BMW Australia Finance Ltd v John Paul Youngman & Anor [2007] NSWSC 624

New South Wales Supreme Court

CITATION : BMW Australia Finance Ltd v John Paul Youngman & Anor [2007] NSWSC 624

HEARING DATE(S) : 18/06/2007

JUDGMENT DATE : 21 June 2007

JUDGMENT OF : Associate Justice Malpass

DECISION : The appeal is allowed. The decision made on 9 August 2006 in respect of the plaintiff's claim is set aside. The matter is remitted back to the Local Court for determination according to law. The defendants are to pay the costs of the proceedings. If so entitled, they are to have a certificate under the Suitors Fund Act.

CATCHWORDS : Action on guarantee - Magistrate treats it as a claim for damages - issues litigated between the parties disregarded and action found to have failed by reason of failure to mitigate damages

BMW Australia Finance Ltd PARTIES : John Paul Youngman Martha De Youngman

FILE NUMBER(S) : SC 14410/06

COUNSEL : Mr N. Cotman SC / Mr R Beazley (Pl) Mr D. J. Fagan SC / Mr P. Strasser (Def)

SOLICITORS : Bartier Perry (Pl) Landerer & Company (Def)

LOWER COURT JURISDICTION : Local Court

LOWER COURT FILE NUMBER(S) : 11652/2004

LOWER COURT JUDICIAL OFFICER : Norton LCM

LOWER COURT DATE OF DECISION : 9 August 2006

- 5 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

ASSOCIATE JUSTICE MALPASS

21 JUNE 2007

14410/06 BMW Australia Finance Ltd v John Paul Youngman & Anor

JUDGMENT 1 HIS HONOUR: The plaintiff and Veritage Press Pty Ltd (the company) entered into a "prestige purchase agreement" (the agreement) in respect of a BMW motor vehicle (the vehicle). The total amount payable was expressed to be $118,930.60 (this did not accord with the expression of payments that were to be made under the agreement). A guarantee given by the defendants formed part of the agreement ("all monies payable by or recoverable from the hirer pursuant to the agreement which are not paid by the hirer on the due date for payment"). 2 There was default under the agreement (the company went into administration). The administrator disclaimed the agreement. A claim was then made against the defendants under the guarantee. 3 Thereafter, there was communication between the parties (including an exchange of correspondence). The exchange proved to be inconclusive. The defendants were seeking a price which would see them obtain the vehicle and be released from obligations under the guarantee. The plaintiff gave them a figure of $62,014.72. The defendants informed the plaintiffs that this figure was acceptable (the offer). This did not lead to a concluded agreement (initially, because the plaintiff maintained the stance that there should either be continuation of the agreement or reassignment of it and later, because it was claimed (contrary to the evidence) that the offer had not been made). Indeed, it was later suggested by the plaintiff that if it had been made, the offer would have been accepted. 4 The plaintiff gave notice of repossession. The offer was repeated. The vehicle was repossessed and sold at auction (it was unsuccessfully offered on two earlier occasions). The plaintiff's estimate of value was $31,000. A lesser price was obtained at auction. The nett sale proceeds were $26,702.73. 5 The plaintiff brought proceedings in the Local Court. The process propounded a claim pursuant to the guarantee for a sum of $36,706.97 (the amount due under the agreement less a statutory rebate and the nett sale proceeds). 6 The defendants both defended the proceedings and relied on cross-claims. One of the issues raised was a question of the "Value of the Goods". The defendants were contending that the value was $62,014.72. 7 What was sought to be recovered against the defendants was that which was payable by the hirer on repossession (the agreement required the hirer to pay as liquidated damages the amount by which monies paid and value provided by the hirer or on the hirer's behalf by way of deposit and rent instalments together with the value of the goods at the time of the taking of possession is less than the nett amount payable). The agreement defined "Net Amount Payable" as the total amount payable less the applicable statutory rebates. It also defined "Value of the Goods" as meaning the best price which could be reasonably obtained at the time of the taking of possession of the goods. 8 The Local Court proceedings went to a hearing. The Magistrate (Norton LCM) found for the defendants on the plaintiff's claim and for the plaintiff on the cross-claims of the defendants. 9 The plaintiff has brought an appeal to this Court seeking to have the decision on its claim set aside. The defendants have filed a Notice of Contention (which was amended on the day of the hearing). The hearing of the appeal took place on 18 June 2007. The parties were legally represented. The parties relied on written submissions, supplemented by oral argument. 10 An appeal lies as of right where there has been error in point of law. The onus is borne by the appellant. It must be shown that there is material error that justifies the disturbing of the decision. 