CATCHWORDS

 

 

TRADE AND COMMERCE - consumer protection - misleading and deceptive conduct - representations - reliance - causation - purchase of three earthmoving scrapers - provision of finance - representations as to availability of finance and settlement - whether misleading and deceptive - whether representor a broker - damages

 

EQUITY AND COMMON LAW - economic duress and unconscionable conduct - sale of three earthmoving scrapers - conclusion of contract in respect of two scrapers - request for variation or acceleration of payments by other party to contract - other party as potential financier of purchase of third scraper - whether purchaser at a special disadvantage - whether request for payment unconscionable - whether request for payment by financier unconscionable

 

TRADE AND COMMERCE - Consumer Protection - unconscionable conduct - as for Equity and Common Law

 

Trade Practices Act (Cth), s4(1), s51A, s51AA, s51AB, s52, s75B

Fair Trading Act 1987 (WA), s5, s9, s10, s11, s11(2), s5

Federal Court Rules, O11 r10

 

 

 

 

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470

Adour Holdings Pty Limited (In Liquidation) v Commonwealth Bank of Australia (1991) ATPR 41-147

Bateman v Slatyer (1987) 71 ALR 553

Bright v Sampson and Duncan Enterprises Pty Ltd (1985) 1 NSWLR 346

Bromley v Ryan (1956) 99 CLR 362

Byrd v Nunn (1897) 7 Ch D 284

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447

Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40

Davie v New Merton Board Mills Ltd [1959] AC 604

Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152

Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410

Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167

Gates v The City Mutual Life Assurance Society Ltd (1986) 150 CLR 1

Gould v Vaggelas (1958) 157 CLR 215

James v Australia and New Zealand Banking Group Ltd & Ors (1986) 64 ALR 347

Jones v Dunkel (1959) 101 CLR 298

The King v Hay [1924] VLR 97

Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 131 ALR 363

O'Brien v Komesaroff (1982) 150 CLR 310

In re Robinson's Settlement; Grant v Hobbs [1912] 1 Ch 717

Shepherd v Noyes Bros Pty Ltd (1985) ATPR 40-588

Tefbao Pty Ltd v Stannic Securities Pty Ltd (1995) ATPR 41-391

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514

Warnock v ANZ Banking Group Ltd (1989) ATPR 40-92

Wheeler Grace & Pierucci Pty Ltd v Wright & Anor (1989) ATPR 40-940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPALSWAN PTY LTD v COMMERCIAL AND GENERAL ACCEPTANCES PTY LTD and IAN SCOTT

NO WAG 86 OF 1994

 

 

 

 

 

 

 

 

 

 

 

 

R D NICHOLSON J

PERTH

18 NOVEMBER 1996

 

IN THE FEDERAL COURT OF AUSTRALIA   )

WESTERN AUSTRALIA DISTRICT REGISTRY)

GENERAL DIVISION                    )      NO WAG 86 OF 1994

 

 

B E T W E E N:                      OPALSWAN PTY LTD

 

                                    Applicant

 

                                    and

 

                                    COMMERCIAL AND GENERAL ACCEPTANCES PTY LTD

 

                                    First Respondent

 

                                    and

 

                                    IAN SCOTT

 

                                    Second Respondent

 

 

                       MINUTE OF ORDER

 

 

JUDGE MAKING ORDER:     R D NICHOLSON J

 

DATE OF ORDER:          18 NOVEMBER 1996

 

WHERE MADE:             PERTH

 

 

THE COURT ORDERS THAT:

 

 

     1.   Judgment for the applicant against the first respondent for $89,000.00.

 

     2.   Issue whether judgment should be entered against second respondent reserved for submissions.

 

     3.   Costs reserved for submissions.

 

 

 

     Note:  Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

 

IN THE FEDERAL COURT OF AUSTRALIA   )

WESTERN AUSTRALIA DISTRICT REGISTRY)

GENERAL DIVISION                    )      NO WAG 86 OF 1994

 

B E T W E E N:               OPALSWAN PTY LTD

 

                             Applicant

 

                             and

 

                             COMMERCIAL AND GENERAL ACCEPTANCES PTY LTD

 

                             First Respondent

 

                             and

 

                             IAN SCOTT

 

                             Second Respondent

 

 

CORAM:    R D NICHOLSON J

DATE:     18 NOVEMBER 1996

PLACE:    PERTH

 

                    REASONS FOR JUDGMENT

                            INDEX

                                                     Page No

Witnesses                                                 5

 

Admissibility of evidence on Prestige Securities          6

 

THE SEQUENCE OF EVENTS                                  7

     Initial contact                                     7

     Incorporation of Opalswan                           8

     Liquidation of Productive Parts                     9

     First offer                                         9

     First written offer                                 10

     First representation  (par13)                        11

     Business card                                       11

     Caratti's role                                      11

     Second written offer                              12

     Arrangements with Grangefield                        12

     The Strathfield Deed                              13

     Second representations  (par20)                   13

     Third written offer                               13

     The Archibalds Contract                           14

                                                     Page No

     Third & Fourth representations  (pars21 & 22)     15

     2 October agreement and the fifth representation  16

     (par 23)

     Possession of two scrapers                        20

     Sixth representation  (par27)                        21

     Threatened termination of the Archibalds Contract    22

     Demand and Seventh representation  (par30)        23

     Eighth representation  (par32)                    26

     Continuing negotiations                           26

     Additional payment                                27

     Ninth representation and CAGA Loan Deed (par34)   27

     Purchase of spare parts - tenth, eleventh,

     twelfth, thirteenth and fourteenth

     representations  (pars36, 37, 38, 40 and 43)         29

     Further additional payment                        31

     Further December developments                        32

     Carmille as alternative lender                    34

     Written authority                                 36

     Fifteenth representation  (par49)                 37

     CAGA as lender (again)                            37

     Third Strathfield Deed                            38

     Productive Parts writ                             39

     Carmille again                                    40

     Strathfield again                                 40

     8 March settlement deadline                       41

     Zel as purchaser of 089                           42

 

 

THE TRADE PRACTICES CLAIMS                             43

     Whether Scott Agent for CAGA                      44

     Whether Scott directly and knowingly concerned    44

     CAGA Relationship to Opalswan                        44

 

CLAIMS FOR ECONOMIC DURESS AND UNCONSCIONABLE CONDUCT     50

 

                                                     Page No

DAMAGES                                                54

     The alternative bases for damages                 56

     Revenue Account Claim                             56

     The Capital Account Claim                         63

     The Claim for Fees                                65

     Hiring of alternate Equipment                        65

     Cost of Repairs, Parts and Labour                 66

 

 

Conclusion                                             67

 

 

APPENDIX

REPRESENTATIONS AS FOUND                                  69

 

 

TABLE 1

ORIGINAL PROPOSAL                                      57

 

TABLE 2

ZEL SCHEME - As at 10 March 1994                       58

 

                    REASONS FOR JUDGMENT

 

The applicant ("Opalswan") seeks damages, firstly, in respect of alleged advice and confirmations given by the second respondent ("Scott") allegedly as servant and agent of the first respondent ("CAGA").  It is alleged such advice and confirmations were false or in the alternative were made without reasonable grounds to believe they were true.  It is further alleged that they were related to future matters, the advice and confirmations were misleading and deceptive conduct by operation of s51A of the Trade Practices Act (Cth) ("the TPA") and s9 of the Fair Trading Act 1987 (WA) (the "FTA"). 

 

Damages are sought, secondly, in respect of certain conduct said to constitute economic duress and unconscionable conduct at common law and in equity and unconscionable conduct contrary to s51AA of the TPA and s11 of the FTA.

 

CAGA carried on business in its own right and under the business name "CAGA Finance".  It is pleaded that the capacity in which CAGA acted in these alleged events was as agent for (1) Ross Norgard ("Norgard") initially the administrator and later the liquidator of Productive Parts Corporation Pty Ltd ("Productive Parts") and (2) various known and unknown financiers but including Strathfield Holdings Pty Ltd ("Strathfield").  In addition, it is pleaded CAGA "subsequently acted as its own principal for the purposes of providing finance for the purchase of the equipment" to which the pleadings relate.

 

As a further preliminary matter it is pleaded that at all material times on and after 4 August 1993 Frederick Ronald Johnson ("Johnson") and Bernard Wayne Johnson ("B Johnson") (collectively "the Johnsons") were directors of Opalswan.  Additionally it is alleged John Michael Caratti ("Caratti") was and acted as an agent of Opalswan after the same date.

 

The central focus of these pleadings is the intended purchase by Opalswan of three motor scrapers (collectively described as "the Equipment"), namely:

 

          ·  one caterpillar 651E serial no 89Z00093

          ·  one caterpillar 651E serial no 89Z0089 ("the 089 scraper")

          ·  one caterpillar 631D serial no 24 W03338

 

The two scrapers other than the 089 scraper are collectively described as "the two scrapers".

 

Opalswan's claim is that prior to 4 August 1993 the Johnsons and Caratti were advised by Scott CAGA had authority from both Productive Parts and a financier to arrange the sale of the Equipment and the finance to facilitate it.  It is said that as a consequence Opalswan was incorporated to be the purchaser of the Equipment.  The claim is constituted by a recitation of the advice, confirmations and conduct to which the claim relates and to which individual reference will be made.  In short, Opalswan's case is that it was strung along concerning the availability of finance until a point had been reached where it had no choice but to implement the measures which it says gave rise to the damages it now claims.

 

Witnesses

 

Opalswan's case was supported by evidence from Johnson; P Townsend, Operations Manager of JJ Archibald & Co Pty Ltd ("Archibalds"); Caratti, unpaid Manager of Opalswan until he became a director in 1995; De Rosa, the "in-charge" accountant in the office of the liquidator; JJ Burton and N W Strickland, auctioneer valuers; R P Riseley, Contracts Manager for Henry Walker Contracting Pty Ltd; and R M Love ("Love"), business manager accountant and guarantor of certain debts of Productive Parts.

 

The only witness for CAGA was CR Hartz, director.  Scott also gave evidence, making a brief statement and then opening himself to cross-examination from each other party.

 

I found De Rosa to be a witness who had maintained thorough records of all steps and conversations in which he was involved in the matter.  In my opinion he was a very credible witness whose evidence is to be preferred to any evidence with which it is in conflict.

 

Admissibility of evidence on Prestige Securities

 

Hartz testified in his evidence‑in‑chief that in mid-1993 Scott's company Prestige Securities was engaged as a consultant to act as a finance broker.  Objection to the admissibility of that evidence was taken on the ground that Prestige Securities is not referred to in CAGA's defence to the allegation in par 3 of the Amended Claim that Scott was the servant or agent of CAGA.  CAGA did not admit this paragraph and Scott denied it.  No prior cross-examination on the point had occurred.  No application was made by CAGA to amend its defence to raise the question of Scott's relationship through a company.  The evidence was heard subject to later resolution of the objection.

 

The evidence was such that, if not specifically pleaded, it  took the other party by surprise and raised issues of fact not arising out of the preceding pleading: Federal Court Rules ("FCR") O11 r10.  In my opinion the issue of whether Scott acted as an agent is so substantial an issue raised on the claim that it would be unjust to admit, unheralded by any pleading, evidence germane of Scott having acted through a company.  See In re Robinson's Settlement; Grant v Hobbs [1912] 1 Ch 717 at 727-8; Davie v New Merton Board Mills Ltd [1959] AC 604; O'Brien v Komesaroff (1982) 150 CLR 310 at 317‑8; Bright v Sampson and Duncan Enterprises Pty Ltd (1985) 1 NSWLR 346 at 350 and 353; The King v Hay [1924] VLR 97 at
101; Byrd v Nunn (1897) 7 Ch D 284 at 285-6 and 287-8.  I therefore allow the objection. 

 

However, I do not consider that even if that evidence were admitted it would lead to a different result.  There was no discovery in relation to Prestige Securities.  No proof of the existence of the company was tendered.  Neither Hartz nor Scott gave evidence of any legal relationship between Prestige Securities and Scott.  Hartz testified Scott was a director of it but Scott denied he was.  No documentation supported the alleged relationship between CAGA and Prestige Securities, for example evidence of the establishment of the consultancy arrangement or of payment to Prestige Securities.  The evidence if admitted would not have carried any weight.

 

Furthermore, even if the evidence carried sufficient weight to establish a relationship between CAGA and Prestige Securities, it would remain for argument whether CAGA nevertheless held out Scott as its agent.  The evidence of Scott was that potential clients of CAGA were not told about Prestige Securities and he admitted he did not tell Opalswan about Prestige Securities.

 

                   THE SEQUENCE OF EVENTS

 

The evidence discloses the following sequence of events. 

 

Initial contact

 

In July 1993 Stephenson, whom Caratti then knew to be interested in a company managing the Equipment, contacted Caratti and advised him there was an opportunity to obtain an interest in the Equipment and the person to see was Scott. 

