as Ford Credit's, that his companies' debt to Ford Credit be paid out (T 267.4-.8). (2) Mr Tomlin understood that Ford Credit was entitled to take back the stock that it had bailed to him; he was anxious that this not happen and was therefore prepared to allow Ford Credit's representatives to be on and remain on the premises during September and early October 1998 (T 130.10-131.9, 131.50-132.13). (3) Mr Tomlin instructed his solicitors to write to Ford Credit on 30 September 1998, informing Ford Credit that if it wished to have its personnel at the site that would be allowed (T 132.15-.27). (4) Mr Tomlin agreed for the proceeds of sale of cars to be paid to Ford Credit during this period (T 132.29-.37). (5) Mr Tomlin knew that Ford Credit was owed money and was not obliged to provide any further finance (T 132.44-.52). The behaviour of Ford Credit's staff at the premises 181 Mr Tomlin sought to suggest that Ford Credit's staff had behaved in an inappropriate manner whilst they were on the premises during September and early October 1998 (see, for example, paras 113 to 116 of his affidavit sworn 1 July 2003). That evidence is denied by the relevant Ford Credit officers. It is also contradicted by evidence of employees of the Tomlin companies, including Mr Buckton, Mr Chalker and Ms Giggins. I do not accept Mr Tomlin's evidence on this point. I conclude that the Ford employees who were on the premises during September and early October 1998 behaved appropriately and "professionally" (to use a word that resounds throughout the evidence of the employees to whom I have referred). The decision to take control of the car keys 182 Ford Credit was entitled to do this. The keys were kept by the relevant employee (usually Mr Esh) in one place. They were made available to employees of the Tomlin companies who required them (for example, to take a customer for a test drive). 183 Mr Tomlin sought to suggest that this happened over his opposition. However, Mr Chalker's evidence was that Mr Tomlin told him that he had agreed to this happening (T 460.35, .40) and that, thereafter, cars were allowed out of the yard when required for appropriate purposes such as test drives, detailing or repair work (T 460.42-.55). I accept Mr Chalker's evidence, and find that Mr Tomlin did agree to Ford Credit's doing what (as I have said) it was in any event entitled to do. Requirement for payment of proceeds of sale 184 As I have found in para [180(4)], Mr Tomlin agreed to this. Thus, he cannot complain of it. It is necessary to add only that, having made the agreement, Mr Tomlin did not honour it. His companies received payments for some cars by EFT direct to the relevant bank account. Those payments were not paid on to Ford Credit. Further, Mr Tomlin instructed Mr Buckton to hold and bank into one or other of his company's accounts a number of cheques received in payment for cars sold. Ultimately, Ford Credit discovered this, and the cheques were given to it. Change in commercial arrangements 185 This relates to the basis on which the relevant Tomlin company was able to obtain new cars. Formerly, there was an "automatic release" system, whereby the car was ordered and delivered, and payment was made by Ford Credit to the relevant vendor (Ford Australia or Nissan Australia, as the case may be). Under a manual release system, each order had to be approved individually. 186 It is not apparent why this is a wrong, let alone an actionable wrong; but in any event there is simply no evidence that it caused anything other than some additional administrative load to the Tomlin companies and their employees. Termination of the bailment plan agreements 187 I have already concluded that, on the proper construction of the bailment plan agreements, either party was entitled to terminate them at any time in respect of future arrangements. This is what Ford Credit did. There is no need for it to justify its actions. 188 If, however, there were some need for Ford Credit to justify its actions then recent events including the repeated shortfalls on audit, the failure of the Tomlin companies to repay the overpaid amount of $197,550, the cancelled EFT payment of $66,023 and the failure of the Tomlin companies to honour their promise to pay all proceeds of sale to Ford Credit in reduction of debt, would have provided more than ample justification. 189 There is no basis for concluding that the termination of the bailment plan agreements was undertaken as part of a process to force Mr Tomlin to sell his companies or their business to Kloster Ford. If this was part of the plaintiffs' case, I reject it. Chaining up the premises 190 When the bailment plan agreements were terminated by notice on 11 September 1998, chains were put around the premises to secure them. It is likely that this caused some inconvenience (for example, to customers who had left their vehicles at the premises to be serviced). However, given the notices of termination were served late in the afternoon (at about 4.30 pm) it is possible that members of the public may have perceived that this was part of the normal process of securing the premises overnight. Indeed, the evidence of Mr Peter Perkins, a salesman employed by one or other of the Tomlin companies, suggests that this is how it may have appeared (T 502.6-503.24). (Mr Perkins appears to have been mistaken as to the time when the chains were put on. He said, initially, that it was early in the day, but agreed later that it could have been "between 3 and 5 o'clock. For present purposes nothing turns on this.) 191 What is quite clear is that no customer's vehicle was impounded overnight. The chains were taken down about half an hour after they were put up, and those who needed to do so were able to enter and leave the premises (presumably, with their cars) by the main gate. There is no basis in the evidence (apart from unsubstantiated and, for the reasons I have given, unacceptable assertions by Mr Tomlin) for concluding that the chaining of the premises on 11 September 1998 caused any, let alone any significant, damage to the plaintiffs. The negotiations with Kloster Ford 192 After 2 September 1998, the Tomlin companies remained indebted to Ford Credit and Mr Tomlin was unable, or unwilling, to procure that indebtedness to be discharged. Thus, Ford Credit's employees remained at the premises. As I have already found, their behaviour was appropriate. Indeed, Mr Buckton thought, Ford Credit's employees may have appeared to customers to be part of the Tomlin companies' staff (T 400.52-401.15). 