FEDERAL COURT OF AUSTRALIA

Endormer Pty Limited v Australian Guarantee Corporation Limited [2001]

FCA 1208

TRADE PRACTICES - Misleading and deceptive conduct - alleged by motor vehicle dealer in liquidation against financier in relation to financier’s administration of motor vehicle bailment floor plan – proceedings for damages brought by such motor vehicle dealer at the instance of its directors purportedly in office – loss and damage leading to such winding up insolvency claimed to have been caused by such alleged misleading and deceptive conduct and negligence of the financier – equitable charge held by financier over motor vehicle dealer’s assets sought to be set aside by reason of lodgment with ASC out of time – additional claim for damages made by wound-up motor vehicle dealer against receiver appointed by financier by reason of receiver’s disposition of motor vehicle dealer’s assets at alleged inadequate sale price – equitable charge guaranteed by directors and their wives – same measure of damages claimed by directors and wives from financier arising out of financier’s conduct complained of – whether mortgage over home of one director invalid by reason of alteration made thereto by financier after execution -–whether grounds of appeal reviewable.

Corporations Law ss 263, 266 and 420A

Trade Practices Act 1974(Cth) ss 52 and 53

Contracts Review Act 1980 (NSW)

Farrow Mortgage Services Pty Ltd (in Liquidation) v Slade and Nelson (1996) 38 NSWLR 636 referred to

Horn v York Paper Pty Ltd (No 2) (1991) 23 NSWLR 622 applied

Independent Automatic Sales Ltd v Knowles & Foster [1962] 1 WLR 974 applied

Italiano v Barbaro (1993) 40 FCR 303 applied

Kent v La Communaute des Soeurs de Charite de la Providence [1902] AC 220 (PC) applied

Mitchelson v Mitchelson (1979) 24 ALR 522 referred to

State Rail Authority of New South Wales v Earthline Construction Pty Ltd (In LiquidtionLiquidation) (1999) 73 ALJR 306 referred to

Walsh v Law Society of New South Wales (1999) 198 CLR 73 applied

Endormer Pty Limited (In Liquidation), Kwikday Pty Limited, Glenn Robert Jarrett, David Colin Paterson, Jarrett Holdings Pty Limited & Alinbow Pty Limited v Australian Guarantee Corporation Limited and Peter James Hedge

N 1354 OF 2000

LEE, FINN & CONTI JJ

29 AUGUST 2001

SYDNEY

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.                  The Appeal be dismissed.

2.                  The Appellants pay the Respondents’ costs of the Appeal.

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

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

THE COURT

Background circumstances

1                     This is an appeal from the judgment of Gyles J delivered on 21 November 2000 by which his Honour:

(i)                  dismissed causes of action for damages brought by the Appellants against the Respondents, in the case of the First Respondent being causes of action for contravention of ss 52 and 53 of the Trade Practices Act 1974 (Cth) and the tort of negligence in relation to its conduct as a financier of the First Appellant’s motor vehicle dealership pursuant to a bailment floor plan or plans, and in the case of the Second Respondent, being the causes of action for negligence based upon his conduct as the receiver appointed by the First Respondent in relation to the First and Second Appellants under the auspices of deeds of charge given by them to secure moneys owing to the First Respondent under the bailment floor plan, and in relation to which deeds of charge the Third to Sixth Appellants were guarantors;

(ii)                dismissed a further cause of action to set aside such deeds of charge given by the First and Second Appellants respectively in favour of the First Respondent, and to set aside the subsequent appointment by the First Respondent of the Second Respondent as receiver to the First and Second Appellants;

(iii)               dismissed other causes of action against the Appellants brought in the same contexts;

(iv)              entered judgment in favour of the First Respondent on the Cross-Claims of the First Respondent against the Appellants as principal debtors/guarantors in respect of moneys outstanding under the said securities in the sum of $975,143.69.

2                     The Appellants were represented by counsel in the proceedings at first instance, but the appeal was conducted by the Third Appellant (Mr Jarrett) in person. Though he is not legally qualified, Mr Jarrett asserted an entitlement to appear in the place of the First Appellant (“Endormer”), pursuant to a deed said to have been signed in his favour by the lLiquidator thereof, and to represent the Second Appellant (“Kwikday”) by virtue of his office as a director thereof. Mr Jarrett further asserted entitlement to represent the Fourth Appellant (“Mr Paterson”) and the Sixth Appellant (“Alinbow”) a company controlled by Mr Paterson, by virtue of a deed purportedly entitling him so to do. Mr Jarrett next asserted entitlement to appear for the Fifth Appellant (“Jarrett Holdings”) by virtue of his office as a director thereof. Mr Jarrett and Mr Paterson were directors and controllers of Endormer and Kwikday at the times material to issues arising at first instance and on appeal. In the circumstances, the Court permitted Mr Jarrett to conduct the appeal on behalf of all Appellants including himself, given their common interest and the proximity of their relationships. No objection was raised by the Respondents to that course. Mr Jarrett had signed and filed the Notice of Appeal, and had also signed the Outline of the Appellants’ Submissions of 2 May 2001 and the Appellants’ Submissions in Reply of 24 May 2001. I We would infer that he was the author of such documents. The argument of the parties on appeal, the hearing of which commenced on 24 May 2001, extended over one and one half hearing days. Five volumes of appeal books were filed, containing the transcript of the lengthy proceedings below (which extended over more than thirty days) and the documentary exhibits tendered in the course of the same.

3                     Endormer was a new and used motor vehicle dealer which had conducted a Nissan motor vehicle dealership trading as Drummoyne Nissan, and subsequently a Hyundai motor vehicle dealership trading variously as Sydney City Hyundai, Sydney City Motor Group, Eastside Hyundai and Broadway Financial Services.

4                     Kwikday was a wholly owned subsidiary of Endormer.

5                     The First Respondent (“AGC”) was the financier for Endormer and Kwikday having taken over that role from Barclays Finance Limited (“Barclays”).

6                     The Second Respondent (“Receiver”) was appointed by AGC to Endormer and Kwikday on 13 April 1994.

7                     Material events which occurred in the course of the contentious relationships involved in the proceedings comprised mainly the following, which I we have extracted from the judgment below and which are set out in chronological sequence for ease of future reference; in so doing I make only sparse reference to Kwikday, which though placed in receivership by AGC was not placed in liquidation at the instance of Messrs Paterson and Jarrett (as in the case of Endormer) or otherwise; the judgment below refers predominantly if not essentially to Endormer as the corporate vehicle most involved in the controversies which happened:

1991

Oct/Nov (generally) Wholesale finance package successfully negotiated by Mr Paterson for $2.35 million (approx) from Barclays principally to enable earlier AGC borrowings to be paid out; at that stage, Mr Paterson then conducted Endormer’s Drummoyne Nissan dealership together with Mr Neville Crighton, who was apparently a wealthy and experienced motor vehicle dealer.

1992

Feb (generally) By reason of AGC’s desire to win back Endormer business, Mr Paterson developed proposals for finance facilities from AGC for Endormer by way of supplement to the Barclays facility; thereafter most retail financing came to be provided by AGC, though Barclays continued to provide a substantial wholesale financing facility.

Feb 19 Nissan gave notice to Endormer of intended termination of the Drummoyne Nissan dealership, and thereafter Endormer put in train steps to establish a Hyundai franchise; prior to establishing such replacement motor vehicle franchise, Mr Crighton retired from his involvement with Endormer and Kwikday, and was replaced by Mr Jarrett.

June 24 Barclays gave Endormer 30 days notice of intended termination of the Barclays financial arrangements.

June 30 AGC notified Endormer that Endormer’s wholesale finance application to AGC for $2.35 million was declined, thereby placing Endormer in a situation potentially without motor vehicle dealership financing.

July 2 Endormer applied to AGC for a reduced facility of $1.75 million, upon being notified by AGC officers that an application for any larger sum would not be approved; this facility was by this time required for the purpose of conducting the new Hyundai franchise in lieu of the Nissan franchise.

Barclays extended time for repayment of its facility to 31 August 1992, on the basis of Endormer’s then ongoing discussions with AGC for the $1.75 million facility.