 

Some time later Caratti became aware the owner of the Equipment was Productive Parts, a company engaged in earthmoving work.  It went into voluntary administration on

15 July 1993.  Caratti approached Johnson who was interested with him in Grangefield Holdings Pty Limited ("Grangefield"). Johnson had dealt with Scott over a number of years.  Caratti therefore arranged for Johnson to inquire of Scott concerning the matter.  Caratti did not tell Johnson to make known his involvement because he considered his name was not in good standing in the finance world.

 

After the inquiry Scott spoke to the administrator of Productive Parts ("Norgard"), and to its financier Strathfield, the principal of which was Coles.  Caratti's evidence was he suggested to Johnson to approach CAGA and Scott from CAGA concerning purchase of the Equipment and a package of finance.  Scott testified Johnson approached him in the above terms; he approached Norgard who said he was interested in an offer; he then had discussions with Coles of Strathfield who said it could arrange suitable finance; he informed Johnson of these responses.  Scott's evidence corroborates Johnson's evidence that Strathfield was the financier to the purchase of the Equipment by Productive Parts, which had by then gone into liquidation.  I therefore find Scott advised Johnson that both Productive Parts and Strathfield as financier would agree to the sale of the Equipment and finance to facilitate the same.  I do not find, as par7 of the Claim pleads, that Scott advised Johnson CAGA had the authority of those entities to arrange the sale and finance it.

 

The administration of Productive Parts had come about at the instance of Love, the guarantor to the purchase of the Equipment by that company.  Love testified he was approached by Scott who told him he had a buyer and finance had been arranged through CAGA.  Scott denied this.  Love informed De Rosa.

 

Incorporation of Opalswan

 

Caratti and Johnson did not want to assume the risk of acquiring the Equipment in Grangefield, so they brought about
the incorporation of Opalswan on 4 August 1993.  Their intention was for Opalswan to hold title to the Equipment and for it to be leased to Grangefield for use.  The Johnsons became the directors and shareholders in Opalswan.  Johnson and Caratti's evidence was Johnson held his shares in trust for Caratti.  In cross-examination Johnson accepted that when he first dealt with Archibalds, Scott and De Rosa he had not disclosed Caratti's involvement (in Opalswan or Grangefield) although he had done so to Coles.  Townsend testified in cross-examination he did not know Caratti was involved when he entered into arrangements with Johnson and only learnt about it two months later.

 

Liquidation of Productive Parts

 

On 12 August 1993 Norgard ("the liquidator") was appointed liquidator of Productive Parts.

 

First offer

 

It is pleaded that around the end of August 1993 Johnson for Opalswan orally agreed with Scott (as agent of CAGA) that he would arrange the sale and financing of the Equipment for $430,000. 

 

It was Johnson's evidence that near the end of August 1993 Opalswan agreed with Scott to buy the Equipment free of encumbrances for $430,000.  Johnson said there were to be separate hire purchase agreements for each scraper with respective residuals of $30,000 on each 651E and $20,000 on the 631D.  Payments were to be in arrears over 36 months with interest at 12.45%.

 

With respect to scraper 089, which was in a disassembled state, it was proposed $20,000 of the purchase price would come back to the purchaser to cover its costs of reassembling the scraper.

Caratti gave no evidence on this.  Scott testified only to a series of offers.  The case for Opalswan did not lead evidence on Scott's authority to conclude this particular agreement.  It is apparent neither Scott nor CAGA had title.  There is no evidence to support a finding Scott ever had the authority of the liquidator.  I find the agreement pleaded as the First Agreement (par9 of the Claim) is not made out.  However, I find an offer in the above terms was made on behalf of Opalswan to Scott.

 

First written offer

 

Shortly afterwards Opalswan saw the prospect of undertaking work in Collie and Johnson expressed a need for the Equipment to Scott.  He was advised by Scott the price would be increased to $450,000.  Scott told him there would be a brokerage fee of $5,000.  Johnson agreed.  Scott requested him to put the deal in writing.  He did so in a letter dated 2 September to CAGA (Attn Scott).  The letter recorded agreement to pay a fee of $5,000 to CAGA refundable if the deal did not proceed.  When delivering the letter to Scott on that day, Johnson paid a bank cheque for $5,000.   A receipt for it was issued in the name of CAGA, describing the payment as being for an "application fee".  In doing this he acted on the instruction of Caratti.

 

It is apparent the payment was made pursuant to the agreement recorded in the letter.

 

The letter was addressed to CAGA.  In cross-examination Johnson testified that up to that date he had thought CAGA were the lenders.  Scott informed the liquidator Opalswan had presented the offer. 

 

It is pleaded (par11) that agreement was reached but as CAGA did not have title and as the receipt characterised the payment as an application fee, I consider the letter constituted an offer. 

First representation  (par13)

 

I find that on 2 September Scott advised Johnson the owner of the Equipment approved the sale and finance had been approved.  He told Johnson the finance would be received by Opalswan on 10 September 1993 ("the first representation").  Scott affirmed this on 7 September.

 

Hartz first heard of Opalswan when Scott reported to a regular fortnightly meeting about September or October on new applications for finance.

 

Business card

 

In early September at the offices of CAGA Scott gave to Caratti a business card showing the name of CAGA on which Scott was described as "Manager".  Scott accepted he had used the card and testified he regarded himself as one of the managers.  He could not recall whether he had Hartz' permission to use the card but he said it was one of a number of cards he used.  He thought he should have sought Hartz' permission to use the card.  Hartz testified the card was not authorised and he would have objected to it had he seen it.  He could not say the card had not been arranged by his office.

I find Scott used the card which had been arranged by CAGA's office.  The prima facie position arising from the nature of the card that it was authorised is not displaced by the above testimony.  No evidence was led of the system attaching to the issue of cards, the other cards used by the office or accounting records pertaining to the printing of cards to support a finding the usage was beyond authority.

 

Caratti's role

 

Caratti's evidence was that on 3 September he visited Scott at CAGA concerning another matter.  Opalswan was also discussed.

He said he informed Scott he was behind Opalswan and was a silent shareholder in it.  Caratti's evidence was Scott said he knew this from discussions with Stephenson.  Caratti testified Scott assured him the purchase and the finance were definitely going to occur. 

 

Scott's evidence was he did not know of Caratti's involvement in Opalswan until November/December although he spoke to him on another matter involving the financing of the purchase of a bulldozer.

 

Second written offer

 

On 15 September Johnson for Opalswan, acting at the request of Scott, wrote to the liquidator of Productive Parts submitting the offer to purchase the Equipment for $450,000 on an "as is, where is" basis but in an up and running condition.  Johnson testified in cross-examination he had some idea at that time there was a lender other than CAGA and that, although he had not dealt with a liquidator before, he appreciated possession could not be given until the assent of the person selling the scrapers had been obtained.  Johnson's evidence in chief was that on that day Scott told him the finance had been approved and the owner had approved.  In cross-examination he said this occurred within the next couple of days. 

 

Johnson therefore thought Opalswan had a deal, particularly as the price offered was what had been proposed by the liquidator through Scott.

 

On 16 September Scott advised De Rosa he had been able to arrange independent finance for the sale of the Equipment.  He did not identify the source of finance.

 

Arrangements with Grangefield

 

Earlier in September Caratti and Johnson resolved Grangefield would meet all the debts of Opalswan so that the latter was to be only a holding company.

 

The Strathfield Deed

 

Scott accepted in cross-examination for CAGA that around this time he had a willing seller, an anxious buyer and a willing financier in Strathfield and he was conveying this to Johnson.

 

Around 20 September 1993 Scott requested Opalswan to execute a Deed of Loan and Chattel Mortgage with Strathfield ("the first Strathfield Loan Deed") in connection with the agreed purchase and financing of the Equipment.  This was then done, although the deed is dated 30 September 1993.

 

Caratti accepted in cross-examination that therefore as at 20 September he knew the financier was going to be Strathfield.

 

Second representations  (par20)

 

Scott was aware the work had to be undertaken on 27 September.  He accepted he told Johnson on 21 and 22 September finance was set and the money coming.  Likewise he accepted that on 24 September he told him he would do his best to have settlement that day.  Further he accepted on 27 September he said to Johnson finance would be available by 28 September.  I find that in the weeks commencing 20 and 27 September Scott confirmed to Johnson on numerous occasions settlement would take place and possession of the Equipment would be given to Opalswan within a few days or less ("the second representations").

 

Third written offer

 

On 21 September Johnson on behalf of Opalswan signed a letter to the liquidator in terms prepared by Caratti at the request of Scott.  The letter purported to confirm a conversation between Scott, Love and Johnson on that date stating how certain parts were be released and the price was to be
$450,000 with $20,000 being returned to Opalswan to complete the rebuilding of the engine of the 089 scraper.

 

When Johnson had delivered the letter to Scott, Scott asked that a more detailed letter be written to the liquidator.  Scott notated the letter with suggested amendments which were incorporated. The amended letter was sent under the signature of Johnson as director to the liquidator dated 22 September.  It confirmed the offer to purchase the Equipment unencumbered for $450,000.  The 089 scraper was to be rebuilt.  $20,000 was to be repaid to Opalswan for purchase of new parts for this scraper and completion of rebuilding.  These matters were expressed to be subject to the financing arrangements set out in the letter of 2 September 1993 to Scott.  The letter had been preceded by discussions between the liquidator, Coles and Scott and came as no surprise. 

 

On 23 September the liquidator wrote to Opalswan accepting the letter offer of 22 September subject to certain qualifications ("the counteroffer").  Settlement was to be within seven days.  The $20,000 was to be paid to Opalswan later on the settlement date.  Details were provided concerning the location and delivery of each scraper. The liquidator requested Opalswan to contact CAGA's Scott to arrange settlement at the earliest possible date. 

 

On 23 September, at Scott's request, Johnson wrote to CAGA (Attn Scott) setting out a cash flow projection said to show capacity to pay for the Equipment.  This was requested by Scott for Strathfield and in supplying it Johnson was in no doubt Strathfield was then the intended financier.

 

The Archibalds Contract

 

The tender for the work at Collie was won by Archibalds.  Johnson for Grangefield arranged for Archibalds' to use the Equipment for that work.  On 23 September 1993  Archibalds
placed an order with Grangefield for supply of the two scrapers for work to commence on 27 September  ("Archibalds Contract").  It follows from the fact the order was only for two scrapers that it was known at the date of the order the 089 scraper was not then available.  This inference is supported by evidence that Johnson was aware at the time the 089 scraper would take a week to re-assemble.

 

When Scott received the purchase order he obtained Johnson's consent to amend the name of the supplier to Opalswan on the basis that Opalswan was the party in respect of which finance was being sought.  There is no evidence that Archibalds novated the contract with Opalswan.  To the contrary there is evidence of Townsend that he met Johnson when he represented Grangefield at a tender meeting.  It is apparent Townsend dealt with Johnson as the representative of Grangefield.  In my opinion Opalswan's case does not establish that it ever had a contract with Archibalds.  The contract was between Archibalds and Grangefield.

 

A copy of the counteroffer was returned to the liquidator on 2 October with an acceptance executed by the directors of Opalswan.  De Rosa in cross-examination accepted the counteroffer was subject to finance.

 

Third & Fourth representations  (pars21 & 22)

 

It is pleaded that on 1 October 1993 Scott advised Caratti Strathfield held insufficient funds to finance the whole of the Equipment but it could finance the two scrapers within a week ("the third representation").  Caratti's evidence was to that effect, adding that Scott requested a new deed executed to reflect the purchase price of $270,000 for the two scrapers.  He testified he accepted this variation on the condition the 089 scraper would follow in a matter of days.  His evidence was Scott assured him it would ("the fourth representation").  In cross-examination he stated he believed
Scott's assertion which was that settlement and possession would be given in that time.

 

Scott denies this evidence on the basis that he did not know of Caratti's involvement until later.

 

Johnson testified to Scott having advised "us" on 1 October that Strathfield did not have enough money to set the three scrapers.

 

De Rosa testified in cross-examination that Coles, the Johnsons and Love were all expressing to the liquidator the view that if he wished to sell the Equipment in the short term he should do so in a manner which would enable Opalswan to honour its contract with Archibalds.

 

Caratti's evidence is corroborated by Johnson and is consistent with the stage to which matters had developed as testified to by De Rosa.  I accept Caratti's evidence and in doing so also reject Scott's evidence that he had no contact with Caratti on this matter until November.

 

2 October agreement and the fifth representation  (par 23)

 

I reject Scott's evidence concerning the events of 1-3 October where it conflicts with the evidence of De Rosa or other witnesses.  I therefore do not accept Scott left the Johnsons to deal with De Rosa and Love or that he did not attend the meeting on the morning of 2 December.  Relying in particular on the evidence of De Rosa I find the events of 2 October occurred as follows.

 

Settlement had not occurred on 30 September.  Nevertheless there was a commonality of interest among all parties in the three machines being sold and purchased while the Archibalds contract was on foot.

 

On 1 October 1993 Opalswan through Caratti agreed to accept the two scraper agreement in reliance on the third and fourth representations made by Scott.

