4860/02 BRAYSTOCK PTY LTD & ANOR v ROBERT PETER GARLAND
JUDGMENT
1 HIS HONOUR: The case, as it has come to be argued, concerns the ownership of a piece of equipment used in a specialist truck alignment business. The business, including equipment used in it, was sold by the second plaintiff to the defendant. At the same time, the first plaintiff granted to the defendant a lease of the premises in which the business was conducted. The directors of the first plaintiff are the second plaintiff and her husband, Stephen Foster. In the business she did the administrative work and he the mechanical.
2 The issue is whether the property in axle correction equipment installed in a pit in the premises passed to the defendant under the contract for sale, as being included in what was described in the contract as "Truck Aligner". The defendant took this equipment when he left the premises. If it was not his, the Court is asked to assess damages for its loss. If it was his, a smaller award is sought in respect of damage to the premises caused by the manner of its removal.
3 The contract for sale was entered into on 8 January 1997 and settled on the same day. The lease was also entered into on that day. The contract for sale was materially in the following term. It was made between the second plaintiff as vendor and the defendant as purchaser. The purchase price was $130,000, made up of goodwill $30,000, plant, fittings, chattels and fixtures $70,000 and stock $30,000. The business sold was described as "Front End Specialist & Truck Repairs and business normally associated therewith". Condition 1 of the contract provided that the "business includes the goodwill and all plant, fittings, chattels and fixtures used by the Vendors [sic] in connection therewith as set out in the Inventory". The Inventory is on a separate page of the contract which is headed "Equipment included in sale". The top item is "Truck Aligner". Also included in the list are "4 Wheel Car Aligner" and "F100 Alignment equipment". As well there are specified "2 Post hoist" and "4 Post hoist". The list includes items as minor as a hot water urn and a microwave.
4 The Lease contained the following material terms. The lessor was the first plaintiff and the lessee the defendant. By clause 18 the lessee acknowledged that the items set out in annexure "B" were owned by the lessor but were to be left in the demised premises for 12 months and then removed unless purchased by the lessee. Those items were a MIG welder, a Trans jack and a Hendrickson service unit high lift ram and large air chisel stipulated to have a total value of $11,000. By clause 21 the lessee was given first right of refusal if the lessor sold the premises during the term of the lease. By clause 22 the lessor agreed to leave in the premises for 12 months certain tools in what was called the MVRIC list, which were tools that were required to be in the premises for licensing purposes. By clause 5(b) the lessee covenanted to maintain and leave the premises in good repair upon vacating them.
5 The principal question to be resolved in the case is what was comprehended in the term "Truck Aligner" appearing in the inventory to the contract of sale.
6 There was evidence that there were in the premises, at the date of the sale and the time leading up to it, two items of equipment, either or both of which are candidates to fit that description. These were described in detail by the man who supplied and installed them as long ago as 1985, Bruce Reilly, an expert in the design, manufacture, installation and use of such equipment. His sales brochure is in evidence.
7 The larger piece of equipment was the axle correction equipment the subject of the proceedings. It was installed in a pit in the premises. It was described in a heading in the brochure as "Axle Correction Equipment", but also under an illustration as "Safe T Steer 'In pit' Truck Wheel Aligner". It was bolted down so that it could only be removed by cutting through the bolts. The second piece of equipment was described in a heading in the brochure as "Truck Laser/Wheel/Axle/Chassis Measuring System", but also under an illustration as "Truck 'in shop' laser assignment systems". This item of equipment was much smaller than the axle correction equipment - it appears to be a collection of tools hung on a wheeled trolley, or contained in a carrying case. I shall call it a portable aligner. There were in the premises additional items called truck turntables, which were used with both forms of aligner. Property in the portable aligner was undisputedly passed by the contract - this is what the plaintiffs say is the "Truck Aligner" in the contract. It is not disputed that property in the truck turntables also passed.
8 Evidence of the process of truck alignment was given by Mr Reilly. To align a truck you have to adjust castor, toe and camber. The first two can be achieved with the measuring capability of the portable aligner and an adjustment built into the vehicles. However, camber needs adjustment only when an axle is bent, generally by collision damage. There is no built in adjustment for this and the axle must be corrected through the application of up to 150 tonnes force, using the axle correction equipment.
9 Both Stephen Foster and the defendant gave evidence that generally each of them used the portable aligner with the truck over the pits, even when the axle correction equipment did not have to be used to correct camber. Both sometimes used the portable aligner elsewhere. In both cases the truck turntables had to be used. When the truck was over the pit they were in place there as shown in the illustration in the brochure. But if the portable aligner was used away from the pit, the turntables had to be removed from the pit and taken for use with the portable aligner. The defendant did this only with trailers, because they could not be driven over the pit.