Jul/Aug (about) AGC granted approval to Endormer for such finance facility of $1.75 million.

Aug 2 Bailment floor plan relating to the AGC finance accommodation of $1.75 million wasere entered into between AGC and Endormer and Kwikday; the remaining Appellants provided guarantees in respect of such floor plan, including Mr Paterson and Mr Jarrett, and the Endormer financial arrangements in favour of Barclays were terminated.

Aug 2 (about) Mr Jarrett and Jarrett Holdings invested $100,000 in Endormer’s business by way of “equity” support, Mr Jarrett raising such funds by second mortgage over his home.

1993

July Approximate time of signing of Deeds of Charge from Endormer and Kwikday in favour of AGC.

1994

Mar 18 Date appearing on the Deed of Charge from Endormer in favour of AGC.

Mar 31 Date of lodgment of Deed of Charge from Endormer in favour of AGC with Australian Securities Commission.

Apr 12 Endormer resolved to appoint an insolvent administrator to itself.

Apr 13 AGC appointed Receiver to Endormer (and Kwikday) pursuant to Deeds of Charge.

Apr 13 Federal Court appointed provisional liquidator to Endormer based upon an affidavit of insolvency made by Mr Paterson on behalf of Endormer.

Apr 15 Initial consensus arrived at for the sale by the Receiver of Endormer to Twamley Pty Limited (“Twamley”) of the principal assets of the receivership, Twamley being a company controlled by Mr Smithson who had previously dealt with AGC through another dealership.

Apr 20 Agreement finalised for the sale by the Receiver to Twamley of the principal assets of the Endormer receivership.

Apr 24 Federal Court orders that Endormer be wound up.

1995

Sept 21 Twamley resells assets of the business acquired from the Endormer Receiver for a consideration which included $900,000 for the goodwill, logo and businesses’ names.

Proceedings for breach of s 52 of Trade Practices Act and for negligent conduct brought against AGC

8                     The case for the Appellants under this heading was to the effect that the amount of the AGC funding provided pursuant thereto was inadequate, and the terms thereof too restrictively administered, with the consequence that the business was deprived of necessary working capital, which was claimed to be the root cause of the later financial problems which caused the damage to the motor vehicle dealerships and the consequential losses complained of. His Honour made factual findings bearing upon those causes of action brought by the Appellants against AGC for contravention of ss 52 and 53 of the Trade Practices Act 1974 (Cth), and for negligent breach of duty at common law, in each case adversely to the Appellants, and in doing so drew inferences and conclusions from proved circumstances, and otherwise from the lack of credibility which he attributed to Endormer’s executive officers Messrs Paterson and Jarrett. It is appropriate that we reproduce below the majority of such adverse findings sequentially from the segment headed “Section 52 TP Act and Negligence” in the judgment below, in order to demonstrate the nature of the task which the Appellants were obliged to address on appeal (the paragraphs numbers inserted below, except where indicated to the contrary, are those appearing in the reasons of his Honour):

(i)                  Endormer did not disclose to AGC, prior to AGC’s rejection of the initial finance application for $2.35 million on 30 June 1992, the fact of Nissan’s earlier notice of termination of Endormer’s Drummoyne Nissan franchise given on 19 February 1992, yet such application was inherently predicated upon Endormer’s continuing the conduct of such franchise. Incidentally at the time such earlier finance application was made, the principals of Endormer were Mr Paterson and Mr Neville Crighton, a wealthy and experienced motor dealer, and not Mr Jarrett: see [13];

(ii)                Endormer’s financial accommodation account with Barclays had proved to be troublesome for Barclays “from the beginning to the end”; there had been difficulty encountered by Barclays in obtaining information and reports, difficulty in accounting for vehicles and concerns about Endormer’s financial position. Nissan’s notice of termination of its franchise in favour of Endormer precipitated Barclay’s notice of termination of its facility particularly when it became also apparent that Mr Crighton did not intend to take up any interest in Endormer’s then proposed replacement Hyundai franchise; Barclays was relieved to receive advice from Endormer that AGC would be paying out the Endormer indebtedness, because it relieved Barclays of anticipated problems: see [14];

(iii)               Endormer’s ongoing relationship with Barclays was thus doomed in any event, being a situation unaffected by any contemporaneous involvement of AGC in relation to Endormer; there was no substance to Endormer’s claims that lack of Endormer retail business, and Endormer’s involvement with AGC, particularly in relation to retail business, influenced Barclays' decision to terminate the Endormer finance facility and his Honour accepted the testimony of Barclays’ officers in that regard; thus his Honour concluded that Barclays was not available at any subsequent material time as an alternate source of finance to AGC, and no case had been made on behalf of Endormer for the ongoing availability of any other source of finance to that of AGC: see [15] and [17];

(iv)              Messrs Paterson and Jarrett knew that AGC officers Messrs McGilvray and Moore had no authority to approve the $2.35 million facility which was being sought by Endormer from AGC to replace the Barclays facility, notwithstanding their assurances that AGC approval would be forthcoming; Mr McGilvray believed that AGC approval of the application for the $2.35 million facility sought by Endormer would be forthcoming, and forthcoming within a reasonable time; he had not previously experienced the rejection of any loan etc application by the AGC decision-makers in circumstances where he had supported the same nevertheless; nevertheless Mr McGilvray did not inform Mr Paterson or Mr Jarrett at any time that the AGC decision-maker had actually granted approval to the requested $2.35 million facility, contrary to their testimony: see [18.1 and 18.2];

(v)                Endormer’s application to AGC for $2.35 million accommodation was ultimately rejected because of Mr Rowland’s assessment of the lack of capacity of Endormer to financially service such proposal facility; Mr Rowland was the ultimate AGC decision-maker in relation to such application: see [18.3];

(vi)              There was nothing sinister or irregular in the analysis and revision undertaken by AGC’s officer Mr Davidson in respect of the figures presented by Endormer to Mr McGilvray: see [18.4];

(vii)             The AGC facility of $1.75 million which was ultimately approved and made available represented the maximum amount of funds that Mr Rowland would have approved on behalf of AGC for availability to Endormer, consistently with the protection of its own interests, and such status quo of limited ongoing availability of funds thereafter prevailed because of AGC’s assessment of Endormer’s confined capacity to service the facility: see [18.5] and [24]; moreover, his Honour was not persuaded that the cause of Endormer’s woes was the result of an inadequate availability of funds from AGC, or that the AGC conditions of availability were too restrictive: see [18.6];

(viii)           No action was taken by AGC adversely to Endormer which was calculated to do anything more than was reasonably required to protect the interests of AGC as creditor of Endormer, whilst at the same time doing as least harm as was reasonable in the circumstances to the business of Endormer; in that context, his Honour rejected Endormer’s attack upon the bona fides of AGC’s Mr Rodd, and considered that he and the other AGC officers were anxious for Endormer to succeed; moreover, the obtaining of relevant information from Endormer was a difficult experience for AGC, and AGC encountered problems in tracking vehicles purportedly still on bailment to Endormer, and in disposing of used vehicles; it was not possible to read the story of the dealings between Barclays and Endormer on the one hand, and AGC and Endormer on the other hand, without recognising a striking similarity of the problems encountered by both financiers in administering their respective Endormer accounts: [see [21];

(ix)              The reality was that the cause of the financial failure of Endormer was chronic undercapitalisation and a critical shortage of working capital; there was at all material times a deficiency of current assets of Endormer compared with its current liabilities; his Honour considered that a chartered accountant Mr Bryant, who was engaged by AGC to provide independent expert advice, provided the most helpful analysis of the financial problems of Endormer and the business which it was conducting; Endormer’s case involved the notion that such problems would have been solved by Endormer being allowed to borrow more funds to increase its working capital, albeit on a short-term repayment basis, but his Honour rejected the viability of that proposition: see again [21];

(x)                There was no reliable evidence to suggest that lack of finance to purchase motor vehicles for resale was, in the circumstances of Endormer’s business, the cause of any lack of profitability thereof; in any event the reduction in the amount of finance available to Endormer from AGC in the way originally envisaged was entirely the result of the decision of Endormer to appropriate part of the available proceeds of the overall facility for the time being for purposes other than the purchase of vehicles pursuant to the finance facilities, that is to say, the Bailment Plan involving both Endormer and Kwikday: see [23]; and

(xi)              All steps complained of that were taken by AGC, including the increase in the interest rate charged, accorded with AGC’s contractual rights: see [25].