 

De Rosa, being aware that Strathfield may only be able to finance the two scrapers, attended on the liquidator's solicitors and had prepared a draft "Memorandum of Understanding".  The Memorandum provided for Strathfield to finance the sale by Productive Parts to Opalswan of the two scrapers, the payment of the purchase price and the application of it by the liquidator.  It included the following clause:

 

      "[CAGA] agrees to use its best endeavours to arrange finance to enable Opalswan to complete the purchase of the [089 scraper]...by not later than 15 October 1993 failing which Strathfield will provided finance by no later than 25 October 1993 or such other date as may mutually be agreed between [Productive Parts] and Strathfield"

 

De Rosa discussed the draft with the liquidator who instructed him the provision for CAGA to "use its best endeavours" was not acceptable to him.  He required an undertaking from CAGA it would unequivocally arrange the finance.

 

De Rosa attended at CAGA's office on the morning of Saturday 2 October and discussed the draft Memorandum with Scott.  Scott approved of it, including amendments to the above clause so that it then read:

 

      "[CAGA] undertakes to arrange finance to enable Opalswan to complete the purchase of the [089 scraper] ...  by no later than 15 October 1993"

 

On the Saturday afternoon, De Rosa again attended upon the liquidator's solicitors who prepared a further draft Memorandum of Understanding which purported to embody the adjustments discussed with the liquidator and Scott.

 

On the morning of the Saturday Opalswan executed an agreement to purchase the 089 scraper "as per previous discussions"
("the 089 agreement").  Caratti's evidence was this had been dictated by Scott, which Scott denied.  At the same time Opalswan executed a substitute Deed of Loan and Chattel Mortgage with Strathfield ("the second Strathfield Loan Deed") providing for the advance of $270,000 to finance the purchase in the Two Scraper Agreement.  It also executed a letter of offer from Opalswan to Productive Parts ("the fifth written offer") offering to purchase scraper 089 for $180,000.  This was prepared by De Rosa at the liquidator's request.  The offer was expressed to be "subject to finance but [CAGA] (Mr I Scott) will give you an undertaking to provide the necessary finance simultaneously with this offer." 

 

The offer provided for settlement on the 089 scraper within 14 days or as earlier agreed.  De Rosa testified there was agreement to settle within 7 days.

 

Around midday on 2 October Johnson delivered to Scott the 089 agreement and the fifth written offer.  Scott requested him to take them to De Rosa, which he did.  Scott accepted he then told Johnson not to worry about the finance for the 089 scraper because that would be set within a few days ("the fifth representation").

 

The amended Memorandum of Understanding was taken to a meeting on the evening of the same day attended by Coles, Love, Johnson and De Rosa.  Scott declined to attend.  Other amendments were made and these were the subject of detailed discussion.  Johnson therefore explicitly or implicitly acceded to the amendments.  The clause providing for CAGA's obligation in relation to the 089 scraper appeared in its original unaltered form.  It was amended to convert the obligation on CAGA to "use its best endeavours" to one of undertaking to arrange finance, with the added statement that "failing which Strathfield will use its best endeavours to provide finance by no later than 25 October 1993" or later agreed date.  The document as so amended will be described as
"the varied Memorandum of Understanding."  It was executed on behalf of Strathfield, M & W Holdings and Love.  Neither the liquidator nor CAGA executed the document. 

 

De Rosa left the meeting considering finance was a foregone conclusion because either CAGA or Strathfield would fund the settlement.  Love had learned at the meeting that Strathfield was the financier.  However, he considered Strathfield had made it clear at the meeting it did not want to finance the 089 scraper.  Love understood the effect of the varied Memorandum was CAGA had undertaken to arrange finance, failing which Strathfield would do so.  De Rosa regarded the provision for Strathfield to use its best endeavours as no more than a prudent commercial fall-back position. 

 

That night the sale of the two scrapers was finalised (the "Two Scraper Agreement").

 

On 3 October De Rosa advised Scott of what had occurred at the meeting on the evening of 2 October and asked Scott to confirm the availability of finance.  Scott then faxed a letter dated 2 October on the letterhead of CAGA Finance which confirmed "we have a private lender prepared to advance $180,000 on the third piece of equipment subject to registration of securities over the equipment tendered."   Scott's evidence in cross‑examination was that the "private lender" referred to in this letter was Strathfield.  This is not consistent with the evidence of De Rosa, Johnson and Love that at the meeting on 2 October Coles had indicated Strathfield could not fund the 089 scraper.  It is only explicable on the basis Scott had not attended the meeting on the Saturday night or been properly informed of its outcome.  De Rosa's evidence was that he told Scott of the "events of the previous day" on 3 October and of the understanding CAGA would give an undertaking to provide finance.  He also testified he asked Scott to confirm such undertaking that day and Scott did so.  Scott's evidence is inconsistent with what De Rosa testified he told him.  Even if
De Rosa's briefing did not specifically refer to the change made to the document to merely oblige Strathfield to use its best endeavours, the advice of the obligation which now fell on CAGA would not have left Scott in the position where he could have regarded Strathfield as the lender.  What De Rosa told Scott carried the inference that Strathfield was not the lender.  I therefore do not accept Scott's evidence on this issue.

 

The qualification in the fifth written offer was to be understood with reference to the words which qualify the expression "subject to finance", namely "but [CAGA] (Mr I Scott) will give you an undertaking to provide the necessary finance simultaneously with this offer."  Those qualifying words are consistent with knowledge by Opalswan prior to the varied Memorandum of Understanding that CAGA having been asked to assume and having assumed the obligation to provide finance.  It was the assumption of that obligation which Scott had assumed in making the fifth representation.  It is the true explanation for him having written the letter of 2 October following advice to him by De Rosa of the content of the varied Memorandum.

 

In cross-examination for CAGA Johnson was referred to certain affidavits sworn in the proceedings by Productive Parts in the Supreme Court in which he averred that it was as a result of assurances from De Rosa at the meeting that Opalswan had no doubt finance would be forthcoming.  He maintained, despite this, it was what Scott told them that Opalswan relied on.

 

Caratti denied he was relying on Johnson, asserting he relied totally on CAGA and Scott.

 

Possession of two scrapers

 

On 3 October Scott, at De Rosa's request, confirmed in writing to De Rosa in a letter dated 2 October on the letterhead of
CAGA Finance that "we have a private lender prepared to advance $180,000" on the 089 scraper subject to registration of securities.  Scott's evidence was the private lender referred to was Strathfield.  This is inconsistent with the final form of the varied Memorandum of Understanding and the evidence of De Rosa, Johnson and Love.  It is explicable only on the basis that Scott did not attend the meeting on the evening of 2 October.

 

On 3 or 4 October 1993 possession of the two scrapers was given to Opalswan and handed over to Grangefield.  This occurred in reliance upon the third, fourth and fifth representations.

 

On 5 October 1993 Grangefield commenced work with the two scrapers.  It relied on the same representations to assure it would meet the Archibalds Contract.

 

Sixth representation  (par27)

 

From 4-13 October De Rosa telephoned Scott on six occasions to bring about the execution of the varied Memorandum of Understanding by CAGA in accordance with Scott's undertaking and to obtain the unconditional commitment of the financier with a view to settlement occurring within the agreed time.  On 5 October Scott confirmed to De Rosa the varied Memorandum of Understanding was consistent with earlier discussions between them.  On 6 October Scott advised him he expected the financier's commitment on 7 October.  Scott accepted this.  On 8 October Scott informed him he expected an unconditional commitment to finance by Monday 11 October with settlement by 13 October.  Scott accepted this evidence.

 

Johnson's evidence was that on 7 October Scott advised him funds would be available on 8 or 9 October.  That was denied by Scott. 

 

Caratti testified that from 3 October Scott named almost every Friday in the month as a possible settlement date.  He was told by Scott some time between 5 and 8 October the finance would be available by 8 October.  This was denied by Scott on the basis he had not then become involved with Caratti, a basis which has already failed. 

 

I am unable to accept Scott's evidence of denial in the face of the evidence of his advice to De Rosa and acceptance of that evidence.  The evidence of both Johnson and Caratti is consistent with what Scott was stating to De Rosa at the time.  It is improbable he would not have said the same or similar to Johnson or Caratti or that their evidence on these representations is manufactured. 

 

I find that on or about 5 to 8 October 1993 Scott assured Caratti the settlement on the 089 scraper would take place on 8 October 1993 ("the sixth representation").

 

Threatened termination of the Archibalds Contract

 

Johnson testified that on 8 October Archibalds told him the contract would be cancelled and another contractor engaged if the 089 scraper did not come on site. 

 

The evidence of Johnson and Caratti establishes that on 11 October, in an attempt to avoid termination of the Archibalds Contract, Opalswan caused Robinswood Pty Ltd ("Robinswood"), a family company of Caratti, to provide two additional Caterpillar 631C motor scrapers ("the additional scrapers") at a cost to Opalswan of a mobilisation fee of $1,000.00 and a daily hiring fee of $1,000.00 per scraper pending the availability of the 089 scraper. 

 

There is a question of to which company the additional scrapers were provided.  Johnson's evidence was "we" would pay the hire and "he" charged "us".  Caratti's evidence was the
hire was to Opalswan.  The hiring is undocumented.  Although there is evidence the work on the ground was being executed by Grangefield, the foregoing evidence supports a finding the hiring was an obligation undertaken by Opalswan.

 

Demand and Seventh representation  (par30)

 

On 19 October CAGA, under the signature of Scott and on the letterhead of CAGA Finance, wrote to De Rosa confirming it had a lender for $180,000 on the 089 scraper subject to all parts being available in one place.  It stated it was awaiting confirmation of Opalswan's accounts from its accountants following which contracts could be prepared for submission.

 

The liquidator replied immediately confirming matters clarified by a telephone conversation between Scott and De Rosa in response to CAGA's letter and requesting confirmation the lender had made an unconditional commitment.  In cross-examination Scott could not recall receiving this document or responding to it.

 

De Rosa's evidence (which Scott did not dispute) was that on 25 October Scott told him settlement would be within 24 hours of security documents being returned by Opalswan.  De Rosa testified Scott later told him on 27 October that settlement would be on 29 October and on that date said it would be on 1 or 2 November.  Scott agreed with this evidence.

 

In his cross‑examination by counsel for CAGA, Scott said the reasons settlement did not occur were firstly, knowledge that Johnson had been involved with AGC in allegations he had stripped a machine and dispersed parts; secondly, the disassembled state of the 089 scraper until early November; thirdly, ongoing contention between Opalswan and Strathfield concerning the structure and repayment of the agreement on the two scrapers; fourthly, knowledge of Caratti's involvement. 
Scott's evidence was "Strathfield was continually seeming to change [its] opinion about that".

 

On 2 November Scott for CAGA Finance wrote to Johnson of Opalswan stating he had conflicting opinions from Opalswan and Strathfield as to the amount and the date of the first payment due under the second Strathfield Loan Deed.  Scott requested payment that day failing which Scott asserted he would be put in an untenable position in processing the proposal concerning the 089 scraper.  In cross-examination for Opalswan Scott testified he had been asked by Johnson to argue a case on the issue.  He had made a phone call to Coles on this prior to the fax.  His evidence was that argument on the issue was not really of relevance as far as he was concerned.

 

Caratti and Johnson discussed this and Caratti dictated a response in Johnson's name which was sent that day to CAGA Finance (Attn Scott).  This insisted the payments provided for be adhered to because they were reached as a trade off for an increased interest rate.  In cross-examination Scott testified he simply filed this letter, so it is apparent the information in it was not passed on to Coles.

 

In cross-examination Caratti testified this dispute did not lead him to consider there was a problem with the finance with Strathfield because he considered the finance to be in place.  He said the response had been sent to Scott to inform him of Opalswan's position because he regarded Scott as Strathfield's agent.  He had been told by Scott title to the 089 scraper was with Strathfield and he was unaware of any argument between Strathfield and Productive Parts concerning title to it.

 

Scott's evidence was the request for payment came about because Coles and Opalswan were at loggerheads as a result of Coles trying to change the basis of the agreement on the two scrapers.  Coles had agreed to finance the 089 scraper and Scott saw himself as trying to keep that in place.  His
evidence was that restructuring of the two scraper transaction was a matter of discussion between Johnson and Coles in which he, Scott, did not become involved.  His further evidence was the reassembly of the 089 scraper was an issue between the liquidator and Johnson.  The liquidator had pushed the issue and Johnson was doing his best to satisfy him.  He was aware of the issue but that was all.

 

Caratti testified that from 2 and 3 November Scott was telling him continuously the 089 scraper would settle just about every Friday.  This evidence is too general to support a finding in terms of the pleaded seventh representation that on 3 November Scott advised Caratti that Opalswan would have possession of the 089 scraper by 9 November.