193 Mr Tomlin was exploring ways of raising money to enable him to discharge his companies' debt to Ford Credit. He considered selling his companies, or an interest in them, to Kloster Ford. 194 It appears to be the plaintiffs' case that Ford Credit was applying pressure to force Mr Tomlin to sell out to Kloster Ford. It is undoubtedly the case that Ford Credit would have welcomed such a sale, particularly if (as one would expect) it was paid out as part of, or a result of, such a sale. It is clear that senior officers of Ford Credit recognised that the Tomlin companies were undercapitalised, and thought that they were badly run; and I have no doubt that they saw a sale of part or all of the business as one way in which the outstanding debt could be paid. Thus, Ford Credit was prepared to assist Mr Tomlin in his endeavours to sell to Kloster Ford. 195 However, there is no basis on which I could find that Ford Credit sought by improper means, or indeed by the improper application of proper means, to force Mr Tomlin to sell to Kloster Ford. To the extent that this is part of the plaintiffs' case then (as I have already said specifically, in relation to the termination of the bailment plan agreements) I reject it. 196 The negotiations with Kloster Ford were but one of the ways in which Mr Tomlin was seeking to raise money to enable his companies' debt to Ford Credit to be paid out. He was negotiating with his bank for the provision of further finance. He had the offer of a loan from his father, and the offer of a loan from a colleague in the used car sales industry, Mr Leonard Bragg. There was also, as I shall discuss, the offer of assistance from Mr Bradstreet. Ultimately, Mr Tomlin took this last course. But before he did so, he had reached, and then set aside, two "agreements" with Kloster Ford. 197 One offer made by Kloster Ford to Mr Tomlin was that it purchase a share in his companies, but that he would retain a 20% interest; and would employ him on a package of $100,000 per annum with incentives and a share of profits (T 90.57-91.12). Mr Tomlin said that he accepted that offer on the afternoon of 11 September (after the bailment plan agreements had been terminated and the chains put in place and removed) but that he "reneged on it the next day" (T 312.26-.53; it was at this point, as I noted in para [43] above, that Mr Tomlin broke down). 198 Thereafter, Mr Tomlin reached a further agreement in principle. It appears that this was for Kloster Ford to pay $500,000 for the goodwill of the businesses and $570,000 for the land (owned by Mr and Mrs Tomlin); and, in addition, for Mr Tomlin to be employed on a base salary of $100,000 per annum plus incentives. Mr Tomlin did not proceed with this deal because, apparently, it "would have resulted in my financial ruin" (T 318.16; the account of the negotiations commences at 317.56 and continues to 319.10). 199 In the course of those negotiations, Kloster Ford not unnaturally wished to satisfy itself as to what it was proposing to buy: to conduct some form of "due diligence" investigation. As part of that process, it requested information from Ford Credit. Ford Credit supplied that information. Mr Tomlin protested that this was done without his knowledge or authority. I do not accept that evidence. Ford Credit sent a fax to Mr Tomlin on 17 September 1998, seeking his consent to the provision of financial details to Kloster Ford. Mr Tomlin denied that he had received that letter (affidavit sworn 18 October 2004, para 54). He agreed in cross-examination that it could have been received by Mr Buckton, although he thought that Mr Buckton would have spoken to him had this happened (T 248.4-.12). 200 Mr Melville said that he caused the fax to be sent to Mr Tomlin. I accept that evidence. Further, Mr Melville says that a few days earlier (between 11 and 14 September 1998) he was in Mr Conlon's office listening to a conversation on a speakerphone between Messrs Tomlin and Conlon. In the course of that, Mr Melville said, Mr Conlon asked Mr Tomlin for permission to tell Klosters how much was owed, and Mr Tomlin gave his permission. I accept that evidence. The fax of 17 September 1998 showed what was owed, and the detail of its calculation. 201 Further, Mr Conlon said that he received Mr Tomlin's authority to send the statement to Kloster Ford. Notwithstanding my reservations as to Mr Conlon's credibility, I accept that evidence. It was corroborated by a contemporaneous diary note made by him. It was also corroborated to an extent by Mr Melville, who said that Mr Conlon had told him on 18 September 1998 that he had obtained Mr Tomlin's consent to give Kloster Ford the material. That does not prove the fact of consent; but it does prove the fact of communication. One may wonder why Mr Conlon would have said this to Mr Melville if it were not the case. Alleged failure to supply information 202 A related complaint of the plaintiffs is that Ford Credit refused to supply them with information as to the state of the account, and as to the calculation of the Tomlin companies' indebtedness. Mr Tomlin complained repeatedly that the amount claimed changed from day to day. That is hardly surprising, given that new vehicles were bought (on manual release) and the indebtedness was increased; and that as new vehicles and used vehicles were sold, the indebtedness decreased. 