9                     It was essentially upon the basis of his foregoing findings and conclusions that his Honour rejected the Appellants’ claims against AGC as to conduct on its part by way of contravention of s 52 (and s 53) of the Trade Practices Act and for negligent breach of duty of care. In so concluding, his Honour pointed out that in any event, in so far as the complaints of negligence related to the manner in which the loan arrangements were administered by AGC, such complaints were misconceived, since the relationship between the parties was governed by contract, and there were no identifiable tortious duties which co-existed at material times with AGC’s contractual duties. No cause of action for breach of contract on AGC’s part had been pleaded. As stated above, his Honour was satisfied that all steps taken by AGC relevantly in relation to Endormer (and implicitly to the extent material in relation to Kwikday as well) were so taken in accordance with AGC’s contractual rights, including the unilateral increase in the interest rate which was implemented in AGC’s favour.

Proceedings to set aside Deed of Charge brought against AGC

10                  An additional cause of action was brought by Endormer against AGC, based upon the circumstance that the Deed of Charge from Endormer in favour of AGC, alleged to have been executed by Endormer in July 1993, was not lodged for registration with the Australian Securities Commission until 31 March 1994. It was the case of Endormer below that the date of execution appearing on the Deed of Charge as that supposedly representing the time when the same was purportedly created, being 18 March 1994, was accordingly false. By s 263 of the Corporations Law, it is stipulated that where a company creates a charge, the company shall ensure that there is lodged with the Commission, within 45 days after the creation of the charge, the instrument of charge or a verified copy thereof etc., and by virtue of s 266 of the Corporation Law, it is further stipulated that omission to do so renders the instrument void as a security prevailing against any liquidator subsequently appointed.

11                  However the subject cause of action was not brought by the Liquidator of Endormer but by Endormer itself, albeit that it was described in the initiating process as “Endormer Pty Limited (in Liquidation)”. It was one matter for the Deed of Charge to be void as against the Liquidator, but another matter entirely for the Deed of Charge to be void as against the Company and the Receiver, which the legislation did not stipulate. Reference was made by his Honour to a number of authorities commencing with Kent v La Communaute des Soeurs de Charite de la Providence [1903] AC 220 (PC), followed by Independent Automatic Sales Ltd v Knowles & Foster [1962] 1 WLR 975 and more recently, Horn v York Paper Pty Ltd (No 2) (1991) 23 NSWLR 622, in which the need for joinder of the liquidator to proceedings was held to be necessary in circumstances where a transaction is sought to be avoided as against the liquidator by virtue of the operation of a statute. His Honour rightly dismissed this additional cause of action as misconceived, and with it the related cause of action for declaratory relief to the effect that the Receiver was invalidly appointed pursuant to the Deed of Charge. Incidentally, no contention was advanced before the Full Court, or his Honour, to the effect that any different legal significance should attach to the circumstance that Endormer was the corporate trustee of a trading trust, and undertook its functions in that capacity, nor was any challenge apparently made in the proceedings below to the locus standi of Endormer to pursue this cause of action, or indeed any of the other causes of action.

Proceedings for negligence brought against the Receiver

12                  This further component of the proceedings below concerned the alleged failure of the Receiver to take reasonable care to sell the mortgaged assets of Endormer for the market value thereof, or alternatively for the best price that was reasonably obtainable at the time when the assets were sold by the Receiver to Twamley on 20 April 1994. Again his Honour found against the claims of the Appellants so advanced, irrespective of whether the same were based upon the general law of negligent conduct or upon s 420A of the Corporations Law. His Honour distilled three material complaints out of the arguments advanced on behalf of the Appellants:

(i)                  the speed with which the sale took place;

(ii)                the previous association between the purchaser of the principal assets namely Twamley and certain officers of AGC, being (at least) Messrs McGilvray and Ginane; and

(iii)               the substantial profit made by Twamley on the resale of the assets of the business that occurred about seventeen months later.

13                  No purchase price was paid by Twamley to the Receiver of Endormer for goodwill of the Endormer business. Twamley acquired from the Receiver certain assets of Endormer, such as leases of premises, equipment and new vehicles, and undertook to assist in the collection of debts due to Endormer, and also assumed financial responsibility for all warranties and guarantees in favour of existing customers of Endormer, and for the continued employment of certain employees of Endormer. As already indicated in the chronology set out above, the goodwill, logo and business names of the Endormer businesses (and Kwikday) were re-sold for a price of $900,000 about seventeen months later.

14                  However as his Honour proceeded to find, contrary to the Appellants’ submission as to the alleged improvidence of the transaction between the Receiver and Twamley, the reality was that at the time of the appointment of the Receiver, the business of Endormer was insolvent, and the arrangement with Twamley negotiated shortly after taking office was the best that could be obtained by the Receiver under the attenuated circumstances which prevailed, and proper processes were implemented in that regard by the Receiver. Such condition of insolvency was verified by Mr Paterson himself, in the form of an affidavit filed in support of Endormer’s application to appoint a provisional liquidator which occurred on 13 April 1994. By that time, the business of Endormer had ceased to be a going concern; for instance as his Honour found, there was no cash in the bank account, leases of premises were in arrears, there were discrepancies in the numbers of vehicles that could be located, there was little stock on hand for sale, Hyundai was giving consideration to terminating the franchise which it had granted to Endormer, and there were no funds to meet day to day expenditures, including salaries of employees. As his Honour further found, the terms of resale by Twamley reflected the successful operation of the business as a renewed going concern undertaken by Twamley during that subsequent period of seventeen months, the business of Endormer having ceased to be a going concern at the time when Twamley originally acquired the same.

15                  His Honour was thus satisfied that the Receiver had no alternative upon his appointment but to move urgently to effect such transactions as were conceivably available, and in that regard, the Receiver found himself obliged to work in co-operation with Hyundai, whose approval to any prospective purchaser was necessarily required. In the events which happened, the Receiver was able to obtain competitive tenders from three bidders by 15 April 1994, in relation to which tenders there was not much difference in value, but which were not collusive as his Honour further found, and which tender process required the exercise of a commercial judgment by the Receiver as to which offer was the most advantageous in all the circumstances. The conclusion of his Honour was that the choice of Twamley as the superior offeror was bona fide and reasonable, and the fact that the transaction was necessarily renegotiated before the implementation thereof, in ways which lessened the value to Endormer, made no difference to his Honour’s decision, having regard to the circumstances which then prevailed. As to the profitable resale of the business by Twamley subsequently in 1995, his Honour again declined to draw any inference adverse to the Receiver or AGC referrable to the consideration earlier obtained on the asset sales to Twamley, his Honour holding that the Hyundai franchise was potentially profitable only if properly conducted by a solvent purchaser. In the result, his Honour found that the Receiver took all reasonable care in the circumstances of the case in the disposition of the assets of the receivership, and further that the most favourable transaction of disposition that was reasonably obtainable, having regard to the prevailing contemporary circumstances, was in fact that which was achieved by the Receiver. His Honour hence rejected the claims made against the Receiver by the Appellants for negligent conduct of the receivership, whether based on s 420A of the Corporations Law or the general law (see [40]).

Enforcement of AGC securities by way of cross-claims

16                  AGC sought to enforce, by way of cross-claims against the Appellants, the various securities and guarantees which it held from the Appellants, as follows:

(i)                  Under the 1994 Bailment Plan, Endormer and Kwikday had agreed with AGC that each would not, without the consent of AGC, sell or dispose of vehicles bailed pursuant thereto in any manner inconsistent with the terms of the Plan; AGC asserted in the proceedings a failure to account on the part of Endormer (and Kwikday) for a number of bailed motor vehicles apparently sold or otherwise disposed of, and sued Endormer and Kwikday, for liquidated damages, and for failure to account for converted bailed motor vehicles; Endormer and Kwikday alleged misleading and deceptive conduct on the part of AGC in inducing their entry into the Plan in the first place, being one of two of the causes of action referred to in [5-6] above;

(ii)                AGC also sought to enforce so-called Guarantees of Supplier given by Endormer, Kwikday, Mr Paterson and his wife, and by Mr Jarrett and his wife, which related inter alia to the due performance by Endormer and Kwikday of obligations and conditions in favour of AGC contained in the above Bailment Plan; the Appellants sought to defend such claims upon grounds misleading or deceptive conduct and unconscionability, which claims were pursued at common law and under the Contracts Review Act 1980 (NSW), and were said by his Honour to be rolled up with additional claims of duress and undue influence; and

(iii)               Similar claims in (ii) above were repeated in relation to second mortgage securities provided pursuant to such guarantee instruments over the homes of the Patersons and Jarretts, that is to say, claims based upon misleading and deceptive conduct, unconscionability, duress and undue influence.