 

On 4 November Opalswan forwarded to Strathfield the first instalment of $7,427.08 on the second Strathfield Loan Deed ahead of due date "as a sign of good faith only".  Caratti's evidence was Scott contacted him and advised Coles was insisting a payment was due under the second Strathfield Loan Deed.  Although Caratti informed Scott the payment was not due until December, Scott was "fairly insistent" he could not settle the 089 scraper while Strathfield was requiring the payment to be made.  He therefore made the payment in order to appease Strathfield.  

 

In Johnson's cross-examination it was put to him the payment was made simply because it was due and, unless paid, any financing on the 089 scraper would not be forthcoming.  Johnson denied that. 

 

Scott in cross‑examination for Opalswan could not recall the conversation with Caratti.  However, when Johnson's evidence was put to him he thought the amount of the payment was for a monthly commitment.  Scott therefore appears to have had only limited recollection of the circumstances of the payment which, given the significance of the payment, is not credible.
Scott accepted that after the payment had been made he phoned Caratti and referred to the fact the payment would satisfy Coles.

 

I find the demand for such payment was made by Scott on Opalswan in order to ensure finance for the 089 scraper would be approved and the payment was made under protest.

 

Eighth representation  (par32)

 

Caratti testified that on 4 November Scott stated to him the finance on the 089 scraper would be completed within a few days ("the eighth representation").  Scott denied this.  The only apparent basis for the denial is Scott's earlier rejected evidence concerning his involvement with Caratti occurring later.  I find the eighth representation was made.

 

Continuing negotiations

 

On 6 or 7 November Scott was told by Coles the 089 scraper had been removed by Opalswan.

 

On 8 November Scott spoke to De Rosa concerning the remedying of a default with respect to the sale of the two scrapers.  He denied, as De Rosa testified, that he identified the Commonwealth Development Bank as the lender.

 

Scott accepted that on 9 November he told De Rosa the finance approval would be sent that day.  Nothing was received.

 

On 10 November De Rosa faxed Opalswan particulars of the parts which he had ordered for it to perfect the 089 scraper on the assumption the 089 was to be acquired by it. 

 

Johnson testified that prior to 12 November Scott told him Coles no longer wanted a balloon payment system under the second Strathfield Loan Deed but required equal instalments.  Johnson was angered by this and demanded the finance for the 089 scraper.  Scott responded that if Johnson agreed to amend
the second Strathfield Loan Deed he would set the finance with CAGA as lender.  Scott denied this under cross-examination.  In my opinion Johnson's evidence is consistent with the preceding developments.  It is also consistent with the execution on 15 November of the CAGA Loan Deed.  I therefore accept Johnson's account and find accordingly.  In the result Opalswan agreed to amend the second Strathfield Loan Deed to avoid balloon payments at the end if CAGA would finance the 089 scraper.

 

On 12 November CAGA under Scott's signature on the letterhead of CAGA Finance wrote to Johnson at Opalswan confirming "we now have funding arrangements completed" but adding that if all components that make up the machine could be bought into one place for inspection "we can complete the funding".  The liquidator immediately responded by fax referring to his letter of 19 October, giving updated information and requesting De Rosa be contacted for inspection and to discuss settlement.  Scott gave no immediate response.

 

Scott agreed that he advised Johnson on 14 November that finance for the 089 scraper would be completed by 19 November.

 

Additional payment

 

Caratti's evidence was that around 15 November Scott requested and was given a further fee of $4,000 to complete the financing of the 089 scraper.  He said this was done because Scott had said without it CAGA would not finance the 089.  Scott accepted he requested and received this payment for that reason but did so in relation to B Johnson.  I find the payment was made on behalf of Opalswan for the reason stated.

 

Ninth representation and CAGA Loan Deed  (par34)

 

Caratti's evidence was that around 9-12 November, after continuous pressure from Caratti to Scott to settle on the 089 scraper, Scott advised him the second Strathfield Loan Deed had to be changed.  Caratti said he was told by Scott this was because the balloon payments were to be changed to 36 equal payments.  Scott accepted this evidence.  However, Scott denied he also told Caratti he had a new deed prepared for the 089 scraper because Strathfield were not going to finance it.  In the light of the subsequent execution of documents, I do not accept Scott's denial of this aspect.

 

On 15 November Opalswan executed the amended second Strathfield Loan Deed.  Caratti testified Scott made it quite clear to him that if Opalswan was prepared to amend the second Strathfield Loan Deed as proposed, CAGA would finance the 089 scraper.  I therefore accept Johnson's evidence in cross‑examination that Opalswan agreed to amend the second Strathfield Loan Deed because Scott told it unless the amendment was made the 089 deal would not go through ("the ninth representation"). 

 

On the same date Opalswan executed a Deed of Loan and Chattel Mortgage with CAGA ("the CAGA Loan Deed") which provided for a loan of $180,000 on the 089 scraper.  Scott accepted he had prepared it.  His evidence was Johnson had requested him to cast around to find some other sources of finance because, although Strathfield was still in contemplation, it was proving difficult.  Caratti testified in cross-examination he therefore knew at 19 November finance was in place with CAGA Finance because the CAGA Loan Deed was executed and Scott had said it was accepted.

 

The CAGA Loan Deed was not executed by CAGA.  Hartz testified there never was any authority for the document.  Scott accepted if CAGA had entered into the CAGA Loan Deed it would have been bound to advance the money.  However, he testified it was standard practice for an agreement such as this to be assigned to another viable source of finance.  Scott further testified he had asked Hartz to execute the document and he had refused.  Hartz testified he had not seen the document until its discovery in the course of this proceeding.

 

Purchase of spare parts - tenth, eleventh, twelfth, thirteenth and fourteenth representations  (pars36, 37, 38, 40 and 43)

 

Scott accepted, and I so find, that on 19 November he told Caratti a cheque for $20,000 ("the Replacement Cheque") would be provided to Opalswan by 23 November for the agreed part payment of the spare parts needed for the 089 scraper ("the tenth and eleventh representations").

 

Scott accepted settlement was expected around 19 November so that I accept Caratti's evidence that in the week leading up to 19 November Scott had assured him settlement would occur on that date (part of the pleaded tenth representation). 

 

Later Scott had assured him settlement would occur on 23 November and, when that did not occur, 26 November.

 

Scott also accepted he told Johnson on 14 November finance on the 089 scraper would be available by the end of the following week.  He accepted also that on 19 November he told Johnson settlement on the 089 scraper would proceed on 23 November and he was free to collect the parts of the 089 scraper and reassemble it, and I so find ("the twelfth representation").  Scott did not accept he had represented to Johnson the Replacement Cheque would be received because his evidence was the reimbursement for the repairs executed by Opalswan was to be effected by set-off at settlement.

 

However, Johnson testified that on 25 November he was told by Scott the Replacement Cheque would be forthcoming at settlement on 26 November.  I accept this evidence as more probable than not and so find ("the thirteenth representation").

 

On 19 November, with the authority of the liquidator, Opalswan had taken possession of the 089 scraper and caused the repairs to it to be completed.  Caratti purchased the spare parts required for its reassembly with cheques of Grangefield
post‑dated to 29 November in the total amount of $22,765.23, although it is not disputed the total so expended was $22,838.55.  Caratti's evidence was that a cheque for $20,000 constituting the major part of this expenditure was paid by Grangefield in the expectation CAGA would settle and the Replacement Cheque would be received.  That, however, was a cheque which would have been payable to Opalswan.  Johnson's evidence in cross-examination was that Grangefield would meet the financial obligations of Opalswan in respect of the equipment "and that sort of thing."  The submissions for CAGA, which advert to this evidence, are made on the basis the expenditure by Grangefield on repairs can be found to be an expenditure by Opalswan.  I therefore accept Johnson's evidence extends to payment of the cost of repairs and the expenditure by Grangefield on repairs was expenditure for Opalswan.

 

On 28 November the reassembled scraper was transported to Collie.  I am satisfied Opalswan so acted in reliance upon tenth, eleventh, twelfth and thirteenth representations that the Replacement Cheque would be provided. 

 

Caratti testified he was told by Scott in a heated telephone conversation on 29 November the Replacement Cheque would be provided to Opalswan by 3 December.  Scott denied this evidence but testified he told Caratti Opalswan was one hundred per cent sure to have the Replacement Cheque any day.  In my opinion Caratti's evidence is more consistent with the history of the matter and I accept his evidence.  I find Scott made the stated representation to him ("the fourteenth representation").

 

Opalswan never received the Replacement Cheque or funds in that amount by any other means.  Scott offered no explanation why this was so.

 

Further additional payment

 

De Rosa had found that after 25 November his telephone calls to CAGA were not returned.  On 7 December De Rosa, acting after discussion with Coles, arranged for the liquidator to write to Opalswan inquiring whether the machine had been removed from its Bunbury location and requiring an explanation and identification of its present whereabouts.

 

Johnson responded that day for Opalswan asserting it had purchased the unit; documentation of that was held by it; possession of the unit and its parts had been given on 19 November; and $40,485 had been expended on it by Opalswan.

 

Caratti accepted in cross-examination this letter was prepared by him.  He testified the reference to "documentation" was to the CAGA Loan Deed; the possession had been given by Scott and De Rosa.

 

The liquidator immediately wrote to Scott referring to the preceding correspondence and requesting an explanation.  On the letterhead of CAGA Finance Scott responded on 8 December that settlement had not been completed and that, due to a number of (unspecified) factors, "it is unlikely we shall be able to proceed".

 

Hartz testified that in December 1993 Scott reported to one of the regular meetings there were some problems between the Johnsons and Strathfield which were causing delays in finance approval.

 

On 8 December the liquidator wrote to Opalswan referring to a discussion with Johnson and agreeing to consider allowing a further 14 days for settlement and generally asserting his rights in the circumstances.

 

Around 8 December Scott advised Caratti that Strathfield required an immediate additional payment of $12,367.16 pursuant to the amended second Strathfield Loan Deed.  Caratti's evidence to that effect was accepted by Scott.  Scott denied he had also said that if the payment was not made to Strathfield, CAGA would not provide the finance on the 089 scraper because CAGA was not providing that finance.  He accepted he would have said that unless the payment was made he would have no hope of getting Strathfield to complete their part of the deal.

 

Accordingly Carratti arranged for Opalswan to pay to Strathfield c/- CAGA (attn Scott) $12,367 being "at the higher rate".  In an accompanying letter dictated by Caratti, Opalswan made clear the payment was under protest and in reliance on Scott's advice to appease Coles.  Opalswan inquired in the same letter what was happening on the 089 scraper. 

 

In cross-examination Caratti testified the payment was made because Scott required it.  He said the Strathfield and CAGA financing had become mixed up because Scott was refusing to settle until Strathfield had "settled down".  The payment had been made to Strathfield on the understanding Scott would settle the 089 with funds from CAGA.

 

Caratti's view from mid-November was that the finance was coming from CAGA.

 

Scott in cross-examination for Opalswan testified he would have passed the letter and cheque on to Strathfield.

 

Further December developments

 

It was accepted by Scott that on 14 December De Rosa telephoned him and advised everything was in order and early settlement was pending. 

 

On 15 December, in response to a request from Scott, De Rosa forwarded to him a pro forma invoice for settlement.  Scott
advised approval of it the next day and said settlement would be on 17 December.  This is supported by a letter sent on 17 December by CAGA on the letterhead of CAGA Finance under the signature of Scott addressed to De Rosa confirming documents had been properly completed and drawdown of funds had been requested from the prime lender and, once received, settlement time would be advised.

 

On 17 December the solicitors for Opalswan wrote to the liquidator's solicitors giving undertakings concerning the location of the 089 scraper, declining to accept (unstated) amendments to the contract concerning it and ascribing the problem of delay to CAGA. 

 

The liquidator immediately wrote to CAGA Finance (Attn Scott) with a copy of this correspondence requesting urgent confirmation of time, date and place of settlement.

 

Although Scott denied it, I accept Johnson's testimony that around 21 December Scott advised him settlement would take place in another few days.  Johnson's evidence is consistent with Scott's letter of 17 December and De Rosa's evidence accepted by Scott. 

 

On 21 December the solicitors for Opalswan wrote to the solicitors for CAGA requesting detailed advice on the matters which needed to be attended to on Opalswan's behalf prior to settlement and requesting confirmation that once they were attended to CAGA would be in a position to arrange settlement.

Scott was unaware whether a reply was sent.

 

On December 24 the liquidator advised CAGA its solicitors would attend to settlement matters.

 

When forwarding payment for January to Strathfield C/- CAGA on 31 December Opalswan requested urgent advice concerning
settlement on the 089 scraper.  Scott accepted this letter passed through CAGA's office.

 

Scott testified that in December Johnson had requested that CAGA cast around for other sources of finance.  This was not put to Johnson.  Scott's evidence was that of the three he spoke to only a company called Carmille expressed interest.  He said it did not proceed because Carmille chose not to do so.  Documents had been prepared and sent to Carmille for execution but they were not returned.

 

Carmille as alternative lender

 

In early 1994 Scott told Love that, due to the problems with Opalswan, the 089 would not be financed.  He suggested to avoid legal action the price of the 089 scraper be reduced and Strathfield buy it.  Love met with Coles who confirmed he was not interested in financing it for Opalswan and wanted to buy it himself.  Love refused to reduce the price.  In cross‑examination Love testified Coles had been seeking a price in the vicinity of $130,000-$140,000. 