203 Mr Tomlin had access to Ford Credit's FOCUS computer system. That gave the current balance of the account (subject, as in the case of the $197,550 paid to Nissan Finance, to the postings being up-to-date). Although that did not give a reconciliation of the amount said to be owed, it is apparent that Mr Buckton and Mr Chalker between them could have reconciled the amount said to be owed, as they did following the 2 September audit. 204 The fax that I have concluded was sent to Mr Tomlin on 17 September 1998 certainly contains both a statement of the indebtedness and a calculation of the way in which it was derived. 205 The first written request for a statement of account was made on 21 September 1998, by Mr Butler. On that day, Ford Credit sent the Tomlin companies (or Mr Butler) a statement showing the amount outstanding and details of the source and application of funds. Mr Tomlin agreed that such a document would give him all the detail that he sought to reconcile his account (T 51.7-.18). 206 Mr Tomlin's affidavit evidence was that he "did not ever receive [that] letter and the enclosure … at the time of the date of the letter" (affidavit sworn 18 October 2004, para 57). However, when shown a copy of the letter conceded to have been produced by the plaintiffs on discovery and showing a facsimile transmission date of 22 September 1998, Mr Tomlin was forced to concede that he could not recall one way or the other whether he had got it. I am satisfied, both from the transmission markings on that letter and because it was produced by the plaintiffs on discovery (almost certainly, from Mr Butler's documents) that Mr Tomlin did receive it. I think, despite his denial in cross-examination, that para 57 of his affidavit was carefully framed so that it said, truthfully, that he did not receive the letter on 21 September, whilst at the same time it concealed that Mr Tomlin had in fact received it the following day. I think that he, contrary to his denial, was "trying to be smart or cute" (T 250.38-.46). 207 The inference that Mr Tomlin and Mr Butler received the letter of 21 September is confirmed by a letter of 23 September 1998 from the plaintiffs' solicitors to Ford Credit in which the author says: "I understand that Ford Credit have finally provided the reconciliation to my client … ". A draft of that letter was sent to Mr Butler and he approved it (T 529.45-530.21). Clearly, in context, the "reconciliation" was a reference to the fax of 21 September 1998 apparently received on 22 September 1998. 208 Ford Credit prepared audit reconciliation documents on 22 September 1998. A copy of those documents was exhibited to Mr Tomlin's affidavit sworn 1 July 2003. There was written on the document by hand "given to Mario 23/9 in his office". Clearly, the documents were given to Mr Tomlin on that day. 209 On 30 September 1998, the plaintiffs' solicitors wrote to Ford Credit referring to "the shortfall in the terms of the figures that have now been established". The clear inference is by then the state of the indebtedness had been established. A copy of this letter was sent to Mr Butler. He did not demur to its contents. 210 There was much other information given to Mr Tomlin over the period from 2 September to 2 October 1998. I conclude that his complaint that Ford Credit withheld financial information from him is unsustainable. The deal with Mr Bradstreet 211 On or about 13 September 1998 (a Sunday), Mr Tomlin and Mr Bradstreet agreed that Mr Bradstreet, through a company controlled by him, would buy an interest in the Tomlin companies. As I have said, Mr Tomlin was exploring a number of alternative sources of finance (see para [196] above); his evidence was that if he wished, he could have consummated any of those arrangements. Ultimately, however, Mr Tomlin agreed to the transaction with Mr Bradstreet. 212 Initially, Mr Bradstreet agreed to make an interim loan of $270,000, to enable the indebtedness to Ford Credit to be paid out. He would acquire a 49% interest in Tomlin Motor, and the loan would be repaid through the issue of shares. 213 At some stage, the nature of the transaction changed. Mr Bradstreet, through his company, acquired not only a 49% interest in Tomlin Motor but also a half interest in the premises (owned by Mr and Mrs Tomlin). There was no additional consideration. Mr Tomlin was unable to explain this apparent change, other than to say that it was something to do with the paperwork (T 352.1-.25; see also 353.1-.14 and 355.5-.32). 214 Mr and Mrs Tomlin suggest that the interest in the premises was sold to Mr Bradstreet's company at an undervalue. The apportionment of the total of $300,000 contributed by Mr Bradstreet was as to $180,000 for an interest in the premises and as to $120,000 for an interest in Tomlin Motor. Mr and Mrs Tomlin have been unable to give any, let alone any satisfactory, explanation as to why they would sell an interest in the premises at an undervalue, particularly in circumstances where the initial arrangement was that the advance would be repaid purely out of the issue of shares. (In referring to Mr and Mrs Tomlin, it should not be overlooked that Mrs Tomlin gave no evidence at all.) Given that Mr Tomlin, as he said, had other sources of finance available to enable him to pay out the debt to Ford Credit, it is very difficult to understand why he should have chosen one that, as he now would say, was disadvantageous. At the time, he had had the benefit of advice from the solicitors who have continued to represent him; he had the support of (and offer of financial assistance from) the Motor Traders' Association; and he had the benefit of the advice of an independent accountant, Mr Butler. 