Consistently with his findings made in relation to Endormer’s claims for misleading and deceptive conduct and tortious negligence summarised in [5-6] above, his Honour rejected all such causes of action of the Appellants.

17                  In relation to the second mortgage in favour of AGC given over the Jarrett home, a further point of attack was made by the Jarretts to the effect that AGC’s solicitor had not been authorised to amend that instrument by way of correcting the reference therein to the registered number of a certain earlier first mortgage to a bank, which had been in force as at the time of execution of the second mortgage but which earlier first mortgage had become replaced by a new first mortgage by the time the Jarrett second mortgage came to be lodged at the Land Titles Office for registration by AGC’s Solicitors. The delay in registration appears to have been caused by the circumstance that whilst on 1 September 1992, there had been signed by the respective Appellants undertakings to execute second mortgages over the homes of the Patersons and the Jarretts, and Deeds of Charge over the respective assets and undertakings of Endormer and Kwikday, finalisation of complete documentation of such securities was substantially delayed for reasons not appearing in the judgement below. His Honour found that such alteration had not been material, because the alteration did not thereby disadvantage or impose any greater liability upon the Jarrett mortgagors/debtors, and had not been made fraudulently by AGC’s solicitors, and that consequently the making of the alteration did not avoid such second mortgage to AGC to the advantage of the Jarretts. Indeed I would think that the undertaking operated as an equitable mortgage in any event in respect of the assets to which it related. In so finding, his Honour referred to and relied upon authority such as Farrow Mortgage Services Pty Ltd (in Liquidation) v Slade and Nelson (1996) 38 NSWLR 636 at 640 per Gleeson CJ (with whom Clarke JA agreed) to the effect that in relation to alterations unilaterally made by one party to a bilateral instrument, the same would not normally avoid the instrument at the instance of the other party who had not consented to the alteration, where the making of the alteration was not fraudulent, or else was not material to the advantage of the first-mentioned party. As his Honour pointed out, a similar view in principle had been earlier expressed by Smithers J in Mitchelson v Mitchelson (1979) 24 ALR 522 at 526-7.

Judgment in favour of AGC on cross-claim

18                  As stated in [1(iii)] above, judgment was entered in favour of AGC against the Appellants on AGC’s cross-claim for monies outstanding under the Deeds of Charge, Bailment Plans and Guarantees in the sum of $975,143.69. As pointed out by his Honour at [58], the process of calculation was one of deduction, involving in broad summary “cars bailed, less cars accounted for as either still present on the lot or paid out - together with some financial adjustments”. In [59], his Honour held that the reconstruction of the business records of Endormer/Kwikday undertaken by AGC, together with the stocktake made in the course of the receivership, were appropriate, and implemented in a proper fashion, and that the financial result relied upon by AGC in final submission should be accepted. Earlier in the course of the hearing, Mr Jarrett had apparently exposed certain deficiencies in calculation, which his Honour found to have been ultimately taken into account on AGC’s revision of its own calculations.

Quantum of moneys claimed by AGC by way of Cross-Claim

19                  The issues raised by the Appellants by way of appeal against this finding require the reasons of the primary judge to be extracted in relation thereto below, so as to fully expose his Honour’s reasoning and the steps which he took to satisfy himself that such sum of $975,143.69 was accurately calculated:

“Quantum

58.              I must now return to the proof of conversion and the calculation of the amount outstanding. From the point of AGC, the process is one of deduction – cars bailed, less cars accounted for as either still present on the lot or paid out – together with some financial adjustments. Messrs Paterson and Jarrett say they can add little to the process because once the receivership commenced they lost access to both cars and records.

59.              The evidence satisfies me that the methodology of reconstruction which has taken place from business records together with the stocktake on receivership was appropriate, that it has been implemented in a proper fashion, and that the result relied upon by AGC in final submissions should be accepted. Counsel for the cross respondents devoted considerable attention to this issue in cross examination, and Mr Jarrett, in evidence, also analysed the documents produced, drawing attention to various deficiencies. In my view, such deficiencies as were revealed have been taken account of in the revised claim by AGC. This is not to say, of course, that the documentation was perfect, but proof beyond reasonable doubt is not required.

60.              Apart from exploring deficiencies in the documents, counsel for the cross respondents pointed to the inherent improbability of hitherto undetected conversions on the scale alleged – 44 new vehicles and 31 used vehicles – when AGC was actively supervising the account. He suggested that there was no evidence of funds on that scale having been diverted to the benefit of the individuals concerned, bearing in mind their current parlous position. That submission has some attraction, but it fails to acknowledge the extent to which the financier is in the hands of the dealer in situations like this. The dealer operated from more than one location, with a considerable turnover of new and used vehicles. I have already commented upon the great difficulty which both Barclays and AGC had in keeping track of vehicles and in obtaining timely information. I have also remarked upon the chronic lack of working capital in the business. Failure to account to AGC for proceeds does not imply diversion of all of the funds to private pockets – they may have been used to meet pressing business commitments. I also note that sufficient funds were found from somewhere to pay to Westpac to pay out the guarantee and to relieve those who guaranteed repayment of it.

61.              I am satisfied that the adjustments by AGC are appropriate, and that the amount claimed in final submission of $975,143.69 is outstanding.”

20                  No viable basis was articulated in the course of the appeal for rejecting his Honour’s approach to principle or to detail of calculation. At no time during the course of his address to the Court did Mr Jarrett seek in any meaningful way to come to issue with his Honour’s foregoing process of reasoning. Merely to articulate a denial of any moneys owing was of course an obviously inadequate way to grapple with the task on hand which confronted Mr Jarrett’s presentation of this appeal.

Credibility of Paterson and Jarrett

21                  His Honour also made findings adverse to the credibility of the respective testimonies of Messrs Paterson and Jarrett. Whilst the factual matters in issue were complex and related to numerous matters extending over a number of years, those circumstances were not sufficient to explain the many inconsistencies within their respective affidavits and oral evidence which his Honour exposed. His Honour expressed the following conclusions on the credibility of Mr Paterson and Mr Jarrett:

“63. Mr Paterson was the witness who was closest to those aspects of the business and the events which are of relevance to the case. He conducted virtually all of the negotiations with Barclays and AGC. He is an intelligent person, with experience in the field, who has a considerable sense of grievance over the failure of Endormer and the consequent effect upon the personal finances of his family and the Jarrett family. I have indicated that he had some cause for disquiet from time to time, but my impression is that he has much exaggerated these issues in his own mind and has been reluctant to face up to his failure to manage a grossly undercapitalised business. I think he is also conscious of the fact that he encouraged the financial involvement of Mr Jarrett in the business, with dire consequences for him and his family. Whilst I have no doubt that Mr Paterson consciously gave some evidence which he thought would help the case regardless of the truth, I think he has convinced himself of the correctness of his position and gave evidence accordingly.

64.              Mr Jarrett was an unsatisfactory witness. His knowledge of relevant events was sketchy and unreliable. From time to time he endeavoured to tailor his evidence to suit the case, but had little grasp of what was required to be effective in that endeavour. He undoubtedly had faith in Mr Paterson’s financial and management ability and experience, and effectively left the arrangements with AGC to him.”

Nothing presented to the Court in the course of the appeal provided any foundation for this Court to conclude that his Honour’s findings were surprising or that his Honour had not applied an appropriate test or had misused his position of advantage in making an assessment of credibility (see State Rail Authority of New South Wales v Earthline Construction Pty Ltd (In Liquidation) (1999) 73 ALJR 306).