 

In January Scott told Caratti the money was coming from Carmille.  Caratti's evidence was Scott described Carmille as a company which was part of the CAGA Group and based in Hong Kong.  De Rosa testified Scott told him Carmille was a Hong Kong company.  The evidence of Scott and Hartz establishes Carmille was a Sydney based company trading in commodities which had an office in Hong Kong.  Scott denied having said Carmille was part of the CAGA group.  Given De Rosa's evidence, I accept Scott's denial of that aspect.

 

Scott's evidence in cross-examination for CAGA was Johnson had asked him in January to further pursue Carmille as a lender.  This was not put to Johnson.  He testified Carmille had been pursued in parallel with Strathfield.

 

On 12 January 1994 Scott for CAGA Finance wrote to Opalswan's solicitors advising he would notify them "Thursday morning" when settlement would occur.  On 13 January Scott for CAGA Finance wrote to the same solicitors stating the lender (acknowledged by Scott as a reference to Carmille) was overseas so a settlement could not occur that day and seeking an extension of time. 

 

On 14 January the solicitors for Opalswan wrote to CAGA (attn Scott) asserting their client had been awaiting settlement since 19 November; requiring CAGA to settle immediately; requesting confirmation from CAGA Finance all approvals for finance have been given and all matters were in order for settlement; and proposing if CAGA Finance required time to complete it renegotiate with the liquidator.  Johnson could not explain this last stipulation.

 

On 17 January the same solicitors wrote requesting advice of a settlement time and date immediately and the other information sought in their letter of 14 January.

 

By letter dated 18 January from CAGA Finance under Scott's signature it was stated CAGA was not the lender; the lender had been notified of the necessity to settle; the lender had not responded positively because of the need to have a caveat registered over Johnson's property; details of legal costs were awaited; payment of costs and initial payment needed to be made; evidence of insurance cover was required; and "we understood from your correspondence that the transaction was at an end, and had not taken any action since".  He concluded with a request that if Opalswan wished CAGA to continue the directors should visit its office to resolve the above issues.

 

Johnson testified that he regarded all of this as "a load of rubbish" as there had been no indication of disinterest; Opalswan had always sought to settle and there was no suggestion previously of the caveat.  Scott could not explain
the assertion of disinterest or discontinuance of the transaction. 

 

On 24 January CAGA Finance under Scott's signature wrote to the solicitors for Opalswan stating it awaited payment of funds to its solicitors trust account and written advice concerning insurance and client satisfaction from those sources, pending which "there is no likelihood of a settlement".   Scott was unable to explain how payment of the costs could have been made when CAGA was unable to advise the amount of costs due.  It was Scott's view that if Opalswan attended to the matters specified in the letter of 24 January settlement would proceed.  He held this view because, on his evidence, someone in authority in Carmille had accepted the obligation to provide funding for the 089 scraper on 10 January.

 

On 1 February Opalswan, when making payment of instalments on the two scrapers, inquired why settlement had not occurred.  Scott testified this letter and cheque, which was addressed to Strathfield c/- CAGA, would have been passed on to Strathfield by him.

 

Written authority

 

On 3 February Scott requested Caratti to attend his office.  There he told Caratti the reason settlement had not occurred was Scott needed to ensure all the fees were paid.  Scott then requested Opalswan to complete a written authority for the disbursement of funds at settlement.  This was then drafted and, after typing by Caratti's office, was sealed and returned by Opalswan.  By that document authority was given for payment to Productive Parts ($155,000), Carmille ($12,479 as payment of the initial instalment and advance payment of the second instalment), Strathfield ($9,227 for March instalment) and CAGA ($3,320 for stamp duty and fees).

 

On the same day Caratti obtained a certificate of currency of insurance on the 089 scraper naming Opalswan and Carmille as beneficiaries. 

 

Fifteenth representation  (par49)

 

Scott accepted that on 3 February 1994 he advised Johnson settlement of the purchase of the 089 scraper would occur on 9 February ("the fifteenth representation").

 

CAGA as lender (again)

 

On 10 February the solicitors for the liquidators faxed Scott of CAGA referring to his facsimile and asserting they had previously put them on notice that Productive Parts reserved its rights against CAGA in the event the purchase of the 089 scraper was not settled by 5.00pm on 14 February.  Hartz instructed Scott to reply pointing out CAGA was a broker and not responsible for what a proposed lender did.  Hartz suggested the wording of the reply.  Scott sent a letter to the solicitors that date on CAGA Finance letterhead on behalf of CAGA stating "our capacity in this transaction is purely as broker and your client has been fully aware of this at all times".  The letter also contained denials of liability or responsibility.

 

Johnson testified he again attended Scott's office at CAGA on 14 February for the purpose of signing some amendments to the loan documentation.  He testified Scott presented him with a letter which he signed.  As tendered that letter includes an instruction from Johnson to CAGA to insert three pages in the CAGA Loan Deed and advises the chassis and engine number of the 089 scraper.  Those pages related to a loan by CAGA of $180,000 on the 089 scraper.  It then states that Opalswan agreed in the event of default a caveat be registered over the residential property of Johnson. 

 

Hartz gave evidence he was not aware of the loan proposed in this documentation and CAGA never was going to lend money on this transaction.

 

Scott's evidence was that the document was prepared with the object of CAGA casting about for private investors and assigning the loan to them.  He accepted that if CAGA entered into the deed it would be bound until assignment.

 

Scott accepted he advised De Rosa on 14 February settlement would take place the following day. 

 

Third Strathfield Deed

 

Scott accepted Caratti's evidence that on 14 February he informed him Strathfield now wished to provide funds for the 089 scraper.   At Scott's request he therefore arranged for Opalswan to execute a further Strathfield Deed ("the third Strathfield Loan Deed") providing for a loan of $180,000.

 

Scott accepted De Rosa was told by him on 17 February  settlement was in order and would proceed.  De Rosa also testified that on 18 February Scott inquired if the liquidator would accept settlement and De Rosa gave confirmation that he would on the basis of the exchange of an invoice or bank cheque, stressing the urgency of it occurring.

 

On 18 February Opalswan faxed CAGA Finance (Attn Scott) asking what was occurring regarding settlement.  Scott responded by stating the respective solicitors were discussing the question of settlement time.

 

Around 20 February Scott gave instructions to CAGA's solicitors to complete the documentation.  At that stage as far as Scott was concerned Coles had said he would finance the 089 scraper.  However, Scott knew Coles wanted some additional security, possibly a third mortgage of Johnson's house.  He
had said that was a requirement in early to mid-February.  Scott had therefore also instructed CAGA's solicitors to deal with Coles to resolve these aspects.

 

Productive Parts writ

 

On 23 February Productive Parts issued a writ against Opalswan seeking the return of the 089 scraper and damages.

 

On 24 February De Rosa advised Scott in response to his inquiry the liquidator would consider settling.

 

Hartz testified that around 24 February he was told by Scott there were still problems between Strathfield and Opalswan and Opalswan had told him they were going to deal direct with Strathfield.  Scott had said Johnson did not want Scott to do anything more.  The matter therefore ceased to be discussed at the regular meetings.  This was not put to Johnson and I allow the objection to it.

 

On 1 March CAGA on the letterhead of CAGA Finance under the signature of Scott advised Opalswan through Johnson that "following your decision to deal direct with Strathfield...we take no responsibility for the successful completion of the transaction," adding that this did not void payment of any fees and requesting advice as to progress. 

 

In cross-examination Johnson testified the only time when Opalswan talked to Strathfield was when Strathfield contacted them and around this time it was the case Coles was telephoning him.  Coles continued to be prepared to provide the finance but was "was trying to screw the price up again at the same time".  He said Coles was seeking an increase from $180,000 to $240,000.  Johnson testified he told Scott of this and Scott advised he would set up the finance with somewhere else, to which he had agreed.  Johnson's evidence was that Opalswan did not just go to another financier because Scott
"always said he could set the deal for us" and because there would not have been enough time to go to any other financiers at that stage. 

 

Carmille again

 

On 3 March Scott, seeking settlement, told De Rosa Carmille was willing to finance settlement which could possibly be mid the next week.  De Rosa requested a letter of commitment.  In cross-examination Johnson accepted it was as a consequence of his advice to Scott of Coles changed attitude that the Deed with Carmille was brought forward.  Johnson accepted that at this point Opalswan had abandoned Strathfield and was regarding Carmille as its source of finance.

 

On 4 March CAGA on the letterhead of CAGA Finance under the signature of Scott wrote to Johnson of Opalswan enclosing replacement pages and a Deed of Loan and Chattel Mortgage with Carmille ("the Carmille Deed"), which were executed by Opalswan. 

 

Scott testified he required the Carmille Deed because Johnson requested him to find another source of funding as a consequence of Opalswan not being satisfied to receive funding from Strathfield.  In my opinion it is clear Scott initiated the suggestion of Carmille as the lender and prepared the document for execution by Opalswan which, needing settlement and being served with the writ by Productive Parts, was prepared to comply with Scott's request.

 

Strathfield again

 

On 4 March Opalswan's solicitors wrote to CAGA stating that Opalswan had since late 1993 received numerous assurances the finance required to settle would be forthcoming from CAGA's office.  Scott agreed he had made numerous assurances.

 

On the same date CAGA under the signature of Scott wrote to the solicitors for Opalswan stating CAGA, acting as brokers in the matter, had prepared documents between Opalswan and a lender on 2 March for an advance of $155,000.  It further stated Johnson was notified and the arrival of the Opalswan directors was awaited for signature of the documents and payment of stamp duty.

 

In cross-examination for Opalswan Scott testified he thought the lender at this stage was back to Strathfield.  Scott's evidence was that after Strathfield said it would finance the 089 scraper at the meeting on 2 October, the arrangements with Strathfield were put back in place in November.  However, Coles had always said he would do the deal but needed to improve his position.  This became manifest in Coles requesting more security.  Scott's evidence was that this was what Coles was trying to do during that period.  Nevertheless Scott's evidence was Coles had committed Strathfield to the lending.

 

The same day again the solicitors asked CAGA Finance to address the question of whether they would provide a written assurance to settle.  CAGA on CAGA Finance letterhead under Scott's signature immediately replied no unequivocal undertaking could be given as it was "presently proceeding with lenders".

 

8 March settlement deadline

 

In telephone conversations with Scott on 8 and 9 March De Rosa said the liquidator would give consideration to any settlement offers as they were presented.  Scott queried whether it was worth him continuing his efforts.

 

On 8 March Opalswan under the signature of Caratti and in reply to CAGA's letter of 1 March concerning responsibility advised CAGA Finance the contention in CAGA's letter was
ridiculous when it was them who had required him to talk to Coles of Strathfield.  It stated discussions with Coles disclosed he was only trying to increase the price.  Accordingly it expressed the view the deal should be done with Carmille.

 

In cross-examination Caratti testified it was Johnson who had spoken with Coles.  In Caratti's view Coles was trying to get in on the act of providing funds for the 089, but did not do so.

 

Caratti testified he spoke with Scott who told him CAGA and Carmille would provide the funds and settlement would occur before the hearing of injunction proceedings brought on behalf of Productive Parts, set down for 10 March.

 

By 8 March no finance had eventuated.  Caratti made telephone calls to three finance houses in an endeavour to find finance but was unsuccessful, principally because they wanted land security.  Inquiries continued the following day.  In cross‑examination Caratti testified that as late as 11.00 am on 9 March Carmille and CAGA were going to provide the funds but nothing happened at the appointed settlement time of noon.

 

Zel as purchaser of 089

 

To avoid the litigation instituted by Productive Parts proceeding further, Opalswan entered into an agreement with Caratti's family company Zel Nominees Pty Ltd ("Zel") for Zel to purchase the 089 scraper for the sum of $155,000.00 for the purpose of settling the litigation. 

 

On 9 March 1994 Zel purchased the 089 scraper from Productive Parts with a payment of $155,000.  This brought an end to the Supreme Court litigation.

 

On 10 March 1994 Zel hired the 089 scraper to Robinswood.  On that date Robinswood on-hired it to Opalswan at a charge of $65.00 per hour of usage or $12,000 per month, whichever was the greater.  Caratti's evidence was this payment was to be met by a contra arrangement between the companies, balancing the cost of hire against work done by Opalswan for Robinswood. 

On 11 March 1994 Opalswan provided the 089 scraper to Grangefield for its use.

 

Caratti testified that on 17 March Scott advised him Carmille was prepared to refinance the purchase of the 089 scraper from Zel, to which Caratti assented.  Scott accepted that evidence.  It is common ground no such contract was concluded.

 

                 THE TRADE PRACTICES CLAIMS

 

The pleadings of misleading or deceptive conduct are to be considered in relation to the representations as made out namely, the first to sixth representations and the eighth to fifteenth representations.  The question is whether each of these representations when made was false or in the alternative whether, when made by Scott he did not have reasonable grounds to believe the representation was true.