215 Mr Bradstreet's evidence was, likewise, that the original arrangement was purely a purchase of shares in Tomlin Motor; his interest was in the stock (ie, the motor vehicles) of that company (T 557.4-.8; see also 571.28-572.3 and 576.14-.26). Mr Bradstreet later said that the deal was "that he got a half share in everything, the business and the land" (T 576.34). I do not accept that evidence. I think that Mr Bradstreet used his position of advantage, once he had made the loan, to renegotiate the terms of the original arrangement so that it included not only an interest in Tomlin Motor Company but also an interest in the premises. 216 It may be worth noting, in this context, that Mr Bradstreet recovered his advance "out of the profits we made … and the land sale"; and that when this had happened, he retransferred the shares in Tomlin Motor to Mr Tomlin for no consideration (T 582.38-583.28). Presumably, Mr Bradstreet had seen that the shares in Tomlin Motor might not support the investment that he had made, and sought to strengthen his position by renegotiating the terms of his investment once the advance had been made. 217 There was an issue between the parties whether it was "foreseeable" that Mr Tomlin would enter into the deal with Mr Bradstreet either on the basis originally negotiated or on the basis finally documented. If by this it was meant to enquire whether such loss as the plaintiffs claimed they had sustained through entering into that deal was foreseeable, or could have been avoided, then the issue should be answered adversely to the plaintiffs. As I have said, Mr Tomlin had a number of alternatives open to him, including obtaining finance either from regular sources (his bank) or from private sources (family and friends). On the evidence, taking up those offers would not have required Mr Tomlin to divest control of his companies or ownership of the premises. If, therefore, he suffered loss by entering into the transactions with Mr Bradstreet whereby he did those things, that must be regarded as a result of a deliberate decision by him and not as the result (foreseeable or otherwise) of any assumed wrongdoing on the part of Ford Credit. 218 Further, in this context, it must be remembered that the objective of the transaction (and of the alternatives that Mr Tomlin considered) was to pay out the Tomlin companies' debt to Ford Credit. That was a real debt, actually owing. One way or another, it had to be discharged. I fail to see how it can be said that an individual or a company suffers loss by being required to pay an obligation that is due and owing. Valuation issues 219 The parties devoted an inordinate amount of time and paper to debating the value of the Tomlin companies' used car stock as at 12 August and 2 September 1998, and during the bluenoting process. Mr Tomlin insisted that Ford Credit, through Mr Esh, had substantially undervalued his companies' stock, and had thereby substantially overstated the amount due by way of shortfall. 220 As I understand it, there are two reasons advanced in support of the plaintiffs' position. The first is that Mr Esh did not value, or bluenote, all available cars. The second is that he did not assign correct values. 221 I have already dealt with the first reason, in relation to the audits of 12 August and 2 September. No different considerations arise in so far as this argument is also put on the bluenoting process. I find that Mr Esh did value, or bluenote, all cars that were available. 222 The second reason can be disposed of almost as quickly. In most cases, the plaintiffs' argument is that Mr Esh failed to take account of extras, or special features, that the vehicles had. Those extras (as I shall call them) may be divided into two categories. The first category is extras recognised by the Red Book as justifying a higher value: for example, a larger or different kind of motor, air conditioning or automatic transmission. The second category is what might be called "other" extras: ie, extras not recognised by the Red Book. 223 The evidence was clear that the valuation process was to be undertaken by reference to the Red Book, and that only "Red Book" extras would be taken into account in determining value. Thus, to the extent that the plaintiffs' case suggests that the vehicles had added value, which Mr Esh failed to recognise, by reason of extras in the second category, it must fail. A valuation in accordance with the Red Book would not take account of, or allow value for, extras in the second category. 224 As to the first category of extras, Mr Esh in many cases made allowance for extras such as air conditioning or automatic transmission. However, Mr Tomlin says that a number of the vehicles valued by Mr Esh had "first category" extras, but that Mr Esh's valuation did not reflect this. An acceptance of that requires an acceptance of the uncorroborated evidence of Mr Tomlin that the vehicles in question did have such extras. For the reasons that I have given, I do not accept Mr Tomlin's evidence on that point. This aspect of the case also fails. 225 Further, in relation to "first category" extras, Mr Chalker reviewed the audits of 12 August and 2 September, and raised any concerns that he had with Mr Esh, as I have recorded in paras [138] and [169] above. It may be assumed that Mr Chalker was well aware of the characteristics and features of the relevant vehicles. It may be assumed that, if Mr Chalker thought that Mr Esh's valuation had failed to take account of first category extras, he would have raised this with Mr Esh. He did not do so. 226 Mr Chalker was also intimately involved in the bluenoting process. Indeed, he signed many of the bluenotes on which the true wholesale value was recorded. Again, it should be assumed, Mr Chalker would have detected and sought to correct any error. He did not do so. 227 Further, the evidence as to unvalued first category extras is unacceptable. It comes only from Mr Tomlin. Not only do I reject that evidence because of my general conclusion on his credibility, I think that it is inherently unsatisfactory. Mr Tomlin in most cases did not purport to have an actual recall of the vehicles in question. His evidence that they had extras of some kind was based on what he said was his usual practice (for example, only buying used vehicles that had air conditioning), or by some process of inference or deduction based on the price he paid. Even leaving aside my views on his credibility, I would not find that evidence sufficiently persuasive to convince me that Mr Esh had overlooked some first category extra. 