Grounds of Appeal

22                  It is therefore to be appreciated from the foregoing summary of his Honour’s reasons that his Honour reached a number of conclusions, each of decisive significance adverse to the Appellants, which were based mainly upon probabilities perceptibly flowing from preliminary or antecedent facts established to his satisfaction, and from his adverse assessment of the reliability or credibility of the testimonies of Messrs Paterson and Jarrett as principal witnesses for the Appellants. Such findings were in contrast to his essentially favourable assessment of the credibility of the testimonies of the AGC and Barclays officers. The framing of any viable grounds for appeal therefore presented a formidable task to the Appellants, being a task for which the draftsman or draftsmen thereof was or were clearly unqualified to undertake. The draftsman or draftsmen plainly lacked an adequate understanding as to what was required by legal precept to set aside the findings and conclusions of a judge at first instance in relation to factual matters and circumstances, particularly where assessments as to credibility have been made by the judge in support of findings and conclusions. It is appropriate that I set out below the full text of all grounds of appeal the subject of the Notice of Appeal, save as to paragraph 1 which was merely formal and introductory in character, in order to demonstrate how inadequate was the understanding of the Appellants of the task on hand which they were endeavouring to undertake in preparing that document:

“2. His Honour’s reasoning in determining (para 17 of Judgment) that “there is no casual link between the misleading conduct or negligence and the loss claimed” suffers from internal inconsistencies:-

(a)               His Honour approves of Mr Rodd’s suggestion that Endormer obtain a $100,000 overdraft facility (in fact a loan with high interest component) as a means of overcoming under- capitalisation, but unexplainetery (sic) rejects Endormer’s claim that it would have traded more profitably if it had been granted a larger wholesale facility under the floor plan ie fixed cheap interest finance (substantially cheaper than overdraft rates) used as and when required when stock levels fall.

(b)               His Honour finds that Endormer would not have been mislead into believing that AGC would provide a Wholesale Floor Plan of $2.35Million when McGilvray himself believed the application would be approved as “he had not previously had any application of this type rejected….” [para 18(2)]

3.                  His Honour misdirected himself as to the relevance of facts:-

(a)               Even if it is true that Endormer failed to disclose to AGC the Nissan Termination the evidence from McGilvray and other AGC witnesses was that the Nissan withdrawal of support from dealers throughout Australia was well known throughout the industry. It was relevant to determine whether AGC was aware; not whether AGC had been informed by Endormer.

(b)               Whether or not Mr Crighton would continue with Endormer was irrelevant since AGC had made the offer of a $2.35Million floor plan facility.

(c)                His Honour fails to consider the fact that Endormer wrote substantial retail business in excess of $100,000 per month for AGC and on several occasions was AGC’s most successful Retail Dealer.

(d)               His Honour fails to consider how, given the tight audit procedures adopted by AGC at the relevant time, Endormer could have physically moved and sold in excess of forty cars over such a short period of time without AGC being able to produce one witness – even after a Westpac fraud investigator working with “Australia’s best Receiver” had spent months looking at documents including Messes Jarrett’s and Paterson’s personal diaries and effects which had been unexpectedly seized when they were locked out of the Endormer premises.

(e)                Generally His Honour failed to address the failure by AGC to produce original documents in support of its case when it had full control of same over a number of years together with the unreliability of evidence given by AGC’s own lawyers as to the whereabouts of the original documents.

4.                  His Honour failed to understand and to properly take into account industry practice in relation to:-

(a)               The true nature of the relationship between Dealer and the Wholesaler Floor Plan Financier; the relationship being alike to a partnership rather than master/servant.

(b)               The Retail Business arising from the wholesale floor plan was “The cake”; not the “icing on the cake” as stated by His Honour at paragraph 9 of the Reasons.

(c)                The ex-Barclays officers admitted that the floor plan financing was also aimed at expanding Barclays’ Banking business; the theory being that purchasers of cars financed by Barclays would also eventually hold bank accounts and home finance loans with Barclays.

(d)               There was ample evidence given by AGC witnesses about the efficient intelligence gathering by AGC and their aggressive push to recapture their previous superiority in the car retail business; their adventures into development financing having crashed disastrously. Given this it is difficult to explain how Barclays knew of the Hyundai proposal by Endormer but AGC did not.

(e)                His Honour fails to address at all Mr Rowland’s uncontested evidence that the success of the Dealer depended to a substantial extent on the faith of the financier in the dealer. Mr Rowland was very confident about the future of the Hyundai dealership (which has now been shown to be extremely successful) whereas Mr Rodd and others had no knowledge of Hyundai’s potential and indeed considered it a negative aspect of the floor plan.

(f)                 His Honour failed at all to assess the ample uncontested evidence by AGC’s own witnesses about the adverse effect upon a dealership within the industry of having its ‘automatic approval’ withdrawn with regard to purchase of new vehicles by the Dealer.

5.                  His Honour misdirected himself in the legal analysis of the floor plan arrangements when he considered the relationship to be that between a debtor and a creditor.

6.                  His Honour failed to properly analyse the formidable problems for AGC in administering the Endormer Account (para 21). The problems were AGC’s failure to put into place security documents prior to releasing funds for the Wholesale Plan and their unending and incompetent attempts at recovering their position with Westpac employees such as Mr Rodd now looking over their shoulders and imposing the “Group Culture”.

7.                  His Honour, in upholding the validity of the Receivers appointment failed to consider the numerous misleading statements made by the Receiver both to the Court and to the Liquidator in correspondence.

8.                  In upholding the propriety of the sale of Twamley Pty Limited His Honour failed to take into account the evidence that an agent of Twamley had some weeks prior to commencement of the Receivership found a pretext to visit the Endormer premises and made other enquiries consistent with an investigation to purchase the business in the near future.

9.                  The Receiver failed to explain satisfactorily or at all how the same business could have been sold for almost $1Million shortly after the acquisition by Twamley.”

In summary, as the Respondents’ Counsel has submitted, the grounds of appeal do not purport to demonstrate that the primary judge failed to take proper advantage of his opportunity to see and hear witnesses, or failed to appreciate the weight or bearing of established circumstances, or in what respect or respects the judgment can be seen to be clearly wrong on grounds that do not depend on credibility: Italiano v Barbaro (1993) 40 FCR 303 at 326. They are rather in the nature of rambling commentaries which implicitly invite this appellate Court to re-read the transcript of testimonies given and complex documentation produced in a case involving a hearing extending for more than thirty days. For the reasons appearing below, I am of the opinion that the Notice of Appeal does not disclose any viable ground of appeal.

23                  Grounds of appeal numbered 2 to 6 relate or relate mainly to the causes of action for contravention of s 52 of the Trade Practices Act and for negligent conduct on the part of AGC, in relation to which the findings of his Honour are summarised above. The remaining grounds of appeal concern, or concern mainly, the cause of action for negligent conduct of the Receiver in relation to his realisation of Endormer’s assets. As I have already indicated, the framing of all grounds of appeal would not appear to have been undertaken by a legally qualified person, and demonstrates a fundamental absence of understanding as to what is required for the expression of viable grounds of appeal, particularly in relation to a judgment at first instance involving many findings on factual issues arising out of conflicting testimonies.

24                  Specifically as to grounds of appeal numbered 2 to 6, none of the same propound any viable basis for reconsideration by this Full Court of the conclusions of the primary judge, the substance of which have been extracted already. The drafting of such grounds of appeal fails to come to grips with the findings of his Honour bearing upon his ensuing conclusions, and instead focuses upon either unproved facts, or proved facts which have no decisive bearing upon any crucial findings of the judgment. There is no identification of circumstances which compel different conclusions upon material facts accepted by his Honour. Instead the grounds of appeal are replete with sweeping generalisations not connected to specifically identified facts which may have been unequivocally demonstrated by cogent evidence which, if correct, would necessarily involve the reversal of material findings.