 

Of these representations all of them other than the first representation are ones in relation to which it is necessary to consider the effect of s51A of the TPA and s9 of the FTA.  The effect of those sections is to cast the onus upon a corporation making a representation to show it did have reasonable grounds for making it, in the absence of which the representation shall be taken to be misleading.  Section 52 of the TPA and s10 of the FTA then create a general prohibition on such misleading conduct.  This requires consideration of the question whether there is in this case a corporation making the representations.

 

Whether Scott agent for CAGA

 

The evidence entirely satisfies me that at all times Scott acted as servant or agent of CAGA.  Importantly he acted in the name of CAGA by using its letterhead and signing correspondence for it.  He worked from an office in the CAGA building at which he was visited by representatives of Opalswan.  Telephone calls to him were received by the CAGA office.  He used a CAGA business card designating himself as a manager of CAGA.  He received secretarial assistance from CAGA and met regularly with Hartz.  He was supplied with a motor vehicle by CAGA.  He was the actual or ostensible agent of CAGA at all times. 

 

Whether Scott directly and knowingly concerned

 

It is pleaded for Opalswan that Scott was a person directly concerned in the contraventions claimed with respect to both misleading and deceptive conduct as well as economic duress and unconscionable conduct.  By this plea Opalswan invokes par(c) of s75B of the TPA.  This requires knowledge of the essential facts constituting the contravention; that is of the facts which give the corporation's conduct its character: James v Australia and New Zealand Banking Group Ltd & Ors (1986) 64 ALR 347 at 382; Wheeler Grace & Pierucci Pty Ltd v Wright & Anor (1989) ATPR 40-940 at 50,257.  I am satisfied Scott was directly concerned in and knowingly a party to the representations. 

 

CAGA Relationship to Opalswan

 

It is contended for CAGA the evidence will not support a contention it was anything other than a broker and Scott was acting on behalf of CAGA and thus was a mere conduit for the passing of information. 

 

In this respect Scott gave evidence that at all material times he and CAGA merely acted as brokers between borrower and lender.  Hartz testified a brokerage agreement ought to have been entered into between Opalswan and CAGA through Scott.  However, there was no evidence of such a brokerage agreement and no such agreement was discovered.  Scott also testified he did not always obtain such an agreement and could not recall whether he had done so in this case.  This point was not put to either Johnson or Carratti in cross‑examination on behalf of CAGA.  There is therefore no basis upon which it can be inferred that a brokerage agreement may have been entered into.  Scott's assertion on behalf of CAGA in a letter of 4 March 1994 that "we act as brokers in this matter" is no such basis.  The issue therefore must be decided from examination of the evidence previously set out in the sequence of events. 

 

For Opalswan it is contended the evidence supports its assertion that throughout the whole of the period Opalswan had a contract with CAGA for CAGA to find a financier for the 089 scraper and on at least two occasions (in the CAGA Loan Deed in November 1993 and the amendment to it February 1994) had a more extensive contract with CAGA whereby CAGA would actually provide those funds.  Furthermore, it is contended Opalswan's assertion that it believed CAGA was providing those funds is impossible not to believe. 

 

These submissions require consideration in relation to the periods at which each of the representations occurred:

 

(a)  Representations up to 1 October 1993.

 

Caratti's evidence was that in the beginning (of Opalswan's relationship with CAGA) Scott was a broker but the relationship changed and he became the financier.

 

Scott's evidence of this period indicates CAGA saw itself as the agent of Strathfield.  This was the period when there was a willing seller, an anxious buyer and a willing financier in Strathfield.  However, the case for CAGA does not adduce any evidence of Strathfield having accepted or committed itself to the terms of the first Strathfield Loan Deed, which was not executed by it.  I therefore cannot accept the submission for CAGA that it has been established on the balance of probabilities Scott had a sound basis for making the first and second representations. 

 

The third representation was made on reasonable grounds as the implementation of the Two Scraper Agreement and the second Strathfield Loan Deed bear out.  The fourth representation is not shown by the respondents' case to have been made on reasonable grounds and therefore was misleading.

 

(b)  The events of 2 October 1993.

 

It is submitted for CAGA that whatever Opalswan may have thought prior to 2 October 1993 it cannot maintain after that date it considered Scott had any authority or influence above and beyond that of a broker.  It is said the meeting of 2 October 1993 could not have left Johnson and therefore Carratti in any doubt as to Scott's ability to directly influence the actual terms of a contract between Opalswan and Productive Parts, which in turn had a direct bearing on the provision of finance.  In those circumstances it is said Scott could only be seen as a broker acting on behalf of CAGA and as a mere conduit for information on the availability of finance. 

Specifically it is contended for CAGA that it is untenable for it to be argued for Opalswan it was strung along or completely reliant on Scott's representations as to the availability of finance up to and including 2 October 1993 when it was provided in the fifth written offer that the offer was "subject to finance".  I have already stated that in my
opinion the words "subject to finance" cannot be read independently of the qualifying condition to the effect that CAGA through Scott would give an undertaking to provide the necessary finance simultaneously with the offer.  In my opinion, the varied Memorandum of Understanding in cl7 supports this when it provides that CAGA agrees to undertake and arrange finance. 

 

Nevertheless it is contended that while Johnson may have come away from the meeting of 2 October thinking finance was in place, he cannot successfully argue such a state of mind came about as a result of any representation made by Scott that finance was in fact arranged.  In my opinion, that overlooks the effect of the fifth representation. 

 

In the light of that representation nothing can be made for CAGA from the affidavit sworn in the Supreme Court proceedings by Johnson, not all of which as relied upon was in any event put to him.  Additionally that affidavit was sworn for a purpose which required it to concentrate upon the actions of De Rosa.  I have in any event accepted the evidence of De Rosa in this proceeding.

 

(c)  Events after 2 October 1993.

 

It is the submission for CAGA that as a result of the events of 2 October 1993, Opalswan had placed itself in a distinctly weakened position with respect to its ability to secure finance for the 089 scraper.  This was because the purchase of that scraper, being a separate transaction, was devoid of security to support it and because Strathfield, having alleviated its position by the sale of the two scrapers, was no longer under pressure to satisfy the financial requirements of the 089 transaction.  Therefore it is said that on the evidence, after the meeting of 2 October 1993, Strathfield took positive advantage of its position of strength as the preferred financier and embarked on a course of action to
place itself in the best possible position with respect to the transaction involving the machines other than the 089 scraper. 

Given that Strathfield had both the motive and incentive to string Scott and other parties along as to the availability of finance for the 089 scraper, it is said for CAGA that Scott should be believed in his evidence that from this date he was merely passing on lender's comments verbatim to the Johnsons and Carratti by direct contact and the liquidator was aware of what was going on. 

 

For CAGA it is also contended both Carratti and Johnson and therefore Opalswan knew full well at all relevant times after 2 October 1993 the success of the 089 transaction and therefore the availability of finance depended on reaching a compromise acceptable to the liquidator and Strathfield.  Further it is submitted that in this process Opalswan at all times knew Scott was not in a position to influence, let alone dictate, the outcome.

 

However, it was not the case that the financing of the 089 scraper was entirely dependent on Strathfield.  It was apparent to Scott by 15 November (that is after the sixth, eighth and ninth representations) that the CAGA Loan Deed required execution.  It follows it was apparent to Scott by then that Strathfield would not necessarily be the financier.  By mid‑December (that is after the tenth to fourteenth representations) Scott was seeking to have Carmille signed up as a lender.  He was therefore aware by then neither CAGA nor Strathfield may be the financier.

 

Furthermore Opalswan was entitled to consider it had reached acceptable compromise with Strathfield.  Whenever a compromise was proposed in terms of further payments to Strathfield, Opalswan responded positively by compliance.  Similarly Opalswan agreed to the adjustment of balloon payments.  Even if Opalswan had known Scott was not in a position to dictate
that outcome, when the compromise was accepted there was no reason why Opalswan through Carratti and Johnson could not have continued to think settlement would take place on a nominated date when Scott told them it would do so.

 

In my opinion the evidence leads to the conclusion, as is submitted for Opalswan, that Scott continued to give assurances to everyone involved in the matter until he had run out of excuses.  It is not therefore the case that Scott's evidence that he was merely a broker should be believed.

 

The contentions for CAGA then turn to the removal of the 089 scraper on 19 November.  It is contended such removal brought about a circumstance which affected CAGA and Scott's ability to perform their obligations.  This was because, as the argument is put, the machine over which finance was sought had not only allegedly been unlawfully removed from its owner but the borrower was refusing to return the machine and was facing legal action.  In reliance on Johnson's evidence, it is submitted for CAGA that such action was one which Opalswan had very little chance of winning because the machine had not been paid for.  However, in light of the twelfth representation by Scott it cannot be the case the removal of the 089 scraper could be said to have been unconsented to by CAGA or Scott, whether or not they had authority from the liquidator in the matter.

 

I have already said even if it is the case that following the removal of the 089 scraper, Strathfield made concerted efforts to improve its position and that Johnson and Carratti (and hence Opalswan) were aware of this, that does not carry with it the inference that any representation being made to them by Scott after the removal on 19 November concerning the availability of finance and the setting of a settlement date was not to be believed.

 

There was also the added circumstance that Opalswan had executed the CAGA Loan Deed on 19 November so it was entitled to believe that, one way or the other, and whether Strathfield came to the party or not, Scott would settle the matter.

 

Even if it was the case that Scott's conduct in making the representations grew out of his optimism or hope that the finance would become available, that would not provide a reasonable basis for him having engaged in the conduct: Adour Holdings Pty Limited (In Liquidation) v Commonwealth Bank of Australia (1991) ATPR 41-147.

 

For these reasons I do not accept Scott was a mere conduit for the passing of information or reasonable grounds existed for whatever representation was made.  In my opinion, the case for CAGA has not established the fifth, sixth and eighth to fifteenth representations made by Scott on and after 2 October 1993 were made upon reasonable grounds.  Those representations therefore are to be taken as misleading in accordance with the application of s51A of the TPA, being (as I have found) representations made on behalf of CAGA. 

 

Even without the aid of s51A these representations were misleading because the relevant circumstances showed the need for some qualification to be attached to them or the possibility of non-fulfilment to be disclosed as a requirement of fair trading: Wheeler Grace at 50,251. 

 

    CLAIMS FOR ECONOMIC DURESS AND UNCONSCIONABLE CONDUCT

 

The claim in respect of economic duress and unconscionable conduct is brought both at common law and in equity and with respect to unconscionable conduct under s51AA of the TPA and s11 of the FTA. 

 

For there to be economic duress it is necessary for the evidence to point to pressure applied so as to induce the
victim to enter into a legal relationship, which pressure was such that it went beyond what the law would be prepared to regard as legitimate.  It will illegitimate if it consists of unlawful threats or of unconscionable conduct.  See Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40 particularly at 45-6; applied in Dimskal Shipping Co SA v International Transport Workers Federation [1992] 2 AC 152 at 165-6.

 

With respect to unconscionable conduct it is necessary to establish that one party to a transaction is at a special disadvantage in dealing with the other party because of relevant circumstances affecting the first party's ability to conserve his or her own interests, so the other party unconscientiously takes advantage of the opportunity which thus exists: Bromley v Ryan (1956) 99 CLR 362 at 405 per Fullagar J and 415 per Kitto J.  It is the existence of the disadvantageous position and the taking advantage of that position which distinguishes unconscionable conduct from undue influence: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 480.  The disabling condition or circumstance must be one which seriously effects the ability of the innocent party to make a judgment as to his or her own best interests: at 4480-1.  The type of adverse circumstances which may constitute a special disability may take a wide variety of forms and are not susceptible of being catalogued: at 474.

 

So far as the statutory remedies are concerned, it is provided in s51AB of the TPA and s11(2) of the FTA that factors to which the court may have regard in determining whether a corporation has engaged in conduct which is unconscionable include:

 

      "  (a)      the relative strengths of the bargaining positions of the corporation and the consumer;

         (b)      whether, as a result of conduct engaged in by the corporation, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the corporation;

         (c)      whether the consumer was able to understand any documents relating to the supply or possible supply of the goods or services;

         (d)   whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the corporation or a person acting on behalf of the corporation in relation to the supply or possible supply of the goods or services; and

         (e)   the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent goods or services from a person other than the corporation."

 

The proscription is in respect of a corporation engaging in trade or commerce in connection with the supply or possible supply of goods or services to a person.  The supply of services includes any contract for or in relation to the lending of moneys: s4(1) of the TPA and s5 of the FTA. 

 

The circumstances which are said to amount to unconscionable conduct giving rise to economic duress in the circumstances of this case are those which pertain to (1) the payment of $7,427.08 by Opalswan to Strathfield on 4 November 1993; (2) the payment of $4,000 by Opalswan to CAGA around 15 November 1993; and (3) the payment of $12,367.16 by Opalswan to Strathfield on 9 December 1993.

