Australian Motor Homes Pty Limited v Maria's Farm Veggies Pty Limited

The Background to the Proceedings

1. The facts as found by the learned magistrate are not disputed, and what follows is largely drawn from his Honour's conclusions in that regard.
2. The Local Court proceedings concerned the sale of a motor vehicle, being a Winnebago Iveco motor home, registered number (NSW) CD 57 TD ("the Winnebago").
3. The Winnebago was originally sold by Australian Motor Homes to Maria's Farm Veggies, in June 2015, for the sum of $160,000. The vehicle was declared to be an asset of the company, to be used for company purposes. It was registered in the company's name, and carried livery related to it.
4. In 2015, negotiations for the purchase of the Winnebago were conducted on behalf of Maria's Farm Veggies by Cornelis Disselkoen, who was at the time a director of the company. Mr Disselkoen was named as second defendant in the Local Court proceedings, although he did not appear at the hearing before Cheetham LCM, and took no part in the proceedings.
5. On 26 June 2016, Maria's Farm Veggies was placed into administration pursuant to s 436C of the Commonwealth Corporations Act 2001. Administrators assumed control of the business and, pursuant to s 437D of the Act, the powers of the directors were suspended.
6. Despite the suspension of the powers of the directors, on 9 July 2016 Mr Disselkoen, ostensibly acting for Maria's Farm Veggies, entered into an agreement with Australian Motor Homes to sell the Winnebago back to it. A sale price (which the parties agree was reasonable) of $100,000 was decided upon. Mr Disselkoen had no authority to act, and did not in fact act in the transaction, for Maria's Farm Veggies. The administrators of the company did not authorise the sale of the Winnebago.
7. Although the registered owner and supposed vendor of the Winnebago was Maria's Farm Veggies, Australian Motor Homes paid the purchase price to Mr Disselkoen. The sum of $85,000 was paid into a bank account held in his name, with the balance paid to the benefit of Mr Disselkoen, in a manner not explained on the evidence. Australian Motor Homes did not conduct any ASIC search with respect to Maria's Farm Veggies, and so did not discover that the company was in administration, or that a number of charges over it had been granted.
8. An employee of Australian Motor Homes, Ms Robertson, carried out a "REVS check" against the vehicle on the day the sale was finalised between the company and Mr Disselkoen, 9 July 2016. She obtained a search certificate pursuant to s 174 of the Personal Property Securities Act 2009 (Cth), which stated that no security interest or other registration kind was registered on the Personal Property Securities Register. The certificate also carried a disclaimer as to any guarantee of accuracy of the information.
9. Mr Disselkoen did not issue any kind of tax invoice to Australian Motor Homes, with the evidence of sale being provided by an endorsement on the vehicle registration papers, which allowed the registration of the Winnebago to be transferred. Mr Disselkoen signed the papers as seller; Australian Motor Homes was nominated as the purchaser.
10. The registration was, in fact, transferred from Maria's Farm Veggies to Australian Motor Homes on 11 July 2016.
11. A further REVS check was thereafter conducted by Australian Motor Homes, with the same result as formerly.

