District Court New South Wales Medium Neutral Citation: Esanda Finance Corporation Limited v Atanasovska [2014] NSWDC 169 Hearing dates: 6 and 7 May 2014 Decision date: 09 May 2014 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: (1) Direct that the parties forward to my associate orders that reflect these reasons by 4pm on Wednesday, 14 May 2014. (2) If there is any disagreement about either interest or costs, both parties are to provide to my associate submissions (no more than five pages) on these matters, and any related evidence by 4pm on Friday, 16 May 2014. (3) Any submissions in reply (no more than three pages) are to be provided to my associate by 4pm on 23 May 2014. (4) After the receipt of submissions, I will determine whether I can simply give judgment on the written documents or alternatively, list the matter on a date convenient to the parties for any further argument on interest and costs. Catchwords: CONTRACT - hire purchase agreement - formation of contract - acceptance - meaning of 'disbursement' Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth), s 12DA, s 12DF Contracts Review Act 1980 Evidence Act 1995, s 160 Cases Cited: Batt v Onslow (1892) 13 LR (NSW) Eq 79 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander [2012] HCA 56 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 Current Images Pty Ltd v Dupack Pty [2012] NSWCA 99 Deputy Commissioner of Taxation v Zammitt [2014] NSWCA 104 Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 97326 Kriketos v Livschitz [2009] NSWCA 96 MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 Magill v Magill (2006) 226 CLR 551 New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd [1975] AC 154 Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149 Schwartz v Hadid [2013] NSWCA 89 Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32 Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 Texts Cited: N C Seddon, R A Bigwood, M P Ellinghaus, G C Cheshire, C H S Fifoot, Cheshire and Fifoot law of contract, (10th ed 2012, LexisNexis Butterworths) Category: Principal judgment Parties: Esanda Finance Corporation Limited (plaintiff/second cross-defendant) Liljana Atanasovska (defendant/cross-claimant) Ragaie Awad (first cross-defendant) Representation: Mr A Kaufmann (plaintiff/second cross-defendant) Mr J R Young (defendant/cross-claimant) Gadens Lawyers (plaintiff/second cross-defendant) Simon Diab & Associates (defendant/cross-claimant) File Number(s): 2011/366514 Publication restriction: None Judgment INTRODUCTION 1Esanda Finance Corporation Limited ("Esanda") sues for $164,925.41 plus interest under an agreement alleged to exist between it and Liljana Atanasovska. The only issue is whether there is an agreement, which principally depends upon whether or not Ms Atanasovska's offer was accepted. BACKGROUND 2Between 2001 and 2007, Ms Atanasovska lived in a defacto relationship with Ragaie Awad. In 2004, Mr Awad entered four hire purchase agreements with Esanda in respect of a BMW, two Mercedes motor vehicles and an Avant caravan. The total amount payable under those agreements by Mr Awad was $421,687.03. Mr Awad made payments by direct debit, largely in accordance with the agreements. By 13 March 2008, the total of the payout figures under the agreements had reduced to $224,789.94. 3In 2007, Ms Atanasovska and Mr Awad separated. They agreed that the cars would be transferred to Ms Atanasovska and registered in her name. A finance contract between Esanda and Ms Atanasovska was discussed. 4The registration of the cars was transferred to Ms Atanasovska as agreed. As part of the property settlement, two properties, one in Baulkham Hills and one in Abbotsbury, were transferred to Ms Atanasovska, each for $1. On 11 March 2008, Ms Atanasovska signed in respect of each of the three vehicles and the caravan: (a)an Esanda offer to hire document; (b)a declaration that the hire was predominantly for business purposes; (c)a direct debit request, which included the account number and amount; and (d)a credit application and assessment report providing references and financial information. 5In each offer to hire document, the price of the goods was precisely the same as the payout figure to Mr Awad, and thus totalled $224,789.94. The offers proposed a four-year period of hire and according to the letters of offer; the total amount payable under the four letters of offer was $291,267.04. The four amounts totalling this sum, $291,267.04, were debited to the four accounts of Ms Atanasovska on 13 March 2008 in respect of the three cars, and on 14 March 2008 in respect to the caravan. The statements of Mr Awad were credited with the payout amounts on these same dates. 6The statements of account for Ms Atanasovska in evidence listed her address at the Abbotsbury property, although on the letters of offer, her address was stated to be the Baulkham Hills address. The four statements also in each case stated, "Auto acceptance letter, tax invoice and welcome kit sent". On the debit date, the opening debit was recorded. The statements also each recorded, "Acceptance date 13/3/08". Ms Atanasovska made payments by direct debit from the bank account of a company she controlled as sole shareholder and director, pursuant to the signed direct debit form she supplied on 11 March 2008. 