228 This is not to say that Mr Esh did not make mistakes in the valuation process. He did. Indeed, although with some reluctance, he conceded that he did. For example, he might have failed to identify the type of transmission that a car had; he might have failed to identify the kind of motor that it had; or he might have made a simple transposition error in checking the Red Book. But it is to be expected that, in undertaking the valuation of approximately 150 vehicles in a relatively short period of time, mistakes will be made. No doubt, that is one of the reasons why Mr Chalker checked the audit process and raised concerns with Mr Esh. But it does not follow that any mistakes that were made are indicative of negligence. In this context, it is necessary to bear in mind that the relevant Tomlin company was indebted to Ford Credit for the full amount advanced on the vehicle, and that the full amount would have to be repaid sooner or later. A mistaken undervaluation might accelerate payment of part of the amount owing; it would not mean that something was paid that could never be owing. 229 I conclude that the plaintiffs have failed to make good their case that Ford Credit (or Mr Esh) negligently valued the Tomlin companies' used car stock at any of the relevant dates. Unconscionable conduct 230 The plaintiffs relied on ss 51AC and 52 of the Trade Practices Act 1974. They submitted that the actions of Ford Credit over the period August to October 1998 were relevantly unconscionable, or misleading and deceptive. They referred, in this context, to the valuation of the used car stock, the demands for payment of shortfalls, the alleged pressure to sell to Kloster Ford, the decision to terminate the bailment facilities, and the other matters that I have dealt with above. 231 Substantially for the reasons that I have already given, I do not accept this aspect of the plaintiffs' case. I find that there was nothing unconscionable, or misleading or deceptive, in Ford Credit's acting in the way that it did. It was legally entitled to act as it did. There was good reason for it to act as it did. In acting as it did, it was not motivated by any irrelevant or improper consideration. Damages 232 In view of the conclusions to which I have come, it is unnecessary to consider the plaintiffs' case on damages. However, both to guard against the possibility that my conclusions on liability may be wrong, and because I have concluded that in any event the plaintiffs have not made out a case for damages, I will deal briefly with this question. 233 If the damages case arose for consideration (ie, if Ford Credit had breached some contractual or other duty owed to the plaintiffs, or had been guilty of unconscionable conduct), it would in any event fail for two reasons. The first is that there is no causal connection between the conduct complained of and the damages said to have been suffered. The second is that the plaintiffs have not proved that they suffered any damage. Causation 234 The plaintiffs' case on causation was in essence that the business of the Tomlin companies had declined (in terms of gross sales) after the events of August and September 1998. Thus, they submitted, the events of August/September 1998 must have caused, or should be inferred to have caused, the decline in sales. 235 Underlying that submission is the proposition that Ford Credit's conduct in some way damaged the image or reputation of the business of the Tomlin companies. But the evidence does not make good that proposition. At the most, there is some evidence of what might be called "pub talk", coming from witnesses such as Mr Moores and Mr Giggins. That evidence is hopelessly vague and unspecific, and could not make good the necessary causal link between Ford Credit's actions and the decline in the Tomlin companies' sales. And in any event, when one goes to the circumstances that are said to be the foundation of the pub talk – specifically, the presence of Ford Credit officers on site during September and October 1998, and the brief chaining up of the premises on 11 September 1998 – it is apparent that there is no basis on which to assume some causal connection. 236 In truth, I think, the pub talk was based on a perception that Mr Tomlin's businesses were in a financially precarious position. They were. But that was not the defendant's fault. It was the result of Mr Tomlin's mismanagement, reflected in the abysmal financial performance to which I shall shortly turn. Ford Credit cannot be blamed for this, any more than it can be blamed for taking steps that were legally open to it to protect its position in the face of the financially precarious financial status of the Tomlin companies. 