The Local Court Proceedings

1. In the Local Court, the administrators of Maria's Farm Veggies filed a Statement of Claim seeking payment of the $100,000 it lost through the unauthorised sale of the Winnebago, plus interest and costs. In its defence, Australian Motor Homes denied that Maria's Farm Veggies owned the Winnebago (contending that an entity with a slightly different name was the owner), and denied that it had entered into a transaction to buy the Winnebago that was unauthorised by the owner.
2. It claimed that it bought the Winnebago from Maria's Kitchen Garden Pty Ltd, and denied that the monies paid had been received by Mr Disselkoen.
3. In the Local Court, his Honour concluded that the owner of the Winnebago was Maria's Farm Veggies, and no issue is taken in these proceedings with that conclusion.
4. Following the appointment of administrators, ownership of the Winnebago passed to the administrators.
5. The principal issue with which the Local Court was concerned was whether Australian Motor Homes, as a bona fide purchaser for value, had or should have had notice of the appointment of administrators over Maria's Farm Veggies, and the charges granted over the company. In his judgment, his Honour observed, "Australian Motor Homes contend it did not have notice of a claim or entitlement from the Administrators. It carried out two PPSR searches that did not disclose the existence of any warnings such as outstanding finance charges, re-birthing or accident repair. However, it did not carry out a search against Maria's Farm Veggies Pty Ltd because 'it never does' and did not believe it was necessary. If an ASIC search had been carried out the Administration and numerous charges against the company would have been identified. The relevance of the disclaimer in the Certificate dated 9 July 2016 was not explained. On its face the disclaimer cautions an applicant about the accuracy of the Certificate. If additional searches were available they should have been carried out. Australian Motor Homes were not just dealing with a motor vehicle they were also dealing with a company. It was not appropriate to pay the proceeds of purchase direct to Mr Disselkoen. Australian Motor Homes did not act reasonably in the circumstances."
6. Ultimately, his Honour found that, 1. Mr Disselkoen, purporting to act as a director or for himself, sold the vehicle to Australian Motor Homes on 9 July 2016 for $100,000. He did not have authority to complete the sale on behalf of Maria's Farm Veggies. 2. The purported sale on 9 July 2016 was a bona fide sale for value to the extent that it was an arms length transaction. 3. The Administrator is entitled to claim the value of assets of Maria's Farm Veggies Pty Ltd. 4. Australian Motor Homes completed PPSR checks against the vehicle but not against the corporate entity Maria's Farm Veggies Pty Ltd. 5. The PPSR search carried out was inadequate in the circumstances. 6. Although Australian Motor Homes had no knowledge of the appointment of an Administrator or claims against Maria's Farm Veggies Pty Ltd, it did not take all reasonable steps to identify the party it was dealing with.
7. Judgment was awarded in favour of Maria's Farm Veggies.

The Proceedings Before this Court

1. The appeal is brought pursuant to s 39(1) of the Local Court Act 2007 (NSW), which provides: "39 Appeals as of right (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law."
2. There is an initial dispute between the parties as to the nature of the proceedings. Australian Motor Homes contends that, pursuant to s 75A of the Supreme Court Act 1970 (NSW) the appeal proceeds by way of rehearing. Reliance is placed on Leduva Pty Ltd v NM Structural Engineering Pty Ltd [2010] NSWSC 1164 at [14] per Garling J as authority for that proposition. Maria's Farm Veggies submits that s 75A has no application, and the matter is to proceed as an appeal on a question of law.
3. Section 75A provides, "75A Appeal (1) Subject to subsections (2) and (3), this section applies to an appeal to the Court and to an appeal in proceedings in the Court. (2) This section does not apply to so much of an appeal as relates to a claim in the appeal: (a) for a new trial on a cause of action for debt, damages or other money or for possession of land, or for detention of goods, or (b) for the setting aside of a verdict, finding, assessment or judgment on a cause of action of any of those kinds, being an appeal arising out of: (c) a trial with a jury in the Court, or (d) a trial: (i) with or without a jury in an action commenced before the commencement of section 4 of the District Court (Amendment) Act 1975, or (ii) with a jury in an action commenced after the commencement of that section, in the District Court. (3) This section does not apply to: (a) an appeal to the Court under the Crimes (Appeal and Review) Act 2001, or (b) to a case stated under the Criminal Appeal Act 1912. (4) This section has effect subject to any Act. (5) Where the decision or other matter under appeal has been given after a hearing, the appeal shall be by way of rehearing. (6) The Court shall have the powers and duties of the court, body or other person from whom the appeal is brought, including powers and duties concerning: (a) amendment, (b) the drawing of inferences and the making of findings of fact, and (c) the assessment of damages and other money sums. (7) The Court may receive further evidence. (8) Notwithstanding subsection (7), where the appeal is from a judgment after a trial or hearing on the merits, the Court shall not receive further evidence except on special grounds. (9) Subsection (8) does not apply to evidence concerning matters occurring after the trial or hearing. (10) The Court may make any finding or assessment, give any judgment, make any order or give any direction which ought to have been given or made or which the nature of the case requires."
4. In Leduva v NM Structural Engineering, Garling J said at [14], "Any appeal to the Supreme Court is by way of rehearing. On any such rehearing, the Court can receive further evidence but only on special grounds: s 75A Supreme Court Act 1970."
5. Maria's Farm Veggies submits that the proceedings are governed by ss 39 - 41 of the Local Court Act, and relies upon Ceerose Pty Ltd v Building Products Australia Pty Ltd [2015] NSWSC 1886. In that decision, Beech-Jones J said, at [2], "An appeal to this court from a judgment of the Local Court is governed by ss 39 to 41 of the Local Court Act 2007. Subsection 39(1) confers on Ceerose an appeal as of right on a question of law. Subsection 40(1) enables a party to appeal on a question of mixed fact and law but only with the leave of this Court. Ceerose did not seek such leave. I note that counsel for Cemac, Ms Wright, contended this appeal is by way of rehearing and cited s 75A of the Supreme Court Act 1970. However, that is incorrect. Subsection 75A(4) provides that the application of that section is "subject to any Act", which in this case is the Local Court Act, specifically ss 39 to 41. Neither s 75A of the Supreme Court Act 1970 nor Uniform Civil Procedure Rule 50.16 operate to alter the form of appeal created by ss 39 to 41 (see Ken Wolf Real Estate Pty Ltd v O'Halloran [2012] NSWSC 993 at [50])."
6. Section 75A(4) of the Supreme Court Act makes the operation of the provision "subject to any Act". In this matter, the Act that governs challenges to orders made in the General Division of the Local Court of the nature of those in issue is the Local Court Act. In my view, Division 4 of Part 3 of that Act applies, and s 75A has no application in those circumstances.
7. The Amended Summons filed by Australian Motor Homes is to be heard as an appeal on a question of law pursuant to s 39(1) of the Local Court Act. Determination of this matter is to be in accordance with s 41, which provides: "41 Determination of appeals (1) The Supreme Court may determine an appeal made under section 39 (1) or 40: (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal."