7Payments were made with some degree of regularity until 2010. In December 2008 and January 2009, Ms Atanasovska communicated with Esanda to alter the payment date from the 13th of the month in each case to the 22nd or later in the month. From January 2010 until July 2010, Ms Atanasovska communicated frequently with Esanda concerning missed payments. Communications ceased in about August 2010, despite some efforts by Esanda to contact Ms Atanasovska. Ms Atanasovska made no payment after September 2010. In May 2011, Esanda purported to terminate the agreements. On 3 November 2011, Esanda demanded payment of the amounts then due and possession of the vehicles. 8The vehicles have not been recovered and are not registered in New South Wales. Esanda commenced proceedings on 16 November 2011 for the amount owing. Although Ms Atanasovska pleaded a defence raising no agreement, non est factum, unjust contract under the Contracts Review Act 1980, and misleading conduct under ss 12DA and 12DF of the Australian Securities and Investments Commission Act 2001 (Cth), all these defences were abandoned at the commencement of the trial, apart from the allegation that there was no agreement because there was no acceptance by Esanda of the letter of offer signed by Ms Atanasovska. THE TERMS OF THE LETTER OF OFFER 9In each case, the offer to hire signed by Ms Atanasovska stated: "I... ATANASOVSKA, LILJANA... [address] (the Hirer) offer to hire from Esanda the goods described in this Table (the Goods) at the rent stated in the Table on the TERMS AND CONDITIONS SET OUT BELOW AND IN THE ESANDA OFFER TO HIRE TERMS AND CONDITIONS by which I agree to be bound. I acknowledge by signing in the space provided, that I have received (prior to signing) a copy of the Esanda Offer To Hire Terms and Conditions and they form part of my offer." 10Thereafter, details of the goods and the payments were recorded. The Esanda Offer to Hire Terms and Conditions contained the following provisions: "1. Acceptance (a) The disbursement of all or any part of the total amount to be financed in connection with this agreement by Esanda will constitute a binding acceptance of my offer without notice to me, and the resulting agreement will be deemed to have been made at Esanda's address appearing in the Offer to Hire on the Disbursement Date. (b) No prior act of Esanda's nor the delivery of all or any part of the Goods to me or the receipt of any moneys will be deemed an acceptance and Esanda will have a complete discretion as to whether to accept this offer or not. (c) If I obtain possession of the Goods prior to Esanda's acceptance of this offer, I will be bound by my obligations contained in this offer in respect of the care, use and insurance of the Goods. I indemnity Esanda against any loss or damage to the Goods from the time of my obtaining possession. ... 2. Deposit The Deposit stated in the Table will constitute the consideration for the option to purchase the Goods contained in Clause 11. The Deposit is to be provided by me instructing the Dealer to account to Esanda for the same out of any allowance made by the Dealer for goods traded in by me or money paid by me. 3. Goods During the term of the hiring I: ... (b) will not part with personal possession or control of the Goods; (c) will notify Esanda immediately in writing of any change in my address or any change in the place where the Goods are to be ordinarily kept and will not remove the Goods from the jurisdiction of this agreement without first informing Esanda; ... 8. Termination I may, at any time, terminate the hiring by returning the Goods to Esanda, at my expense, during ordinary business hours at a place at which Esanda ordinarily carries on business or any other place as directed by Esanda and by paying to Esanda (and Esanda will be entitled to recover from me) the Recoverable Amount. ... 10. Additional Conditions I agree that: ... (b) this offer embodies all the terms and conditions of any hire-purchase agreement arising from its acceptance; ... (f) ...I am solely responsible for selecting, obtaining delivery of, examining and accepting the Goods... 16. Interpretation ... (e) "Recoverable amount" is the total of: (i) all amounts that had become due and payable by me under this agreement before the termination and which remained unpaid at that time... (k) "Disbursement Date" means the date that Esanda disburses all, or the first part of any funds in connection with this agreement." 11An offer may prescribe the manner of acceptance but generally an indication that acceptance may occur in a particular manner will not be taken to be the exclusive manner of acceptance. Ms Atanasovska accepted that cl 1(a) did not exclusively define the method of acceptance. She accepted that a communicated acceptance under orthodox contractual principles would suffice for an acceptance to occur. But she submitted that there was neither a communicated acceptance, nor an acceptance by disbursement under cl 1(a). 