237 Thus, on the plaintiffs' evidence, there is no basis to find a causal link, and their "post hoc propter hoc" reasoning should be rejected. But in any event, there is an explanation for the downturn in sales. It is that there was a nationwide, statewide and regional downturn in sales of new and used vehicles at this time. Although Mr Tomlin sought to suggest that his business would have been immune from even the regional downturn, I do not accept that proposition. I think it likely that the sales performance of the Tomlin companies followed, although not necessarily in an exact way, the sales performance of other businesses as measured by data collected by Ford Credit's accounting expert, Mr Andrew Ross. 238 In this context (although it is relevant also to the plaintiffs' case on breach of duty) there is a telling analysis of the problems faced by the Tomlin companies in a letter from their solicitors to Ford Credit dated 30 September 1998. That letter sought, among other things, to ascribe reasons for what it described as "the current conflict". It said, on this topic: "Looking at the overall situation objectively, the factors bringing about the current conflict include the overpayment by Ford Credit of the $200,000 amount, the revaluation of motor vehicles according to the Current Red Book valuation process which values the vehicles at a much lesser amount than our client can in the normal course of business liquidate used cars at to recoup larger amounts [sic]. No doubt this would be an industry problem with the introduction of cheap imports, in particular the Korean vehicles having a flow-on devaluing effect to second hand vehicles. Objectively our clients [sic] position is no different to other dealers in this regard." 239 None of the three reasons that is given is demonstrative of any breach of duty on the part of Ford Credit. (That is why, as I have said, the letter is relevant not just to the question of causation but also to the question of breach of duty.) The first reason refers to the double payment of $197,550. As I have said, that was a mistake on the part of Ford Credit; but it was a mistake of which Mr Tomlin was aware, and on which he decided to act by spending the money to defray his companies' expenses. The second accepts that it is appropriate to ascertain the true wholesale value of stock by reference to the Red Book, and makes a point about the commercial consequences. The third (which might be thought to be a somewhat unusual complaint to make on behalf of a dealer in Hyundai vehicles), as with the second, speaks not of fault on the part of Ford Credit. 240 It is clear that the author of the letter was of the view that the three factors that he outlined led to the dispute between his clients and Ford Credit. Not only are those causes not indicative of any fault, or breach of duty, on the part of Ford Credit; the description of them, and the inference fairly available that they are the real causes of the dispute, together contradict the case on causation that is now put. I have no doubt that the observations in that letter were made on the instructions of Mr Tomlin. I think that the letter – in particular, the paragraph that I have quoted – is a compelling refutation of the case that the plaintiffs now seek to advance. 241 Finally, on this point, although it is correct to say that the gross sales of the Tomlin companies decreased after the events of August and September 1998, their profitability actually increased: something that I shall discuss, but that is inconsistent with the plaintiffs' case on causation. 242 Thus, as I have said, I find that there is no causal connection between the actions of the defendant and the downturn in the Tomlin companies' sales. No damage in any event 243 The plaintiffs relied on a report prepared by an accountant, Mr Darel Hughes. Mr Hughes said that the plaintiffs had suffered loss, excluding interest and ongoing loss of profits, in the sum of $4,904,007. This loss comprised three elements: Loss of profits until 30 June 2003 $3,745,295 Loss of value of business at 30 June 2003 973,712 Loss on disposal of premises 185,000 Total: $4,904,007 244 I do not understand how there can be a claim for the capital loss described as "loss of value of business" and an ongoing claim for loss of profits thereafter. The sale, or notional sale, of the business at 30 June 2003 would reflect the then value of its future maintainable profits. To recover both that capitalised value of future profits and the profits themselves is to recover twice. But this is not the major flaw in Mr Hughes' analysis. 245 Mr Hughes' calculations of loss of profits and loss of value of business were based on a number of assumptions as to increasing turnover and decreasing costs. Those assumptions were based on information, or instructions, given to him by Mr Tomlin. There was no independent proof of those assumptions, and Mr Hughes' opinions, as he readily and properly agreed, were critically dependent on those assumptions. 246 For this reason alone, the plaintiffs' case on damages must fail. It must fail because I do not accept Mr Tomlin as a witness of credibility. Since his projections of future sales and profitability were fundamental to Mr Hughes' assessment of loss, the assessment of loss is nothing more than a calculation; it is not an assessment of any loss that has been proved to have been suffered. I add that those projections were implicit in Mr Hughes' report; but there was not actually any independent evidence from Mr Tomlin giving them, let alone giving the bases upon which he would make them. Thus, a fortiori, his evidence on those matters was not tested. 247 Were it not for those assumptions, the better conclusion might be that the plaintiffs were better off as a result of the events of August and September 1998. Mr Ross summarised the financial results of the Tomlin group for the financial years from 30 June 1995 in appendix 11 to his report. For the first two of those years (1995 and 1996) the "group" consisted of Tomlin Motor. For the next four years (1997 to 2000) it consisted of Tomlin Motor and Tomlin Corporation. For the last three years (2001 to 2003) it consisted of Tomlin Motor and another company, Newcastle Classic Cars. In four only of those years – 1995, 1997, 1999 and 2001 – did the group show an operating profit. The amount ranged from $7,039 in 2001 (when the operating profit was 0.1% of sales) to $28,554 in 1999 (when it was also 0.1% of sales). In percentage terms, the best year was 1995, when the operating profit of $25,432 was 1.0% of sales. 248 In only four of those years – 1995, 1997, 1999 and 2001 – did the group return a net profit before tax. The highest net profit recorded was in 2001, of $258,207. That reflected the net operating profit before tax and an abnormal item (sale of asset) of $251,168. 