25                  Thus Ground 2 may be seen as failing to confront any of the conclusions of his Honour in any viable and comprehensive way, such as to necessarily require a reversal of a finding of his Honour upon a materially conclusive issue. Paragraph (a) thereof attributes findings to his Honour not apparent from the text of the judgment, and seems to be predicated upon some postulated entitlement of Endormer to “a larger wholesale facility under the floor plan” than was ultimately provided by AGC by way of the $1.75 million facility, without articulating any basis in law why Endormer should have been granted the larger facility, notwithstanding the matters set out in [21] above. His Honour’s reference to Endormer obtaining an overdraft facility was made merely in the context of the need for Endormer to cope with the inevitable fluctuations in liquidity of an under-capitalised business, something plainly not potentially decisive upon any issue addressed by his Honour. Paragraph (b) fails to take account of a preceding finding of fact by his Honour , namely “I do not accept that Mr McGilvray said that the person authorised to approve the facility had actually done so….”, being a finding which renders Mr McGilvray’s mere belief foreshadowed to Endormer as to what would happen in that regard of no relevant significance. Moreover as his Honour found, the Appellants did not disclose to AGC in the context of Endormer’s application to AGC for a $2.35 million facility that Nissan had served notice of termination of the Drummoyne Nissan franchise, and as AGC has rightly submitted, the Appellants could not have been misled into believing that AGC would have ultimately provided any such $2.35 million facility for the benefit of a non-existing or shortly to be non-existing franchise. Moreover whatever Mr McGilvray may have said to Mr Paterson and Mr Jarrett at the time or times which he did could not have conceivably related to a proposed new Hyundai franchise.

26                  Ground 3 divides of course into five paragraphs, each asserting supposedly relevant facts concerning which his Honour is said to have “misdirected himself”, but in relation to none of which is any significance assigned by way of repudiation of material findings by his Honour. Paragraph (a) thereof is confusingly framed, but in any event, apart from what has been already pointed out above, the significance assigned by his Honour to non-disclosure of notice of termination of the Nissan franchise was related only to the issue of the credibility of Messrs Paterson and Jarrett. Paragraph (b) is similarly confusing, in that it is seemingly predicated upon AGC having made an offer of financial assistance in the sum of $2.35 million for acceptance by Endormer, but the only AGC offer actually made, as his Honour found, was confined to $1.75 million, following upon AGC’s rejection on 30 June 1992 of Endormer’s earlier application for the larger facility. As to paragraph (c), the same does not identify with precision or at all the evidence tendered to his Honour to the effect predicated by this ground of appeal, and in any event, what his Honour identified in his judgment, by way of the critical financial disability of Endormer, was that it “… was starved of necessary working capital which was the root cause of the later financial problems which caused the damage” and further that Endormer “… at all times was chronically undercapitalised, and, in particular, had a critical shortage of working capital – namely, a deficiency of current assets compared with current liabilities… which caused the financial collapse”. The Appellants have plainly failed to come to issue in the conduct of the appeal in relation to such radical findings. Obviously enough, high turnover without profitability does not alleviate chronic undercapitalisation. Moreover, there is no established basis of relevance involved in the circumstance that AGC wrote retail business for Endormer. It typifies the unconnected assertions of a notice of appeal which has disclosed no real comprehension of the function which it is required to perform. Paragraph (d) relates to the finding of his Honour as to the quantum of the judgment in favour of AGC on the cross-claim against the Appellants. The findings set out in [58-60] of the judgment below do not disclose in any prima facie way error on the part of his Honour. Paragraph (d) merely invites the Full Court to speculate for the purpose of reversing factual findings of his Honour based upon calculations made from business records of Endormer compared subsequently with those of AGC, AGC’s records having been based in the first place necessarily on information which emanated from Endormer; in that regard of course, it was Endormer which effected the sales of motor vehicles the subject of the wholesale floor plan provided by AGC, and AGC was dependent upon Endormer giving prompt and accurate information as to such sales, which his Honour found not to have occurred. Paragraph (e) provides no viable ground of appeal, it not being thereby asserted that accurate copies of any material documents were not made available to the Appellants in order to enable Endormer to establish any supposedly critical proposition; it is not asserted that any alleged failure by AGC to produce original documents had any bearing of a material or decisive nature on any identifiable issue in the proceedings.

27                  Ground 4 sets out six matters as to so-called industry practice which the primary judge is said to have failed to understand and properly to have taken into account, yet without indicating, by reference to the judgment below, the consequences of any such alleged failures to any critical or material findings contained in the judgment. In any event, it is not stated why industry practice should have prevailed to the exclusion of facts established by his Honour. As his Honour found, the relationship between the parties was governed by contract, and no basis was advanced as to why such a finding was wrong in law. As to paragraph (a), no basis is asserted as to why the so-called “true nature of the relationship” was governed otherwise than by the documents entered into between AGC and Endormer (and Kwikday), such as the Deed of Charge, Bailment Plan and Guarantees; obviously AGC had a business or financial interest in Endormer succeeding, so that Endormer could meet its financial obligations to AGC; to aver however in terms of “alike to a partnership”, without significantly more, takes the Appellants nowhere. The same may be said as to paragraphs (b), (c) and (d) of Ground 4 where none of the material alluded to is even purportedly linked to a decisive finding of his Honour upon a material issue. As to paragraphs (e) and (f) of Ground 4, once again nothing therein contained purports to confront any material finding by his Honour, or to explain why any finding upon a material issue was wrong, quite apart from an absence of identification in the Notice of Appeal of the so-called “uncontested evidence” of Mr Rowland and “AGC’s own witnesses”.

28                  Ground 5 is similarly incomprehensible as a viable ground of appeal, in that the same fails to identify what aspect or aspects of “the legal analysis of the floor plan arrangements” the complaint is intended to address, much less to assign any significance to the consequences of his Honour’s supposed misdirection. As to Ground 6, the same can only be described as meaningless and incomprehensible, and in any event also omits to assign significance to material findings of his Honour the subject of his Honour’s alleged failure of analysis.

29                  Grounds 7 to 9 relate to the cause of action for negligent conduct on the part of the Receiver, concerning which the findings of the primary judge are summarised above. Ground 7 is misconceived, or at least deficient in articulation, since the Receiver’s unidentified “numerous misleading statements made… to the Court and to the Receiver in correspondence” have no conceivable bearing upon the validity of the Receiver’s appointment in the first place, as Ground 7 infers. Ground 8 is, as the Receiver has submitted, quite meaningless, the same having no cognisable bearing upon or connection with the Receiver, and in particular the Receiver’s conduct in disposing of Endormer’s assets allegedly at an undervalue. Ground 9 purports to address an issue of inadequacy of the consideration obtained by the Receiver from Twamley for the sale of Endormer’s assets, but does not purport to refer to or distil any error on his Honour’s part in relation to his findings which have been summarised above, even if a period of seventeen months can be rightly described in terms of “shortly”, and $900,000 rightly described as “almost $1 million”.

30                  In the result, none of the grounds propounded on behalf of the Appellants, as set out in the Notice of Appeal, were viable on their face or in their content as grounds of appeal according to law. At no stage did the Appellants seek to amend their Notice of Appeal, whether by reference to their subsequent Outline of Submissions to this Court or in their Submissions in Reply. Nevertheless the Court adopted the practical course of receiving all of the submissions put forward by Mr Jarrett, whether or not foreshadowed in the Notice of Appeal.

31                  The Appellants’ submissions repeated at least for the most part the case advanced at first instance to the primary judge and rejected by his Honour, for reasons identified in his Honour’s reasons for judgment. It is very difficult to distil from such submissions any alleged reasons as to why his Honour was wrong in the findings he made, or why the case put to this Court should be accepted in lieu of what his Honour found. For instance, Mr Jarrett did not explain why his Honour incorrectly found that all steps taken by AGC prior to the appointment of the Receiver, of which complaint is made, accorded with the contractual rights of AGC, or why there was an absence of evidence of any of industry practices for the existence of which the Appellants contended, including practices inconsistent with such contractual rights. One example of the former exercise of contractual rights was the increase in the interest rate payable to AGC, which his Honour found to have been made in any event to compensate for an increase in risk that had occurred.