12Esanda submitted five alternative ways in which acceptance or a contract was proved. The first two can be grouped together. These alternatives are: (1)(a) the debit entries by Esanda against Ms Atanasovska's accounts constituted a disbursement under cl 1(a) of the offer; (1)(b) the credit entries by Esanda against Mr Awad's accounts constituted a disbursement under cl 1(a) of the offer; (2) the opening of accounts in Ms Atanasovska's name and making debit entries to them constituted acceptance under the law of contract; (3) the entry on the accounts stating that, "Auto acceptance letter" was sent establishes that acceptance occurred; and (4) post-contractual conduct - including that payments were made by Ms Atanasovska and at no stage were payments sought to be recovered, that Esanda and Ms Atanasovska had regular dealings in respect of her account in the period 2008 to 2010 and that she was the registered owner of the vehicles since 2007 - establishes that there was acceptance or mutual assent sufficient to prove a contract. I will deal with these alternatives in turn. 1. THE STATEMENTS OF ACCOUNT AS EVIDENCE OF DISBURSEMENT 13This submission raises as an issue the meaning of "disbursement" in the letter of offer. Although the meaning of "disbursement" arises in the context of construction of the offer, rather than strictly the construction of a contract, nevertheless, there can be no difference in approach between construing an offer and the contract. A different approach would have the potential to result in an offer bearing a meaning different from the contract that results from its acceptance. 14The question arises as to the admissibility of surrounding circumstances in construing a term of the contract. In Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407, Allsop P (agreed to by Giles JA at [63]) stated at [14] [omitting references]: "The state of the law in this respect is to be ascertained from a number of High Court cases: Maggbury Pty Ltd v Hafele Australia Pty Ltd; Pacific Carriers v BNP Paribas; Zhu v Treasurer (NSW); Toll (FGCT) v Alphapharm and International Air Transport Assn v Ansett Australia Holdings Ltd. These cases are clear. The construction and interpretation of written contracts is to be undertaken by an examination of the text of the document in the context of the surrounding circumstances known to the parties, including the purpose and object of the transaction and by assessing how a reasonable person would have understood the language in that context. There is no place in that structure, so expressed, for a requirement to discern textual, or any other, ambiguity in the words of the document before any resort can be made to such evidence of surrounding circumstances." 15However, in an application for special leave to appeal in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45, Gummow, Heydon and Bell JJ, constituting the High Court, referred to Franklins Pty Ltd v Metcash Trading Ltd and said at [2]-[4]: "[2] The primary judge had referred to what he described as 'the summary of principles' in Franklins Pty Ltd v Metcash Trading Ltd. The applicant in this court refers to that decision and to MBF Investments Pty Ltd v Nolan as authority rejecting the requirement that it is essential to identify ambiguity in the language of the contract before the court may have regard to the surrounding circumstances and object of the transaction. The applicant also refers to statements in England said to be to the same effect, including that by Lord Steyn in R (Westminster City Council) v National Asylum Support Service. [3] Acceptance of the applicant's submission, clearly would require reconsideration by this court of what was said in Codelfa Construction Pty Ltd v State Rail Authority of NSW by Mason J, with the concurrence of Stephen J and Wilson J, to be the 'true rule' as to the admission of evidence of surrounding circumstances. Until this court embarks upon that exercise and disapproves or revises what was said in Codelfa, intermediate appellate courts are bound to follow that precedent. The same is true of primary judges, notwithstanding what may appear to have been said by intermediate appellate courts. [4] The position of Codelfa, as a binding authority, was made clear in the joint reasons of five Justices in Royal Botanic Gardens and Domain Trust v South Sydney City Council and it should not have been necessary to reiterate the point here." 16In Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, Mason J stated relevantly at 352: "The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning." 17The rule in Western Export Services Inc v Jireh International Pty Ltd has been adopted in recent Court of Appeal decisions: Current Images Pty Ltd v Dupack Pty [2012] NSWCA 99 at [32]; Schwartz v Hadid [2013] NSWCA 89 at [85]-[86]. 