10 Although the contract for sale was in writing, evidence was given of conversations and of documents passing between the parties before the contract was entered into. Both sides conducted the case on the basis that these communications were admissible as part of the background material, which could be taken into account in the construction of the contract, unless the Court rules that the words of the written contract were unambiguous.
11 There was, in particular, a conversation between the defendant and Stephen Foster, in which the equipment to be sold was pointed out. This conversation took place in front of the pit. The defendant says Stephen Foster did not say the equipment in the pit was excluded from the sale. Stephen Foster concedes this, assigning as the reason, that he assumed that as a fixture it was clear the in pit equipment would not pass. Stephen Foster claims to have said in some conversation, that fixtures and fittings remained the plaintiffs' property. His evidence about this is quite unspecific, both as to when and as to the terms in which it was said. Particularly in light of the terms of the written contract of sale, it could not be taken to convey that the axle correction equipment did not pass.
12 In addition to the conversations, documents passed between the parties before execution of the contractual documents. They did not shed light on what was included in the ambit of the "Truck Aligner".
13 Criticism was made of the defendant's credit and there was some substance in this. There were inconsistencies in his evidence. The Fosters gave evidence in a frank and open manner. However, there is not really any controversy as to the facts set out above and there are no conflicts of evidence of any significance to be resolved.
14 The evidence showed that Stephen Foster had carried out the mechanical work of the truck alignment business for ten years or more before the contract. The defendant was a qualified mechanic. He had, in the course of his employment, often brought trucks to the premises for alignment by Stephen Foster, but had not engaged in the process. He had heard of a truck aligner but was not familiar with the equipment.
15 The defendant entered into possession of the business and conducted it in the premises for some years. In June 2002 he left the premises. When he did so he removed the in pit equipment. To do so, he cut through the bolts embedded in the concrete foundation, but in such a way that portions of the bolts were left protruding from the top of the foundation. Shortly prior to his departure, he received a letter from the plaintiffs' solicitors warning that the in pit equipment belonged to the plaintiffs and should not be removed. It does not appear, by any clear evidence, that he knew before then that the plaintiffs claimed that the in pit equipment continued to be theirs. This letter was not answered and the equipment simply removed on his departure in the fashion indicated. Since that time the defendant has conducted a truck alignment business in other premises, apparently involving the use of the removed in pit equipment. The business was originally sold by the plaintiffs because Stephen Foster had not wanted to continue with the truck alignment work. He has, since that time, continued to do some mechanical work on trucks, as well as conducting a tow truck business.
16 So far as the law is concerned, there has been a recent statement concerning the principles of construction of contracts relating to the resolution of ambiguity by the High Court in Royal Botanic Gardens and The Domain Trust v South Sydney Council (2002) 76 ALJR 436. After referring to Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ said at [10]:
"In Codelfa, Mason J (with whose judgment Stephen J and Wilson J agreed) referred to authorities [In particular, speeches of Lord Wilberforce in Prenn v Simmonds [1971] 1 WLR 1381 at 1383-1385; [1971] 3 All ER 237 at 239-241; L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 at 261; and Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 995-997; [1976] 3 All ER 570 at 574-576] which indicated that, even in respect of agreements under seal, it is appropriate to have regard to more than internal linguistic considerations and to consider the circumstances with reference to which the words in question were used and, from those circumstances, to discern the objective which the parties had in view. In particular, an appreciation of the commercial purpose of a contract [ Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574]:
'… presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating'.
Such statements exemplify the point made by Brennan J in his judgment in Codelfa [(1982) 149 CLR 337 at 401]:
'The meaning of a written contract may be illuminated by evidence of facts to which the writing refers, for the symbols of language convey meaning according to the circumstances in which they are used.'"
17 There has been a deal of discussion, judicial and academic, as to whether the English and Australian law on this subject have diverged. See the decisions of Palmer J in Brooks v NSW Grains Board [2000] NSWSC 1049 and of the Court of Appeal in LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74 and J W Carter & Stewart, "Interpretation, Good Faith, and the 'True Meaning' of Contracts" (2002) 18 Journal of Contract Law 182. However, I do not need to enter into that. I take what was said by RD Nicholson J in the Federal Court in BP Australia Pty Ltd v Nyran Pty Ltd (2003) 198 ALR 442 at [32] - [34] as a correct and sufficient statement of the law to be applied in the present circumstances.
"[32] At the risk of repeating what is said in Codelfa, it follows that the issues arising in this matter should be approached in the following manner.