32                  Mr Jarrett claimed that it was “a well known fact by AGC” that Nissan was reducing the number of its dealers, but no transcript or documentary reference was cited, and in any event of course, it was surely a matter of business integrity for Endormer to have notified AGC promptly that it was one such dealer, in the light of its pending application for the $2.35 million facility. His Honour thus explicitly found that Endormer failed to disclose to AGC that it had received notice of termination of its franchise from Nissan. Moreover Mr Jarrett’s several references to the AGC officer Mr Rodd appear to be misplaced, because by the time of Mr Rodd’s involvement, AGC had taken over the entirety of Barclays’ funding role, and the changeover from Nissan to Hyundai had been duly documented.

33                  Contrary to the findings of his Honour, Endormer submitted that the reason for Barclays’ termination of its funding of Endormer was a lack of supply of retail business on Endormer’s part to Barclays, because Endormer had been favouring AGC with that particular species of financing; such proposition was denied by Barclays’ officers, and his Honour accepted their testimony. His Honour rejected Mr Jarrett’s claim that AGC had “enticed” Endormer away from a supposedly happy relationship with Barclays, concluding “I am satisfied that the Barclays personnel were delighted to receive the information that AGC would be paying out the Endormer indebtedness, as it relieved them of any anticipated problem”.

34                  One matter in particular which Mr Jarrett raised in address on appeal was the contention that after AGC granted the subject bailment facility of $1.75 million to Endormer (and to Kwikday as a wholly owned subsidiary of Endormer), it proceeded to reduce the funds available therefrom below that monetary level. In response, Counsel for AGC referred the Court firstly to the following AGC inter-office memorandum of Mr Rowland of 29 September 1992 to the “Senior Manager, Credit”, the opening terms whereof read as follows:

“SUBJECT: CREDIT – APPLICATIONS – ENDORMER PTY LIMITED

You approved the following Wholesale Bailment for Endormer Limited to open their new outlets in the City:

New : $1,000,000

Used : $ 750,000

TOTAL: $1,750,000

The Dealer Principal has approached us to convert $200,000 of this limit to Asset Purchase Limit, which was not provided for, to cover:

-                     computes

-                     Telecom

-                     workshop equipment

-                     shuttle bus

Plus $78,000 to provide a guarantee to the Sydney City Council. They bank Westpac, therefore, we would guarantee Westpac and they would supply the Guarantee to the Council. The rearrangement of limits would then be:

New: $972,000

Used: $500,000

Asset Purchase: $200,000

Westpac Guarantee Rent: $78,000

TOTAL $1,750,000

The rundown on the Nissans is happening faster than expected and they will not be over their limit during the transition period.

They have also received further assistance from Hyundai, with five months rent-free at Kingsford, four months rent-free at Broadway and four months rent-free at Cleveland Street and also a commitment from Hyundai that the rent at Kingsford will not exceed $550.00 per month for the first three years. As well, Hyundai is completing the fit out on Cleveland Street this week and they are hoping to open on 3^rd October 1992.

Your approval to the above is recommended.

D.A. Rowland.”

Mr Rowland, the former employee of AGC earlier identified, was called by the Appellants to give evidence in their case. Mr Jarrett submitted on behalf of the Appellants that the implementation of such re-arrangement of the facilities as set out in the above memo caused financial difficulties to Endormer in the ongoing conduct of its business. The transcript of Mr Rowland’s cross-examination reveals however that the re-arrangement was undertaken at the request of Endormer, albeit not in the exact terms set out in his inter-office memo. That precise proposal apparently did not proceed and on 2 December 1992, Mr Paterson wrote to Mr Adams of AGC as follows (omitting formal parts):

“Further to our discussion re demos, company cars etc, may I suggest the following for consideration:

·                    We put on a twelve months lease (say with a 60% residual) $150,000.00 worth of company cars at our cost. This would take care of parts, service and F & I personnel.

·                    The balance of used cars all on normal used car floor plan with curtailments of 10% at six months pay out at twelve months.

Our facilities are then: New Cars $800,000

Used Cars $600,000

Lease Cars $150,000

Equipment $200,000

TOTAL $1,750,000

DAVID PATERSON.”

Such letter omitted to take into account the sum of $80,000 previously proposed for the rental guarantee. Hence on 9 December 1992, the AGC Area Manager Mr Adams wrote to his superior Mr Rowland and recommended approval to a “rearrangement of our facilities” as follows:

“New cars $760,000

Used cars $560,000

Lease cars $150,000

Equipment $200,000

Westpac Guarantee $80,000

Rent

TOTAL $1,750,000”

The submission therefore of the Appellants to the effect that AGC “squeezed” Endormer by reducing the amount of the floor plan facility was misconceived, or in any event unsupported by documentary evidence.

35                  Another matter raised by the Appellants at the hearing of the appeal, which warrants mention, was that in the course of the AGC/Endormer relationship, AGC subjected Endormer to so-called “manual release”, the significance of which was that Endormer was required to obtain AGC’s permission to sell vehicles the subject of the bailment plan. That restriction was however authorised from the outset by Clause 5(a) of the AGC Bailment Plan bearing date 1 September 1992 made between AGC, AGC (Advances) Limited, Endormer as “Retailer” and Kwikday as “Wholesaler”. In any event, by letter dated 27 April 1993, AGC wrote to Messrs Paterson and Jarrett as follows:

“1. New and used sub-limits – you may switch undrawn used sub-limit to new sub-limit at any time without restriction.

2.                  Vehicle releases – automatic release is reinstated.”

36                  The examples of misconceived complaints addressed in [31-33] above demonstrate why his Honour found it appropriate to say that “In view of my conclusions we do not propose to go though the individual complaints…”. Moreover, having regard to various matters addressed by his Honour, including those for instance set out above, it was to be expected that the documentation tendered by the Appellants at the original hearing would have been replete with complaints and accusations, or references to previous complaints and accusations, levelled by the Appellants at AGC. No such documentation was identified by Mr Jarrett in writing or by oral submission, and the Court was informed by Counsel for AGC that no such documentary material emerged throughout the trial, obviously a factor adverse to the Appellants’ case, who raised a litany of such complaints about AGC and its officers both at first instance and now on appeal.

37                  In the course of oral submissions, Mr Jarrett sought to dislodge the findings of the primary judge concerning the Receiver’s sale of assets to Twamley. Mr Jarrett referred to minutes of a meeting between the Receiver and AGC officers, which was held on 12 May 1994, and which was subsequent in point of time to completion of the Receiver’s disposition of Endormer’s assets to Twamley on 20 April 1994, Minutes of that meeting reported inter alia the following matters:

(i)                  the fact that the directors of Endormer had “obviously anticipated” the appointment by AGC of the Receiver and had undertaken prior discussions with the liquidator, who was appointed at the same time as the Receiver ;

(ii)                Endormer’s offices “had been cleared out prior to 13 April 1994”;

(iii)               virtually “all available cars” had been “wholesaled in the last seven days prior to receivership”.

The third event above described, according to these minutes, apparently had enabled Endormer’s overdraft of $145,000 with Westpac to have been “cleared”, and the directors third party guarantees to have been released.

(iv)              the following issues were said to arise for consideration:

“(ii) Westpac Overdraft Account

- The overdraft of $145K was cleared in the seven days prior to appointment.

- Following clearance of the overdraft the directors had immediately sought to have third party guarantees released.

- There is a risk to Westpac that a liquidator could attack the payments to clear the overdraft as a preference. Two issues must be addressed before the release of third party securities:

(i)                 Westpac must get an indemnity from liquidator that he will not pursue the preference.

(ii)               AGC must investigate the possibility of a claim against Westpac that realisations from bailment cars should have been paid to AGC. This could allow Westpac to pay AGC and then rely on the third party guarantees, thereby maximising the return for the Group.

(iii) Liquidator

-                     Tony Vero of Clayton Utz advises that a Court would be likely to find that the Charge under which PH was appointed was created in July 1993. This may enable the liquidator to obtain a declaration that the charge is void, since it was not registered within the required 45 days. Whilst there are still defences the position is not secure.

-                     PH noted that the estimated dividend to AGC under the floating charge is only $27,000, being receiver costs. There seemed little point in prolonging the expensive legal process of defending the liquidator’s attempt to declare the charge void, if a settlement could be reached with the liquidator.”