The Issues for Determination

1. There are two issues for the Court to consider and determine, each of which raises a question of law. They are, 1. Did the Local Court have jurisdiction to hear the claim before it? 2. Did the Local Court apply the correct test in determining whether or not relief should be granted to Maria's Farm Veggies?

The Submissions

1. Although this point was not taken by it in the proceedings before Cheetham LCM, Australian Motor Homes submits that the claim made by Maria's Farm Veggies was one in restitution, and the appropriate remedies were available in equity. It is argued that the claim in the Local Court sought no more than the restoration of Maria's Farm Veggies to the position it had occupied prior to the unauthorised sale and transfer of the Winnebago by Mr Disselkoen. The claim is one properly characterised as an equitable claim, and the Local Court has no equitable jurisdiction. It is submitted that the Local Court was without jurisdiction to make the orders sought.
2. Support for that proposition is said to be found in Simone v Kola (No 2) [2017] NSWSC 821 at [138] - [140]; Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSWLR 709 at 719; and Albanis v Eleftheriou [2014] NSWSC 416.
3. Maria's Farm Veggies contends that the source of the jurisdiction of the Local Court to hear its claim was s 30(1) of the Local Court Act, which provides: "30 Conferral of jurisdiction (1) Subject to this Part, the Court sitting in its General Division has jurisdiction to hear and determine: (a) proceedings on any money claim, so long as the amount claimed, whether on a balance of account or after an admitted set-off or otherwise, does not exceed the jurisdictional limit of the Court when sitting in that Division, and (b) proceedings to recover detained goods, or to recover the assessed value of detained goods, so long as the value of the goods, together with the amount of any consequential damages claimed for their detention, does not exceed the jurisdictional limit of the Court when sitting in that Division, […]."
4. It is submitted that the claim before the Local Court was a "money claim" for the purposes of s 30(1)(a), and / or a claim for recovery of the assessed value of detained goods, for the purposes of s 30(1)(b) of the Act.