249 In 1996, 1998, 2000, 2002 and 2003, the group returned both an operating loss and a net loss before tax, ranging from a loss of $19,592 in 2001 to a loss of $645,495 in 2002. The loss of $248,343 in 1998 was achieved after crediting another abnormal item (sale of asset) of $122,644. 250 For every year bar 1995 and 2001, the group had a substantial deficiency of net tangible assets: ranging from $129,281 deficit in 1996 to $972,020 deficit in 2003. There were positive net tangible assets of $67,781 in 1995, and $153,486 in 2001. (The group net tangible assets in the latter year were not affected by the abnormal item, which was an intra group transaction.) 251 There was no dispute between Mr Hughes and Mr Ross as to those figures, which were extracted from the relevant financial statements. 252 The suggestion that companies exhibiting the miserable financial performance summarised in Mr Ross' appendix 11 could have a value anything like that attributed to them by Mr Hughes, or that they could have made profits of the kind said by Mr Hughes to have been lost, smacks of the absurd. It demonstrates the fundamental importance to Mr Hughes' calculations of the instructions or assumptions provided by Mr Tomlin. Further, in my view, it demonstrates (even apart from my views on Mr Tomlin's overall credibility) that those assumptions or instructions were hopelessly optimistic. 253 It is apparent that part of the reason for the poor financial performance of the companies – in particular, their pattern of negative net tangible assets – was Mr Tomlin's practice of taking out cash to finance a lifestyle that, if it was not extravagant, certainly verged on the luxurious. The result was that the businesses were chronically undercapitalised. There was a pattern of switching between financial resources. For example, the bank overdraft would be used to pay the amount of a shortfall established by audit; there would then be a drawdown on the come and go facility, and the overdraft would be lowered. Notwithstanding tactics such as these, the overdraft as at August and September 1998 was well and truly over its limit, and consistently so: an indication of undercapitalisation. 254 Mr Ross' summary of financial results for the Tomlin group showed gross sales for the years in question. There was a pattern of consistent increase up until and including the 1998 financial year, and of consistent decline thereafter. Because the plaintiffs relied very heavily on that pattern, I set it out. For convenience, I also repeat the net operating profit (loss) figures for the years: Year Gross Sales Net Operating Profit/Loss 1995 $2,616,554 $ 25,432 1996 17,261,021 (63,909) 1997 22,730,646 15,610 1998 32,347,277 (370,987) 1999 27,849,234 28,554 2000 23,465,810 (19,592) 2001 11,871,534 7,039 2002 11,645,810 (645,495) 2003 8,474,457 (493,800) 255 The plaintiffs in submissions pointed to these figures – in particular, the figures for gross sales – as demonstrating a steady increase in the business of the Tomlin companies up until and including the 1998 financial year, and a steady decline thereafter. This, they said, supported the proposition that, but for the acts complained of on the part of Ford Credit in August, September and October 1998, the business would have continued to grow. 256 It will be observed that the growth in sales was not accompanied by growth in profitability. Indeed, in 1998 (which was the most successful year for sales) there was a substantial net operating loss. Mr Ross said that this indicated that the Tomlin companies were achieving growth at the expense of profitability or, as he put it, "buying market share". As he pointed out, a business could not continue to do that and survive, unless it had very deep pockets indeed. Mr Hughes accepted that the figures were capable of showing pursuit of growth at the expense of profit, but seemed to think that the situation could be turned around by focusing on increased profitability. He pointed to the circumstance that the businesses had merged in the 1998 year, and that there were likely to be savings in overhead expenses. 257 I think that Mr Ross' analysis is to be preferred. There was no evidence that the Tomlin companies had in fact commenced to make any savings during the 1998 financial year, with the possible exception of rent on 258 Maitland Road; and whatever savings were made did not result in profitability. The business was undercapitalised (see the summary of net tangible assets in para [250] above). It had no ability, except such credit as might be afforded it from external sources, to absorb losses on the scale of those made during 1998. To the extent that profits were made in other years, they resulted in some diminution of the deficiency of net tangible assets; it cannot be said that a healthy well capitalised business with strong recurrent profits and substantial net tangible assets is portrayed by the figures that Mr Ross has presented. 258 Further Mr Hughes' views as to cost cutting appear to depend on instructions or assumptions given to him by Mr Tomlin. Those instructions or assumptions cannot form an adequate basis for acceptance of Mr Hughes' opinions based on them: both because of the general problem with Mr Tomlin's credibility and because in any event he gave no direct and reasoned evidence of steps to achieve cost cuttings, as opposed to what might be called generalised plans to reduce staff and overheads. 259 Thus, I am not satisfied that the trends in sales over the years in question provide any adequate basis for the projected future revenues, let alone profitability, of the Tomlin companies. Nor do I regard them as providing any indication of a causal connection between the conduct on the part of Ford Credit of which complaint is made and the decline in fortunes of those companies. 