11 Before proceeding to deal with the appeal, I should make some initial observations. 12 What has happened so far could be regarded as unnecessary and very expensive. If the offer of the defendants had been accepted by the plaintiff, the litigation history that has followed could have been avoided. This is a matter which may have costs consequences for the future. 13 I now turn to the judgment of the Magistrate. Oral reasons were delivered on 9 August 2006 (the reasons). The transcript is before the Court. 14 At an early stage in the reasons, some misconception as to the nature of the case that was before the Magistrate is revealed. He saw it as a claim "for liquidated damages due under a contract for guaranteed indemnity". He saw himself as addressing issues of "liability and damage". In fact, he was hearing a claim for monies due under a guarantee (the plaintiff was seeking to recover a liquidated sum pursuant to an agreement). Save for what was later said in the reasons, this misconception may not have been material. 15 He made findings that the total amount payable under the lease was $119,500 and that the total amount outstanding was $62,230.16. 16 After an analysis of the exchange of correspondence, he came to the view that it did not bring about either a contract or an offer to sell the vehicle for the sum of $62,014.72 (it was a figure put forward by the plaintiff to discharge the guarantee). This led him to the view that the plaintiff was entitled to repossess and sell the vehicle. He further found that the plaintiff had become entitled to claim from the defendants, as liquidated damages, any shortfall after the disposal of the vehicle (to be calculated by application of the definition of "Value of the Goods"). He proceeded with a narration of events between repossession and sale. He then returned to the offer. He observed that it had not been withdrawn (he said "It was clearly still on the table"). 17 He then made the following observations:- "Had the defendants' offer been accepted, there would've been no need to repossess the vehicle, thus saving some $530. In common law, a person who suffers damage as a result of a breach of a contract is required to mitigate his loss. The plaintiffs refused the defendants' offer, sold the vehicle at auction and has sued the defendants for the loss, being the difference between sale price and the amount due under the agreement, thus the claim now before the Court. Had the plaintiff accepted the $62,014 sought by the plaintiff as at 9 January and agreed to by the defendant on 14 January, there would have been no loss save and except approximately $250, a miniscule amount in the circumstances which I am satisfied could have been successfully negotiated between the parties. Accordingly, the plaintiff has failed to mitigate its loss and therefore its claim must fail. THERE WILL BE A VERDICT ON THE CLAIM FOR THE DEFENDANTS." 18 The defences relied on by the defendants did not raise any question of mitigation of damages. In erroneously relying on that question to determine the plaintiff's claim, he appears to have gone on an errand of his own. As a consequence, he did not address the real issue put in contest by the parties. I shall return to this matter in due course. 19 The Magistrate then proceeded to deal with the cross-claims. In relation to them, he made the following observation:- "Additionally, given that the defendant was willing to pay approximately $62,000 for a vehicle with a market value of $30,000 to $31,000 and that they have been successful in the defence of the plaintiff's claim, then clearly they have been unable to establish any loss." 20 In resisting this appeal, the defendants have submitted that the substance of what the Magistrate did was to make a finding of fact that cannot be disturbed (a finding as to the "Value of the Goods"). I do not accept that submission. In my view, the plaintiff was found to be unsuccessful because it had failed to mitigate its loss. A finding as to the "Value of the Goods" involved a determination of questions of fact and the application of the contractual provisions. The question was what was the "best price" within the meaning of the definition. This was an exercise that he did not perform. 21 In my view, unfortunately, this litigation cannot be laid to rest. I consider that there has been material error in point of law and that the Court has no alternative but to set aside the decision made in respect of the plaintiff's claim. His decision on the cross-claims is not an issue in this appeal and the Court is not asked to disturb it. 22 The appeal is allowed. The decision made on 9 August 2006 in respect of the plaintiff's claim is set aside. The matter is remitted back to the Local Court for determination according to law. The defendants are to pay the costs of the proceedings. If so entitled, they are to have a certificate under the Suitors Fund Act. **********