38                  Precisely what assistance Mr Jarrett considered was available to the Appellants from the foregoing materials is unclear. The same were somehow considered to be directed to the unsuccessful attempt of Endormer to set aside the Deed of Charge, as against Endormer and the Guarantors. What is suggested is conduct on the part of Endormer in disposing of motor vehicles held pursuant to the Bailment Floor Plan, and directing the proceeds of sale in a manner which would relieve the directors from exposure under their guarantees of Endormer’s overdraft to Westpac. We agree with Counsel’s response to the introduction of this material that there is no ground of appeal to which the material is relevant:

“As to findings by his Honour concerning the expeditious disposition of assets by the Receiver in favour of Twamley, there is nothing in the material referred to above which puts these findings in doubt. Moreover as AGC further submitted, a fundamental fallacy in the Appellants’ case has never been adequately addressed, namely the absence of demonstration of how any conduct of AGC in relation to the securities occasioned actual loss or damage to Endormer.”:

39                  A further subject raised by Mr Jarrett during the hearing of the appeal was Endormer’s record of introductions of retail finance transactions to AGC. Mr Jarrett referred to the document presented by AGC’s Area and Dealer Account Managers as follows:

“AUSTRALIAN GUARANTEE CORPORATION LIMITED

CONGRATULATES

SYDNEY CITY MOTOR GROUP

FOR INTRODUCING A RECORD $761,660

FOR THE MONTH OF OCTOBER 1993”

The document takes Endormer’s case nowhere. For one matter, achievement of high turnover of retail sales does not bespeak the conclusion that the same rendered its operations profitable contrary to the findings of his Honour. Mr Jarrett also directed the Court’s attention to various AGC monthly accounts for so-called “guarantees” payable under the Bailment Plan, showing how the “APPROVED LIMIT” in respect of the month of April 1993 was $1,750,000 inclusive of $867,027 for “New or Combined Total”, whereas that for the month of May 1993 was $1,322,000 inclusive of $866,366.00 for “New or Combine(d) Total”. However Mr Jarrett did not thereby demonstrate how any such material established error, much less decisive error, in any material findings of the primary judge. By drawing attention to such May 1993 figures, Mr Jarrett did not demonstrate the existence of any default on the part of AGC under the Bailment Floor Plan. Indeed it does not appear from anything reproduced in the Appeal Books that Endormer made any complaint in writing of default on AGC’s part in performance of its obligations under the Bailment Floor Plan, at least prior to the time that Endormer for its part moved to place Endormer in liquidation.

Various other attacks were advanced by Mr Jarrett, in the course of his submissions, purportedly in relation to a number of other findings by his Honour; none of such attacks advanced the appeal to any material extent, as appears from the following examples:

(i)                  The Barclays relationship with Endormer was not “doomed in any event” in the circumstances found by the primary judge,Mr Jarrett’s submission being that “There was never any difficulty with the relationship with Barclays…” ;

(ii)                AGC’s calculation of its Cross-Claim in the sum of $975,143.69 could not be accurate, since Endormer had paid out “substantial sums” (not however quantified on appeal) to AGC in the course of operations pursuant to the bailment plan;

(iii)               If Endormer’s financial situation had been of the inadequate nature described by his Honour at the time of the changeover of financing from Barclays to AGC, he would not have invested $100,000 of his own or his own family’s funds in Endormer’s business;

(iv)              Being made aware of Endormer’s financial position at the time it granted the limited $1.75 million facility, AGC had a duty to manage Endormer’s account with AGC in the light of that limitation, and thus not to “… impose any further restrictions on that account that would further reduce the possibility of cash flow,” such as the increase of the interest rate by 1%;

(v)                As to the second mortgage taken by AGC over Mr Jarrett’s home, the original document was destroyed by him on learning of the appointment of the Receiver, and all that remained were photostat copies, which “… they’d actually somehow managed to register…”.

40                  The foregoing submissions reveal, understandably in the light of Mr Jarrett’s absence of legal qualification, much less of advocacy in a court environment, that he had no comprehension of the substantial task he was undertaking in seeking to set aside the findings of his Honour on predominantly factual issues, being findings made by way of inferences and conclusions drawn from a substantial body of documentation, and from the testimonies of many witnesses viewed in the aggregate, including those of Mr Paterson and Mr Jarrett himself in circumstances where their testimonies had been found not to be compelling.In no instance has Mr Jarrett established that his Honour was wrong in reaching any of the conclusions referred to above. Mr Jarrett’s approach to the enormity of the task undertaken by him was either to distilldistil some usually isolated passage of a document in evidence or some isolated item of oral testimony, and to propound the material so identified, without attempting to place the same against the wider landscape of his Honour’s findings and the impact of such findings upon the reasons. We would illustrate the nature of the task which Mr Jarrett undertook as an unqualified litigant of setting aside the findings of the Primary Judge by reference to the following passage from the judgment of McHugh, Kirby and Callinan JJ in Walsh v Law Society of New South Wales [(1999]) 198 CLR 73 at 91-2:

“Some aspects of the appellate procedure will remain the same where the appeal is conducted solely on written materials, whether those materials be technically evidence in a de novo hearing or the record under consideration in an appeal under s 75A of the Supreme Court Act. In either case, the appellate court will be bound generally to defer to any conclusions on the questions of credibility formed by the court or tribunal from whom the appeal is brought where the latter has seen and heard the witnesses (53). In particular circumstances, it will be open to an appellate court to reach conclusions contrary to those of the court or tribunal below, notwithstanding a credibility finding (54). Sometimes it will be authorised to reject those findings where they are “glaringly improbable”(55) or “contrary to compelling inferences” of the case (56). But the caution required of all appellate courts in such matters has long been recognised and frequently upheld in decisions of this Court (57).”

41                  In relation to the several sub-paragraphs contained in [37] above, in the sequence in which they appear:

(i)                  Mr Jarrett does not address the significance of the testimonies of the Barclays employees who gave evidence, or the Barclays documentation in evidence, which his Honour accepted and upon which he purported to rely; such significance was not to be answered by any bland assertion from the Bar Table as to absence of “difficulty” between Barclays and Endormer;

(ii)                Any such generalised attack upon his Honour’s calculation of the amount payable to AGC pursuant to the Cross-Claim was required to come to grips with the detailed calculations provided to the Court from documentary materials in the course of AGC’s adducement of detailed financial evidence with the assistance of a qualified expert and in relation to which the Appellants had ample opportunity for input, and did indeed take advantage of such opportunity;

(iii)               This submission begs the question as to the adequacy of what financial material was provided by Mr Paterson to Mr Jarrett before he made his unfortunate investment and precisely what documentary enquiries Mr Jarrett made in that context; incidentally, Mr Jarrett had been presumably made aware by Mr Paterson that such provision of capital on Mr Jarrett’s part was occurring after AGC had approved of the lesser facility of $1.75 million, having earlier rejected the Endormer application for the larger facility of $2.35 million;

(iv)              The imposition of a duty of care on the part of a financier in favour of a borrower the subject of this submission is obviously as fanciful as it is novel; as to the interest rate increase, we refer to the circumstances, first, that the manual release procedure was contractually authorised, as was AGC’s increase in the interest rate;

(v)                This issue was not considered by his Honour; what his Honour addressed was the matter of alteration to the Memorandum of Encumbrances made to the second mortgage over Mr Jarrett’s home and whether the alteration was made fraudulently or was material; the issue raised here by Mr Jarrett, seemingly for the first time, seems to misapprehend in any event the significance of secondary evidence by way of an authentic copy of the original, and overlooks the further significance of his prior documentary and prima facie enforceable undertaking to enter into the second mortgage which AGC produced in evidence.

42                  The Appellants have failed to articulate any visible basis for setting aside the judgment of his Honour, much less any significant or material aspect thereof. His Honour’s reasons were carefully and thoughtfully assembled in the context of a large body of oral and affidavit testimony and documentary evidence provided in the course of a lengthy trial. The task of setting aside the inferences carefully drawn and conclusions carefully reasoned by his Honour was always going to be a formidable task, a fortiori when preparation of the grounds of appeal and written outlines of submissions, and the making of oral submissions to the Court, were to be undertaken by a legally unqualified person. The appeal must be dismissed with costs.

Associate:

Dated: 29 August 2001