Determination of ground 1

1. Having considered the submissions advanced by Australian Motor Homes, together with the authorities relied upon, I do not accept that the Local Court was outside its jurisdiction in hearing and determining the claim brought by Maria's Farm Veggies.
2. Section 30 of the Local Court Act confers jurisdiction on the court, sitting in its General Division, to hear and determine "any money claim", subject to a jurisdictional limit (of $100,000, which was not exceeded by the claim). A "money claim" is defined by s 29A of the Act as, "a claim for recovery of any debt, demand or damages (whether liquidated or unliquidated)."
3. That definition is a broad one, and it has been so interpreted. Indeed, in the authorities cited by Australian Motor Homes, a claim for restitution has generally been held to be a money claim, and amenable to the jurisdiction of the Local Court.
4. In Albanis v Eleftheriou, Beech-Jones J considered the jurisdiction of the Local Court to hear a claim pleaded as one in "repudiation", "rescission" or "failure of consideration". The claim related to the purchase of a car which the buyer asserted was not as described, and was worth considerably less than the price paid for it. His Honour said, at [27] - [28], "It follows that counsel for Mr Albanis was correct in submitting to his Honour that his client was able to make a claim in restitution based on the alleged repudiatory behaviour of Mr Eleftheriou. Such a claim for refund is one "which the count for money had and received lies", being a "common law count" (Roxborough at [15] and [16]). Such counts have often been brought in courts that do not exercise any equitable jurisdiction (see Coastal Estates Pty Ltd v Melevende [1965] VR 433 at pp 447 to 448 per Adam J). The "common law count" to which the plurality referred in Roxborough has an ancient lineage which was traced in the various judgments in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; 162 CLR 221. In Lagos v Grunwaldt [1910] 1 KB 41 at p 48, Farwell LJ observed that "everything that could be sued for under those counts comes within the description of debt or liquidated demand", as that latter phrase was used in the English High Court Rules. This passage from Lagos was referred to with approval by Deane J in Pavey & Matthews at p 251. The phrase "debt or liquidated demand" as used in the High Court Rules and discussed in Lagos resonates with the definition of "money claim" in s 29A of the Local Court Act, which refers to "debt, demand or damages (whether liquidated or unliquidated)".
5. In Simone v Kola (No 2) [2017] NSWSC 821, Schmidt J referred (at [42]) to the extract from Albanis v Eleftheriou, with which her Honour agreed, a claim for restitution being a money claim within the meaning of s 29A.
6. The third of the authorities relied upon by Australian Motor Homes, Jennings v Credit Corporation Australia, provides no greater support for its submission as to jurisdiction. In that case, a passing reference was made at [46] to the Local Court's lack of power to grant equitable relief, but the reference is not authority for the position advanced by Australian Motor Homes. It was a case considered in a different context.
7. In Melesco Manufacturing v Thompson (1996) 40 NSWLR 525, both Sheller JA and Powell JA held that the Local Court had power to determine a claim for monies made in reliance on the law of restitution (see 531E - 533D; 541D - 541F). The decision was cited by Bell J in Palmer v Blue Circle Southern Cement [1999] NSWSC 697.
8. In Cho v Park [2016] NSWSC 871 Campbell J similarly accepted that the Local Court had jurisdiction to grant a monetary sum by way of remedy, "whether it is called damages, contribution or restitution" (at [8]).
9. The weight of authority, including two of the three decisions pointed to by Australian Motor Homes, provides support for the conclusion that a claim for restitution is a money claim within the meaning of s 29A of the Local Court Act.
10. In the present case, the contract for sale agreed between Mr Disselkoen and Australian Motor Homes was void because of the operation of s 437D of the Corporations Act. Maria's Farm Veggies was entitled to recover the value of the goods from either or both of the parties to the unauthorised sale. Such a claim might be characterised as having its origins in forms of action (or counts) which were historically equitable. However, "[..] everything that could be sued for under those counts comes within the description of debt or liquidated demand: Lagos v Grunwaldt [1910] 1 KB 41, at 48 per Farwell LJ."
11. The obligation to make a payment for consideration given or received under an unenforceable contract lays in restitution, accommodated by the old count of common indebitatus: Pavey & Matthews Proprietary Limited v Paul [1986 - 1987] 162 CLR 221, at 251 and 255.
12. A claim for a debt is a money claim, amenable to the jurisdiction of the Local Court. It follows that ground 1 cannot be made out.

Was the Correct Test Applied in the Local Court?

1. Ground 2 raises the question of the proper test to be applied in determining a claim based in restitution, with Australian Motor Homes contending that the test involves consideration of "unjust enrichment" as a foundation.