18I note in passing that this approach appears to be a more literalistic stance than is adopted in relation to the construction of statutes, where fairness is a surer guide to meaning than logic (see Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397; Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28 at [69]). Thus, consequences and purposes of a statute may require a construction different from the literal or grammatical meaning: Project Blue Sky at [78], Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander [2012] HCA 56 at [25], Deputy Commissioner of Taxation v Zammitt [2014] NSWCA 104 at [67]. Of course, with statutes, the Interpretation Acts have a role in interpretation, unlike in contract. But it is not easy to see the policy behind a more literalistic approach being adopted in relation to the construction of contracts than in relation to the construction of statutes. It cannot be assumed that contracting parties are better able than Parliament to express legal obligations accurately, and it might be doubted whether statutory expression has an importance or a quality entitling it to a more purposive approach (or an approach more forgiving of infelicitous expression) by the courts than contractual expression. 19In any event, it is necessary that I determine whether there is any ambiguity in the word "disbursement". 20"Disburse" generally means to pay out. In the present case, has there been a paying out of "the amount to be financed" or of "any funds in connection with this agreement"? 21It might be supposed that usually Esanda would finance the purchase of motor vehicles by disbursing the amount to be financed to the owner of the vehicle, which would then enliven the contractual obligations between Esanda and its customer. In the present case, the owner of the motor vehicle was Esanda itself. Esanda financed the hire purchase by Ms Atanasovska by crediting funds to Mr Awad's account with Esanda so as to reduce his balance to nil. Ms Atanasovska submits that there is no evidence that Mr Awad was released of his obligation to make payments to Esanda, nor any evidence that he has released Esanda from his entitlement to make the payments and acquire the goods. 22This argument has more substance in relation to the second proposition than the first, since a zero balance of (Mr Awad's) account is some evidence that the relationship has been finalised. But in any event, I do not think it matters. In my view, the crediting of money to Mr Awad's account, even though it is an account with Esanda, is a form of paying out funds in connection with the agreement. Esanda is paying out funds to the credit of Mr Awad. 23Alternatively, there is ambiguity as to whether "disburse" requires that funds leave Esanda, rather than merely be transferred from one person's account to the credit of another's account within Esanda. In the event that ambiguity exists, I can refer to the surrounding circumstances. These include an application by Ms Atanasovska for a hire purchase agreement for her to hire and purchase the cars and caravan from Mr Awad. This fact suggests that in context "disbursement" would be reasonably understood as embracing a credit to Mr Awad. Since it was known that his account was with Esanda, a reasonable person familiar with the circumstances of the parties would conclude that the agreement was intended to be enlivened by the payment to Mr Awad's account with Esanda. For this reason, I am of the view that the credit to Mr Awad's account was a disbursement of funds in connection with the agreement within the meaning of cls 1(a) and 16(k) of the agreement. There has therefore been an acceptance by Esanda of the offer to hire. 24In case I am mistaken in this conclusion, I propose to consider the other alternative submissions of Esanda. 2. OPENING THE ACCOUNT AND MAKING DEBITS IS ACCEPTANCE AT COMMON LAW 25The conduct of Esanda in opening the account of Ms Atanasovska and making debits to it may indicate that Esanda had decided to accept the offer, but it is trite law that (absent some relevant provision in the offer) a mere decision by an offeree to accept, uncommunicated to the offeror is insufficient to constitute acceptance. The assent to the offer must be communicated to the offeror, in this case, Ms Atanasovska (see Batt v Onslow (1892) 13 LR (NSW) Eq 79). Thus, any uncommunicated unilateral action of Esanda will not bring about an agreement. 3. THE ACCEPTANCE LETTER 26Esanda also relies upon evidence that an acceptance letter was sent to Ms Atanasovska. That evidence is very thin. It comprises an entry on her statement of account, "Auto acceptance letter, tax invoice and welcome kit sent", as set out above. It does not provide any evidence of how the letter was sent, where it was sent (indeed, the address on the statement is different from the address on the letter of offer), whether the correct prepaid postage was affixed (if it was posted) or what were the contents of the, "Auto acceptance letter". 27The evidence of Ms Atanasovska's place of residence in 2008 is equivocal. No reason was given by Esanda as to why there was not in evidence the "Auto acceptance letter", its contents or how and where it was sent. In those circumstances, I cannot, merely from the briefest reference on a statement of account, infer the contents of the letter or the matters in s 160 of the Evidence Act 1995 to enable a presumption of receipt to arise. 