 

The special disadvantage which is said for Opalswan to have existed is the failure of Scott to advise it "of the unlikely results of the various finance attempts", by which I take to mean the true position in relation to the representations made by him.  It is not contended for Opalswan the special disadvantage was constituted by Scott's knowledge that Opalswan was bound to perform the contract with Archibalds.

 

The interest which it is said advantage was taken to promote was the interest of CAGA in receiving a fee for arranging finance for Opalswan, being the interest which Scott as agent of CAGA advanced to the detriment of the interests of Opalswan.

 

In my opinion, in the case of the first and third instances relied upon, the relevant corporation engaging in the conduct was not CAGA.  It is apparent from the findings concerning these instances that it was Strathfield which asked CAGA to collect the payments.  It was not CAGA which was the stronger party but rather Strathfield.

 

Furthermore Opalswan was not placed at a special disadvantage of the requisite type by its need for finance on the 089 scraper and the failure of Scott to be frank about financing prospects.  This was not a circumstance where the parties were different in bargaining power.  Johnson and Carratti were experienced business men familiar with this type of transaction.  They understood the amended second Strathfield Loan Deed and their rights and obligations under that transaction.  That was the case even if the special disadvantage relied upon was Scotts' knowledge of Opalswan's contractual commitment to Archibalds.

 

Additionally, as evidenced by the purchase of the 089 scraper by Zel, Opalswan was able in the end to call on funds from a company related to Caratti.  There was some evidence Opalswan had nowhere else to go for finance in that Carratti tried unsuccessfully to canvas other financiers, as did Scott.  It is open to inference that Strathfield or, in the absence of Strathfield, CAGA was the financier of last resort for Opalswan.  That was not a position brought about as a consequence of any exercise of special advantage on the part of CAGA or Scott.

 

It was also the case that if Scott had informed Opalswan of the true position in relation to each representation, it may still have wished to appease Strathfield as a potential lender.  Knowledge by Opalswan that settlement would not occur on the dates the subject of Scott's representations, would not preclude Strathfield having remained in the field as a lender.

 

 

In my opinion the elements are not present to enable these claims to be made out by Opalswan.

 

                           DAMAGES

 

It is the submission for Opalswan that whilst in the present case an assessment of damages pursuant to s82 of the TPA would most likely be made in accordance with the rules for assessing damages in the tort of deceit, that section is nevertheless wide enough to allow a measure of flexibility to the Court to determine the appropriate damages on a given set of facts: see Gates v The City Mutual Life Assurance Society Ltd (1986) 150 CLR 1 at 14; Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410 at 420-1; Bateman v Slatyer (1987) 71 ALR 553 at 564; Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 506; Tefbao Pty Ltd v Stannic Securities Pty Ltd (1995) ATPR 41-391 at 40,345; Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 131 ALR 363 at 369.

 

The damages claimed by Opalswan follow the particulars of loss and damage as amended during trial and reading as follows:

 

      "THE POSITION OF THE APPLICANT WITH RESPECT TO THE 089 SCRAPER HAD CAGA FULFILLED ITS OBLIGATIONS AS PROMISED BY 1 OCTOBER 1993.

 

      1.Total repayments as at 1 November 1996 (36 months

         x $6,000):                                         $180,000

      2.Representing:

         (a)   Capital repayments of $4,305.56 per month:               $155,000

         (b)   Interest payments of $1,694,44 per month:                $ 25,000

                                                            _________

 

                                             TOTAL:                     $180,000

                                                            _________

 

      Residual value of the 089 scraper in good working order as at November 1996: $240,000

 

      THE POSITION OF THE APPLICANT WITH RESPECT TO THE 089 SCRAPER IN LIGHT OF TAKING ITS ARRANGEMENT WITH ZEL NOMINEES PTY LTD

 

      1.Total hire liability by November 1996

         (36 months x $12,000):                             $432,000

         (No Capital component)

      2.Residual value to Applicant is Nil                

      3.The loss of the Applicant as a revenue account:    $432,000

         Less interest to CAGA that would have been paid:   $ 25,000

                                                            _________

     

                                                      TOTAL:$407,000

                                                            _________

      4.Applicant's loss on the Capital Account:

         (a)   Residual value as at November 1996:                      $240,000

         (b)   Less original purchase price:                            $155,000

                                                            _________

 

                                                      TOTAL:$ 85,000

                                                      _________

      5.Losses with respect to the 089 scraper are the

         sum of 3 & 4 above:                                $492,000

 

      OTHER LOSSES

 

      6.Fees paid to CAGA to arrange finance of the 089 scraper $9,000

      7.Liabilities incurred in the hiring of alternative equipment in par29 of the Amended Substituted Statement of Claim:

         (i)   7 weeks hire of two 631 C Scrapers from Robinswood Pty Ltd at the rate of $1,000 per day per machine for 7 weeks (on 6 day week basis): $84,000 reduced to $42,000

         (ii)  Mobilisation fee of $500 per machine: $1,000

      8.Costs repairs on 089 scraper: $40,485.55

 

                                             Total losses: $583,485.55"

 

It is accepted for CAGA that the measure of damages in tort is appropriate in most, if not all, cases under PtV of the TPA, especially those involving misleading and deceptive conduct in the making of false statements.  In reliance on Gates supra, it is stated the relevant question to be asked in assessing damages is not how much better off the claimant would have been if the misleading or deceptive statements had been true, but how much worse off the claimant was by reason of having relied on those statements. Cf Warnock v ANZ Banking Group Ltd (1989) ATPR 40-92.

 

It is the case that in order to recover damages Opalswan must prove the loss or damage claimed to have been suffered was "by" conduct in breach of the Act: Wardley Australia Ltd v Western Australia (1992) 175 CLR 514.  See the principles laid down in Gould v Vaggelas (1958) 157 CLR 215 at 236, being a case dealing with the tort of deceit.

 

As to the effect of s82, Spender J in Shepherd v Noyes Bros Pty Ltd (1985) ATPR 40-588 at 46,750 said:

 

      "When one has regard to the words of s82, two fundamental observations may be made.

 

      The requirement that the entitlement to damages is to "a person who suffered loss or damage" suggests that the essential ingredient of the statutory cause of action is not of the non-attainment of a benefit or the non-realisation of a profit but the incurring of loss or damage, inviting a comparison between the position of the Applicant after the contravention with his position before the contravention.  This is the "worse off" approach.

 

      The second important aspect of the statutory formulation of the cause of action is that that loss or damage has to be suffered "by" the conduct of another person that constitutes a contravention of PtIV or V of the Act.  This makes it plain that it is only loss or damage that is caused by the contravening conduct which can be recovered in the statutory cause of action."

 

The obligation on the Court, having found damages occurred, is to do its best to quantify the loss even if a degree of speculation and guess work is involved: Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167 at 182.

 

The alternative bases for damages

 

I do not consider the first alternative in Opalswan's claim for damages is appropriate in the light of the "worse‑off" approach and the findings of fact.  The liability of CAGA arises from findings that Scott for CAGA continued to represent the availability of finance without qualification when qualification was needed to avoid misleading and deceptive conduct.  The liability is not found to have arisen from liability of CAGA fixed by reference to the CAGA Deed.  Furthermore the primary purpose to be served by an award of damages is the placement of Opalswan in the position in which it might have been expected to be if the misleading conduct had not occurred.  The alternative position of claim best meets that objective.

 

Revenue Account Claim

 

This claim arises from the arrangement made with Zel.  At the time that arrangement was put in place Carratti was a shareholder of Zel.  Robinswood was a company of which Carratti was the director and secretary and Zel was a
shareholder.  Opalswan was a company controlled by Johnson and Carratti.  Carratti became a director of it on 1 June 1995 and Johnson ceased to be a director or shareholder on that date.  Grangefield was a company controlled by Johnson and Carratti. 

Before the arrangement with Zel was put into place it was not intended Opalswan would derive any income from ownership of the 089 scraper or would have possession of it.  Grangefield was to operate it and meet any financial obligations of Opalswan with respect to it.  This is shown in the following table:

 

                           TABLE 1

                      ORIGINAL PROPOSAL

 

 

OPALSWAN	¬Purchases the Equipment
HOLDING COMPANY

 

         ¯              

  Provides machines to Grangefield

         ¯

GRANGEFIELD

OPERATING COMPANY

 

         ¯

  Responsible for finance costs,

  insurance costs, maintenance

  ("use costs"); receives income

 

         ¯

ARCHIBALDS

 

 

As the arrangement was implemented with Zel it is shown in the next table:

                              TABLE 2

                 ZEL SCHEME - As at 10 March 1994

 

Shareholders: Caratti and Caratti's ® brother	ZEL	¬  Purchased 089 scraper 10/3/94     for $155,000 from Productive Parts
	Trustee of a          Trust for       Caratti's Mother

               ¯  

           Hire of 089 scraper for $2000 per month             

               ¯

Shareholders: Zel and a ® Caratti company	ROBINSWOOD
	Trading arm of the        Caratti group

              ¯           

           Hire of 089 scraper at $65 per hour or

                     $12,000 per month

              ¯

50% Johnson as trustee for Caratti 50% B Johnson (Since 1/6/95 both issued shares are held by Caratti companies)	OPALSWAN
	Holding Company

              ¯         

   Hire on basis Grangefield meets Opalswan's obligations to Robinswood - but see evidence on discharge by contra work

              ¯

Shareholders: Johnson and  ® Caratti interest	GRANGEFIELD
	Operating Company

              ¯           

                     Contract of work

              ¯

ARCHIBALDS

Upon implementation of the arrangement with Zel any money owed by Opalswan would be cut out by hiring the machine backwards and forwards so that when all finances were paid there would be a reconciliation.  The position was Opalswan would allow Grangefield to use the machine to generate income.  The arrangement between Opalswan and Robinswood in respect of the payment of any money owed to Robinswood would be met by work being carried out with the 089 scraper for and on behalf of Robinswood and any other Carratti company on their properties throughout the State.  The arrangement was there would be a final reckoning at the end of the three year term of the amended second Strathfield Loan Deed.  There was evidence such work had been done on Carratti properties.  On Carratti's evidence Opalswan did about $250,000 worth of work for Robinswood, about $170,000 worth which was done at farms at Southern Cross.  Johnson gave evidence of hiring fees for work done around farms and at Malaga. 

 

It is submitted for CAGA the arrangement entered into between Opalswan and Zel was on its face and in reality a sham designed to create a damages claim.  In my opinion such inference is not open.  It is apparent the arrangement was structured so as to obtain the best corporate advantage available in the circumstances but it was neither a sham nor designed to create a damages claim. 

 

Similarly I am unable to accept the submission that the conduct of Opalswan with respect to the arrangement with Zel (which I understand to mean the involvement of Zel as purchaser) was unreasonable, unbusinesslike and not necessary.  The evidence does not support such an inference.   There is no evidence that Zel's involvement was not the only commercially appropriate option open to Caratti.  It was not unreasonable in the circumstances. 

 

If the submission is intended to assert Zel should have lent the money to Opalswan to purchase the 089 scraper, it is the
case the only evidence is that of Caratti that his mother, as the controlling interest in Zel, would not agree to do so.  Mrs Caratti was not called by Opalswan.  Her evidence could have elucidated the issue of control of Zel by Caratti.  However, even if the inference can be drawn that her uncalled evidence would not have assisted Opalswan's case - Jones v Dunkel (1959) 101 CLR 298 - that does not permit an inference that untendered evidence would in fact have been damaging to the party tendering it.  Caratti's evidence was uncontradicted by either party. I do not consider it was inconsistent with the evidence that Caratti and his brother were the shareholders of Zel.  The principal activity of Zel is shown on the register maintained by the Australian Securities Commission as being "trustee for the [Caratti's mother's] Trust - share trading."  His mother is a director of Zel.  In these circumstances I do not consider it can be found that Zel's decision to purchase the 089 scraper rather than lend money to Opalswan was unbusinesslike or unreasonable.  It is apparent from that evidence the refusal by Caratti's mother to loan funds was determined by the commerciality of Zel obtaining a deduction against tax for depreciation.  That was reasonably in her interests as beneficiary of the trust.

 

However, there are three matters which affect Opalswan's claim on revenue account:

 

(1) Allowance of credit for contra work

 

For CAGA it is submitted the evidence of the contra work done by Opalswan on Caratti properties supports an inference there have been considerable and significant inroads towards cutting out the debt.  I consider these submissions are correct and that the value of the work done on behalf of Opalswan should be set off against the claim for hire liability.  On the evidence that value should be $250,000.

 

(2) Failure to mitigate

 

It is further submitted for CAGA it is open for the Court to infer Carratti is capable of controlling all the related companies.   Carratti's evidence was Zel purchased the machine through a trust which, having tax problems, got the benefit of depreciation which was significant in relation to earthmoving equipment.  I agree the inference of Caratti's control can be drawn from all the circumstances of the companies other than Zel in relation to which the evidence of control by Caratti's mother was not rebutted. 