The Submissions

1. Reliance is placed by Australian Motor Homes on what was said by Mason CJ in Commissioner for State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51, at 75, "Restitutionary relief, as it has developed to this point in our law, does not seek to provide compensation for loss. Instead, it operates to restore to the plaintiff what has been transferred from the plaintiff to the defendant whereby the defendant has been unjustly enriched."
2. Unjust enrichment is established where a benefit has been received, the benefit is unjust, and the benefit was at the expense of the claimant.
3. Australian Motor Homes argues that it was not unjustly enriched in the transaction for the purchase of the Winnebago from Mr Disselkoen. There was no enrichment, as it substituted an amount of cash money for goods of the same worth. There was nothing unjust in its receipt of the goods, reflected by the absence of any legal or equitable cause of action.
4. It is submitted that the Local Court failed to apply the unjust enrichment test, and thereby fell into error.
5. Maria's Farm Veggies refers to the same passage from Commissioner for State Revenue (Vic) v Royal Insurance Australia Ltd, but adds the continuation of the passage, not cited in submission by Australian Motor Homes. In full, the passage is: "Restitutionary relief, as it has developed to this point in our law, does not seek to provide compensation for loss. Instead, it operates to restore to the plaintiff what has been transferred from the plaintiff to the defendant whereby the defendant has been unjustly enriched. As in the action for money had and received, the defendant comes under an obligation to account to the plaintiff for money which the defendant has received for the use of the plaintiff. The subtraction from the plaintiff's wealth enables one to say that the defendant's unjust enrichment has been "at the expense of the plaintiff", notwithstanding that the plaintiff may recoup the outgoing by means of transactions with third parties."
6. It is submitted that restitutionary relief operates to restore to the plaintiff that which has been transferred from the plaintiff, whereby the defendant is unjustly enriched. The focus is on the superior claim of the plaintiff, not on whether the defendant has been unjustly enriched. Reliance is placed on Roxborough v Rothmans of Pall Mall Limited (2001) 208 CLR 516 at 529.

Determination of Ground 2

1. The case before the Local Court pleaded the sale agreement, the invalidity of that agreement because of the operation of the Corporations Act, the payment by Australian Motor Homes of $100,000 to Mr Disselkoen, and the liability of Australian Motor Homes in restitution.
2. The learned magistrate heard and determined the case brought by Maria's Farm Veggies on the basis that the contract for the sale of the Winnebago between Mr Disselkoen and Australian Motor Homes was void and there was a prima facie liability to make restitution. There was no error in that approach.
3. Whilst it was open to Australian Motor Homes to displace prima facie liability by raising a defence to demonstrate that restitution would be unjust, his Honour rejected the defence of bona fide purchaser for value without notice that was raised. The conclusion of the court was that Australian Motor Homes did not take all reasonable steps to identify the party it was dealing with in the transaction relating to the Winnebago. Prima facie liability was not displaced, and Australian Motor Homes was liable for restitution.
4. It was not necessary for his Honour to consider whether Australian Motor Homes had been unjustly enriched over and above concluding that Maria's Farm Veggies was entitled to restitution. Its claim was the superior claim.
5. The focus of the inquiry is on the claimant for restitution, not on the net asset position of the respondent to the claim, and on identifying the superior claim. In Roxborough v Rothmans it was held (at 529 [26], per Gleeson CJ, Gaudron and Hayne JJ) that, "[…] as between the parties to the litigation, the defendant having no title to retain the moneys, the plaintiff had the superior claim. That, in our view, is the critical question. As between the appellants and the respondent, who has the superior claim? The answer lies in the circumstance that there has been a payment of moneys by the appellants to the respondent for a consideration which has failed, and the respondent has no title to retain the moneys [footnotes omitted]."
6. His Honour concluded that Australian Motor Homes had possession of a vehicle belonging to Maria's Farm Veggies, for which no payment had been made to Maria's Farm Veggies. In that circumstance, Australian Motor Homes had been unjustly enriched, by the loss of wealth to Maria's Farm Veggies, which had neither the Winnebago nor the purchase price.
7. It was no answer to the claim to rely upon payment of monies to a person not entitled to those monies. It was open to Australian Motor Homes to issue a cross-claim against Mr Disselkoen for the monies wrongly received by him.
8. I am not persuaded that his Honour applied the incorrect test to the question before him.
9. It follows that the summons should be dismissed, with costs.

orders

1. The Court makes the following orders: 1. The Amended Summons filed on 3 October 2017 is dismissed. 2. Subject to order (3), the plaintiff is to pay the costs of the defendant to the summons. 3. Should the defendant seek any other order for costs than that set out at (2), written submissions in support of the application are to be filed and served by 4pm on 14 March 2018. Any submissions in reply are to be filed and served by 4pm on 28 March 2018. Any application will be determined by the Court on the papers.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 February 2018