260 In those circumstances, the proposition that the plaintiffs have suffered loss of the kind, let alone in the amounts, for which Mr Hughes contends is completely unsupportable. It is for those reasons that I have said that, if it were necessary to do so, I would find that the plaintiffs have not established that they suffered any loss even if (contrary to what I have said) there were some causal connection between the events of which they complain and their financial position that I have summarised. 261 I will add only that although Messrs Hughes and Ross conferred, pursuant to directions given by me, and produced a joint report that eliminated some of the differences between them (and which also produced agreed outcomes depending on the view one took of the remaining areas of dispute), there remained, at the end of the day, a number of questions of dispute. Because of the views to which I have come on the key elements of the plaintiffs' claim for damages, it is not necessary for me to identify and resolve each of those remaining disputes, and I do not propose to do so. I will however indicate that in general I found the opinions of Mr Ross to be more adequately supported, both by evidence and by reasoning, than those of Mr Hughes; and in general I would accept them in preference to the opinions of Mr Hughes where the two are in conflict. Conclusions on the issues 262 It will be apparent from what I have said that the plaintiffs' case must fail. It will also be apparent how many of the issues posed by the parties should be answered. However, by way of summary, I return to those issues and answer them individually: (1) Whether Ford Credit failed to correctly calculate the amount of shortfall owed to it (having regard to the discounted wholesale value of the stock) on 2 September 1998 as alleged at paragraph 158L of the Sixth Further Amended Statement of Claim (the "Claim"). Answer: No. (2) Whether the failure referred to in the above paragraph amounted to a breach by Ford Credit of the Bailment Agreements between Ford Credit and TMC and Ford Credit and TC. Answer: Does not arise. (3) Whether Ford Credit, in terminating the Bailment Agreements on 11 September 1998, was in breach thereof by reason if its failure to properly calculate the discounted wholesale value of the used car stock on 2 September 1998 (as alleged at paragraph 158K of the Claim). Answer: No. (4A) Whether Ford Credit, in the conduct of its audit of TMC and TC on 12 August 1998, failed to take into account the security comprised of used cars the subject of the NFC facility. Answer: No. (4B) Whether by reason of the matter referred to in paragraph 4A above, TMC/TC owed Ford Credit a shortfall in the amount of $197,550 with respect to used vehicles the subject of the NFC facility at the conclusion of the audit of 12 August 1998. Answer: Yes. (5) Whether the facts and circumstances alleged at paragraph 122 of the Claim amount to a contravention by Ford Credit of s 51AC of the Trade Practices Act . Answer: No. (6) Whether Ford Credit was entitled to terminate the Bailment Agreements on 11 December 1998 between it and TMC and TC. Answer: Yes. (7) Whether the termination of the Bailment Agreements was a breach of the agreements as alleged at paragraph 54A of the Claim. Answer: No. (8) Whether the demand for payment of "about" $650,000.00 constituted a breach of the Bailment Agreements with either or both TMC and TC. Answer: No. (9) Whether Ford Credit owed a duty of care to TMC/TC/Tomlin with respect to the conduct of the business of TMC/TC. Answer: No. (10) What was the content of that duty (if any)? Answer: Not applicable. (11) Whether (by reason of the matters alleged in paragraphs 151-154 of the Claim) Ford Credit acted in breach of the duty of care. Answer: No. (12) Whether there was an implied term in the Bailment Agreements that Ford Credit would act in good faith. Answer: No. (13) What was the content of the obligation arising out of the implied term (if any)? Answer: Not applicable (but see para [116] above). (14) Do any of the matters alleged at paragraphs 56 to 77 and 158A to 158B of the Claim amount to a breach of that duty? Answer: No. (15) Whether the representations by Ford Credit as to TMC's/TC's indebtedness on and after 2 September 1998 (as alleged at paragraphs 110(2), 110(5), 158L and 158Y of the Claim) were negligent misstatements. Answer: No. (16) Not pressed – 11/3/05. (17) Whether the alleged failure by Ford Credit to disclose to TMC/TC/Tomlin the discounted wholesale value of the vehicles blue noted by it exceeded the amount drawn down under the Facility (including, which is not admitted, the $197,550.00), was a contravention of s 52 of the Trade Practices Act (as alleged at paragraph 121I of the Claim). Answer: No. (18) Whether the Plaintiffs are entitled to damages including exemplary damages and, if so, which of the Plaintiffs and in what amounts. Answer: No. (19) Whether the Plaintiffs are entitled to recover damages for both capital loss and loss of profits (ie, is the issue of continuing damage one which gives rise to an entitlement to claim both). Answer: No. (20) Whether the Plaintiffs are entitled to damages pursuant to s 82 and/or s 87 of the Trade Practices Act. Answer: No. (21) Whether the Plaintiffs acted reasonably or foreseeably in entering into the arrangements they did with Mr Bradstreet (and entities associated with him) following the events of September 1998. Answer: No. Orders 263 I make the following orders: (1) Direct entry of judgment for the defendant on the plaintiffs' claim. (2) Order the plaintiffs to pay the defendant's costs of the proceedings. (3) Reserve liberty to either party to discharge or vary order (2), by making application on notice to the other and my associate within 14 days of today's date. (4) Exhibits to be retained for 28 days and thereafter held or disposed of in accordance with the Rules. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.