 

Further it is submitted the inference can be drawn the arrangement entered into with Zel was neither motivated by a desire to mitigate damages nor directed to that end.  Relevantly to this, it is said it can be inferred Zel could have financed Opalswan's purchase of the 089 scraper so that, if it had done so, Opalswan would have suffered no loss on revenue account in respect of the repayments claimed. In my view the evidence does not permit of this inference because of the control of Zel by Caratti's mother.  It was open to Caratti to have nominated Grangefield to hire the 089 scraper and therefore for Grangefield to meet the hiring liabilities from revenue received.  The reason Opalswan was introduced was to protect the capital of the 089 scraper from litigation against the operating company Grangefield.  That was a reasonable commercial consideration. 

 

However, it was clearly within Opalswan's right to mitigate damages on revenue account by requiring Grangefield to meet the hiring liabilities which Caratti's evidence said were due for payment from Grangefield to Opalswan.  Opalswan must account for the benefits it should have received from hiring the 089.  The arrangement for contra work to discharge that liability was evidently done to suit the convenience of Caratti and his group of companies and not to mitigate the liability on revenue account created in Opalswan by receipt of
payments from Grangefield which would have discharged Opalswan's liability to Robinswood.   It was not reasonable or commercial for Opalswan to forego payment from Grangefield of the hiring liabilities nor was it commercial for it to do so when it had the same liabilities to Robinswood.

 

There is a further point of relevance to the issue of mitigation.  Grangefield received from Archibalds revenue calculated at the hourly rate for the 089 scraper of $175.  The hourly rate creating the hiring liability from Opalswan to Robinswood was $65.  There was therefore capacity in Grangefield to discharge the liability to Opalswan by payment rather than contra work.  That supports the inference that contra work was utilised because it suited the convenience of Caratti and his group of companies.  Additionally, despite the greater rate charged to Opalswan by Robinswood compared to the rate charged by Zel to Robinswood for hire, there was nothing uncommercial about the former rate. 

 

I therefore consider there has been a failure by Opalswan to mitigate its damages.

 

(3) Grangefield's discharge of Opalswan's liabilities

 

On behalf of CAGA it is then submitted the arrangement with Zel was designed, or if not designed then implemented, in such a way so as to ensure no liability with respect to hire liability would reside in Opalswan at the end of the three year period.  It is also submitted for CAGA if Opalswan has so arranged its affairs as to ensure there is no loss, it cannot claim a loss.  Although the contract of hire between Robinswood and Opalswan did not specify limitation to a three year period, the contention nevertheless requires consideration.  I take it to be based on the evidence of Johnson in cross-examination that Grangefield was to meet Opalswan's financial obligations with regards to the hiring liabilities.  That evidence means Grangefied rather than
Opalswan was liable to Robinswood, so there cannot have been any loss on revenue account by Opalswan because the liability giving rise to that loss was one in respect of which Opalswan has a right of recovery from Grangefield. 

 

For these reasons I conclude Opalswan has no right of recovery in respect of the claimed loss on revenue account either because of the failure to mitigate or because the liability was that of Grangefield.

 

The Capital Account Claim

 

The first submission for CAGA is it should be inferred on the evidence as a whole no loss is suffered by lack of actual ownership of the 089 scraper by Opalswan, both possession and ownership of it being merely matters of convenience for the group of companies as a whole.  It is not the case that Opalswan received the possession of the 089 scraper as a matter of convenience.  Zel refused to allow it to acquire ownership by refusing to lend to it.  Opalswan therefore lost the opportunity to acquire the capital.

 

It is next submitted for CAGA it is self evident the arrangement entered into with Zel had the immediate effect of creating a substantial capital loss by Opalswan.  It is also submitted for CAGA it is open on the evidence to draw the conclusion such loss is and was intended to be nothing more than a paper loss tailored to suit the advantage of the companies in the group.  Reference is then made to the fact that the only explanation given for the necessity of the arrangement was the preference of Caratti's mother.  This contention does not assist CAGA unless the actions of Zel in declining to lend are seen as the actions of Caratti alone.  The evidence is that Zel is the trustee of Caratti's mother's interests and she was not in agreement to any step other than purchase.  There was a sound commercial reason for this, namely the wish of Zel to achieve deductions for depreciation.
There is not the evidence to permit of a finding in terms of the submission.

 

There is the question whether the loss on capital account was caused "by" Scott's misleading and deceptive conduct.  It was De Rosa not Opalswan to whom Scott had represented that the amended Memorandum of Understanding was acceptable to him and would be acceptable to CAGA.  Scott was not at the meeting on the night of 2 October and so was not a party with Johnson to agreeing the terms of the varied Memorandum of Understanding, which in any event was executed by those parties doing so after Opalswan had made the fifth written offer.  However, when Opalswan delivered the 089 agreement and the fifth written offer to Scott, it did so on the understanding of the fifth representation then made by Scott.  The reliance of Opalswan on CAGA and hence on representations made for it, is supported by the content of the qualifying words to the provision for financing in the fifth written offer.  Having relied upon that representation to commit itself, damage was caused to Opalswan by the misleading character of that representation and the subsequent representations which led it to not wish to repudiate the agreement resulting from the fifth written offer.  It follows that I consider Opalswan can maintain a claim for the loss on capital account.

 

So far as the quantum of capital is concerned, the residual value is claimed as at November 1996.  The evidence of Opalswan's expert Strickland was he could not put a value on the machine as at that date.  Burton was in the same position.  There is therefore a contingency involved in the claim for residual value, namely that the machine was in the same condition in November 1996 as in March 1996 when Burton and Strickland valued the machine at the amount now claimed of $240,000.  The further contingency is that the market and mining industry will be in a similar state in November 1996 as in March 1996.  There is no evidence led from any party upon which to arrive at findings relative to these contingencies. 
Nor are there any submissions for CAGA on what the appropriate rate of discount would be.  In these circumstances there is no proper basis for the Court to reduce the amount claimed for Opalswan on this item in these respects.

 

The Claim for Fees

 

It is common ground and I have found that Opalswan paid to CAGA the sum of $5,000 as fees for arranging finance of the Equipment.  I have found that Opalswan made an additional payment of $4,000 to CAGA to complete the financing of the 089 scraper.

 

It is the fact the major part of the initial transaction, the financing of the two scrapers, was carried to completion.  Opalswan should not be entitled to a refund of the original sum of $5,000.  I would therefore reduce the amount claimed for fees to $4,000.

 

Hiring of alternate Equipment

 

I have previously found this was an obligation undertaken by Opalswan. 

 

There is, however, evidence of Townshend to which the case for CAGA points that the two additional scrapers "should have [been] in the rubbish dump".  His evidence was one scraper was not fit for work but the other one did work after some repairs had been effected on it.  In the light of this evidence Opalswan claims only half of the cost of two machines at $1,000 per day for a six day working week over a period of seven weeks.  The claim also includes the mobilisation fee. 

 

For CAGA it is contended the causative link between its conduct as found and the incurring of these expenses is not made out because the evidence as to whether Grangefield actually faced termination of its contract with Archibalds was
inconclusive.  Townshend's evidence was he had orally informed Johnson if the 089 scraper was not there by a certain date he would have to get other people on site and his gear would no longer be required so that he would have to leave the site.  His evidence was he had authority from Archibalds to make such a statement to Johnson.  In my opinion it is the case that Grangefield faced termination of its contract with Archibalds.

 

There is no foundation for the further submission for CAGA that the hiring of the alternative equipment was so manifestly prejudicial to Opalswan and so unusual and unreasonable from its perspective that the inference is open, the hiring was a sham or, if not, damages with respect to the hiring of the additional scrapers should not in all the circumstances be allowed.

 

Nevertheless it is contended for CAGA that in the face of evidence Grangefield was to meet the loan repayments that would otherwise be an obligation of Opalswan, as the 089 scraper had not been purchased at that stage, Opalswan could suffer no indirect loss in the event of the termination of the Archibalds contract.  In my view this submission is correct and precludes recovery by Opalswan on this item.

 

Cost of Repairs, Parts and Labour

 

Carratti's evidence establishes that $40,485.55 was expended on repairs to the 089 scraper.  Although Johnson's affidavit evidence in the Supreme Court action was that these costs had been met by Opalswan, his evidence in cross-examination in this action was of that amount the sum of $22,838.55 was paid by Grangefield.  Opalswan's case does not establish that Grangefield made the payment on behalf of Opalswan so that Opalswan remains indebted to Grangefield.  Accordingly Opalswan's claim should be reduced by the amount paid by Grangefield.

 

Opalswan's expert Strickland, while finding it difficult to put a value on the 089 scraper, testified that wreckers would probably have given $40,000 for it in its unrepaired state.

 

Opalswan seeks to recover as damages the residual value of the 089 scraper as at November 1996 making allowances only for the original purchase price.  I accept the submission for CAGA that it should not be permitted to double dip by claiming in addition the cost of repairs which in effect increase the residual value of the machine.  The cost of repairs should be credited against Opalswan's claim for the loss of the residual value of the machine reducing that component of the claim by $17,647. 

 

Conclusion

 

For the above reasons I consider Opalswan has made good the Trade Practices claims in respect of misleading and deceptive conduct.  I would allow damages in the sum of $89,000 calculated on the following basis:

 

   "THE POSITION OF THE APPLICANT WITH RESPECT TO THE 089 SCRAPER IN LIGHT OF TAKING ITS ARRANGEMENT WITH ZEL NOMINEES PTY LTD

 

   1.Total hire liability by November 1996

         (36 months x $12,000):                       $432,000

         (No Capital component)

   2.Residual value to Applicant is Nil             

   3.The loss of the Applicant as a revenue account:Not allowed

         Less interest to CAGA that would have been paid:   "  "

                                                      _________

 

                                                TOTAL:       NIL

                                                      _________

 

   4.Applicant's loss on the Capital Account:       

 

                                                      $240,000

                                                Less:$17,647

                                                      ---------

         (a)   Residual value as at November 1996:          $222,353

                                                  

         (b)   Less original purchase price:          $155,000

                                                      _________

 

                                                TOTAL:$67,353

                                                      _________

   5.Losses with respect to the 089 scraper are the

         sum of 3 & 4 above:                          $67,353

                                                      ---------

 

   OTHER LOSSES

 

   6.Fees paid to CAGA to arrange finance of the

         089 scraper $9,000 less $5,000               =$4,000

   7.Liabilities incurred in the hiring of

         alternative equipment in par29 of the

         Amended Substituted Statement of Claim:

         (i)   7 weeks hire of two 631 C Scrapers

               from Robinswood Pty Ltd at the rate

               of $1,000 per day per machine for

               7 weeks (on 6 day week basis): $84,000

               reduced to $42,000 - not allowed.

         (ii)  Mobilisation fee of $500 per machine:

               $1,000 - not allowed.

   8.Costs repairs on 089 scraper:

         $40,485.55 less $22,838.55                   =$17,647

                                                      --------

                                          Total losses: $89,000

                                                      ________"

 

 

 

                          APPENDIX

                  REPRESENTATIONS AS FOUND

Pleading Paragraph No	Representation No	Date
13	1	02/09/93	Finance had been approved and would be received on 10/09/93
20	2	21-24/09/93	Settlement would take place and possession of the Equipment would be given to Opalswan within a few days or less
21	3	01/10/93	Strathfield held insufficient funds to finance the whole of the Equipment but it could finance the two scrapers within a week
22	4	01/10/93	The 089 scraper would follow in a matter of days
23	5	02/10/93	Finance for 089 scraper would be set within a few days
27	6	5-8/10/93	The settlement on the 089 scraper would take place on 8 October
32	8	04/11/93	Finance on the 089 scraper would be completed within a few days
34	9	9-12/11/93	The second Strathfield Loan Deed required amendment because Strathfield had declined to proceed with it

 

Pleading Paragraph No	Representation No	Date
36 37	10} 11}	19/11/93	A cheque for $20,000 ("the Replacement Cheque") would be provided to Opalswan by 23 November for the agreed part‑payment of the spare parts needed for the 089 scraper
38	12	19/11/93	Settlement on the 089 scraper would proceed on 23 November and Johnson was free to collect the parts of 089 scraper and re‑assemble it
40	13	25/11/93	The Replacement Cheque would be forthcoming at settlement on 26 November
43	14	29/11/93	The Replacement Cheque would be provided to Opalswan by 3 December
49	15	03/02/94	Settlement of the purchase of the 089 scraper would occur on 9 February

 

 

 

     I certify that this and the preceding 69 pages are a true copy of the Reasons for Judgment of his Honour Justice R D Nicholson.

 

     Associate:

 

     Date:              18 November 1996

 

 

 

 

                         APPEARANCES

 

Counsel for the Applicant:     Mr D Chantler

Solicitors for the Applicant:  Jon Davies & Co

 

 

Counsel for the Respondent:    Mr G Barrow

Solicitors for the Respondent:Williams & Hughes

 

 

Date of Hearing:               6, 7, 8, 9 and 10 May 1996

Date of Judgment:              18 November 1996