28Ultimately, Esanda did not press the argument that I should conclude that Ms Atanasovska received this acceptance letter. Thus, even if it was sent, an absence of a finding of receipt meant that the sending could not by itself constitute acceptance. There was no basis to find that the postal rule applied so as to deem acceptance to occur on postage (even if postage was established, which it was not). 4. POST-CONTRACTUAL CONDUCT 29Post-contractual conduct is admissible to establish whether a contract was formed (see Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at [25]-[26], Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149 at [99]-[106], Kriketos v Livschitz [2009] NSWCA 96 at [5], [109]). In the present case, Esanda relies on the payments by Ms Atanasovska without complaint, regular dealings between Ms Atanasovska and Esanda on the basis that Ms Atanasovska was obliged to make payments to Esanda, and the circumstance that Ms Atanasovska was the registered owner of the vehicle. 30Of these matters, a question arises in relation to the payments by Ms Atanasovska. Clause 1(b) of the offer precludes receipt of moneys by Esanda being "deemed an acceptance". Whilst this clause places some limitation on the use that can be made of payments by Ms Atanasovska, such that receipt of these payments by Esanda cannot constitute acceptance, nevertheless, it seems to me that those payments remained part of the post-contractual conduct that, perhaps with other matters, can evidence acceptance. 31I do not think any significance attaches to Ms Atanasovska obtaining registered ownership in 2007, but the other matters taken together constitute surrounding circumstances which persuade me that a contract was made between the parties, even though the circumstances might not identify the precise point in time or item of conduct that constituted acceptance. 32There is authority for the proposition that the model of offer and acceptance might not be appropriate in all circumstances to determine whether there has been a mutual assent sufficient to establish a contract. Ultimately, the court must determine whether the parties intended to contract and this intention is to be ascertained objectively (see N C Seddon, R A Bigwood, M P Ellinghaus, G C Cheshire, C H S Fifoot, Cheshire and Fifoot law of contract, (10th ed 2012, LexisNexis Butterworths) at 97 et seq; Franklins Pty Ltd v Metcash Trading Ltd at [4]; see also New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd [1975] AC 154 at 167; compare MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125). The rigidity of offer and acceptance is sometimes not suited to meet what people actually do (see Cheshire at 97). In Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 97326 McHugh JA said, "a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words". See also Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32 at 79-83 where Ormiston J accepted the American Restatement of Contracts, Second 22(2) which provides: "A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined." Vroon was approved in Magill v Magill (2006) 226 CLR 551 at [210]. 33To be valuable, post-contractual conduct must "necessarily" lead to the inference that consensus has been reached (Kriketos at [115]-[117]). In my view, the post-contractual conduct identified above does necessarily lead to the inference of consensus. 34Ms Atanasovska submitted that these rules have no application when there is a written offer, but I see no basis for such a limitation. CONCLUSION 35In my view, a contract is established under cl 1(a) by the disbursement by Esanda of funds into Mr Awad's account with Esanda, and by the mutual assent established by the surrounding circumstances. Accordingly, there should be a judgment in favour of Esanda for the amount of $165,925.41 plus interest. 36The parties asked that I not deal with the question of costs in the judgment. Although there was no issue raised about the quantum of the claim, the parties have not addressed on the appropriate rate of interest and I propose to allow the parties to deal with that matter as well as the issue of costs. 37Accordingly, I make the following directions: (1)Direct that the parties forward to my associate orders that reflect these reasons by 4pm on Wednesday, 14 May 2014. (2)If there is any disagreement about either interest or costs, both parties are to provide to my associate submissions (no more than five pages) on these matters, and any related evidence by 4pm on Friday, 16 May 2014. (3)Any submissions in reply (no more than three pages) are to be provided to my associate by 4pm on 23 May 2014. (4)After the receipt of submissions, I will determine whether I can simply give judgment on the written documents or alternatively, list the matter on a date convenient to the parties for any further argument on interest and costs. ********** 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. Decision last updated: 20 October 2014