Cavacuitti & Anor v XTMCA Ltd

Cavacuitti & Anor v XTMCA Ltd - [2002] NSWIRComm 117 - NSWIRComm 2002 case summary — Zoe

[11]

2 The applicants seek to have declared void ab initio an arrangement which they had with Toyota. The case as opened by Mr Van Aalst of counsel who appeared for the applicants differed from that which appeared in the summons to some extent and what follows is based on his opening address. The applicants allege that in about February 1998 they embarked upon a course of action together with Toyota which was designed to lead up to and be consummated by the grant of a Toyota dealership to the applicants at a location centred in Cooma, Southern New South Wales. Toyota prepared a report intended to reflect the capital which Mr Cavacuitti would be required to inject through the second applicant to make the dealership feasible. It was said that Toyota represented in that document that the applicants needed to invest about $500,000 on a site from which to carry on the dealership operation. Toyota, as part of this course of conduct took steps to assist the applicants in obtaining a motor vehicle dealer's licence and to register a business name "Monaro Toyota". Toyota took steps to assist the applicants in obtaining finance to enable them to acquire vehicles for sale through the dealership. The parties looked at a number of potential sites in Cooma from which the dealership could be conducted. It was the obligation of the applicants to secure the site but this had to meet the approval of Toyota as being an appropriate site from which to carry on the dealership. Toyota prepared several sets of documentation intended to represent the terms and conditions upon which the dealership would be conducted. There were difficulties in obtaining an appropriate site and Toyota assisted the applicants in endeavouring to obtain council approval for at least one of the sites. As an interim measure the applicants secured a short-term lease of a property in Cooma in July 1998 which was due to expire on 31 December 1998. The applicants, however, did not obtain a site which was acceptable to Toyota which would cost no more than the $500,000 figure which had been set as being an appropriate amount for investment and which would, in the view of the applicants, allow a reasonable return on their investment. There were disputes concerning the successive sets of documentation prepared by Toyota, and as to whether they represented an understanding earlier reached between the parties as to the contents of that documentation. In December 1998 the applicants decided to withdraw from the arrangement that they said they had with Toyota because, according to correspondence entered into at that stage, they were unhappy with new draft documentation prepared by Toyota which was said to be unrepresentative of the basis upon which negotiations had been conducted previously. It was said that the latest documentation had changed the arrangement significantly and that Toyota had "pulled the rug" from underneath the applicants. This was alleged to be unfair and the applicants sought orders to the effect that the arrangement be declared void and that compensation be paid for losses which had been suffered in reliance upon the conduct and representations made by Toyota. It was said that the second applicant had sustained a loss of $103,772, that the first applicant had lost salary in the order of $57,000 which he could otherwise have earned, that the second applicant was precluded from earning anticipated profits over the next three years totalling $240,000 and that other assets had been lost. The total claims were approximately $600,000.

[37]

28 By about June 1998 the parties had agreed that a site formerly conducted as a Shell Service Station at 48-52 Sharp Street would be a suitable site from which to conduct the dealership. The cost was more expensive than originally anticipated by Mr Cavacuitti but nevertheless he determined to pursue its acquisition. Concept plans were drawn up by an architect retained by Toyota, Mr Avramidis. Mr Cavacuitti retained his own architect to draw up plans for submission to council, based on the concept plans. Those plans which were admitted into evidence in the proceedings showed an area set aside for "ski hire" and a small engine workshop together with a separate showroom office. It was the evidence of Mr Cavacuitti that he had always intended to conduct other businesses as well as the dealership because the anticipated income from the dealership would never represent a sufficient return on capital. He said that he specifically discussed businesses such as a ski hire business with Messrs Smith and Whalley. Whilst there is a concession on the part of the Toyota personnel that some businesses were discussed including a small engine repair facility and the sale of outboard motors, they denied any mention of a ski hire facility. Messrs Smith and Whalley also denied having seen the plans drawn up by Mr Cavacuitti's architect which contained reference to a ski hire area. However there was admitted into evidence a facsimile transmission from Mr Cavacuitti to Mr Avramidis copied to Mr Whalley dated 30 September 1998. This communication referred to costs savings, presumably in connection with the plans originally submitted to council for the ex-Shell site. The facsimile transmission concluded that there had been deleted from the new proposal "the rear showroom and ski-hire additions." This facsimile transmission was an exhibit to an affidavit sworn by Mr Whalley. I am satisfied that, at the least, Mr Whalley held documentation from Mr Cavacuitti indicating that there was mention on plans prepared in connection with the ex-Shell site of the conduct of a ski hire business from that site.

[69]

60 Before dealing with the specific allegations of unfairness I should make some general observations about the processes by which and the principles utilised for the determination of whether the requisite unfairness exists. A convenient starting point is contained within the joint judgment of Fisher CJ and Hungerford J in the Full Court of the Industrial Court of New South Wales in Baker v National Distribution Services Ltd (1993) 50 IR 254. At 271 their Honours said: "The test of unfairness within the meaning of s 88F of the Industrial Arbitration Act, and hence s 275 of the present Act, has received much attention by the Court and by the previous Industrial Commission over very many years, but, in our review of the cases, the approach stated by Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 over 26 years ago has endured; his Honour commented (at 374) that unfairness of a contract or arrangement was to be determined according to "the common sense approach characteristic of the ordinary juryman ….It is a plain matter of morals not law." His Honour cautioned, however, (at 374,375) that the section's "massive power makes it imperative that it should be exercised with proper restraint … it should not permit itself to become a refuge for those who are merely disgruntled with a bargain entered into on even terms. … the discretion should be exercised to protect victims of wrong dealing not to prescribe anodynes." Those words by his Honour echoed what had been said earlier by Beattie J in Agius v Arrow Freightways Pty Ltd [1965] AR (NSW) 77 at 89 that it was a matter of deciding "in each particular case by the application of the tribunal's common sense and sense of justice whether a particular transaction is unfair, harsh and unconscionable". The nature of the unfairness attracted by s 88F was considered later by the Industrial Commission in Court Session (Perrignon and Dey JJ, Cahill J dissenting) in A & M Thompson Pty Ltd v Total Australia Limited [1980] 2 NSWLR 1 at 13 as follows: "It has been said that fairness is determined by the commonsense approach of a juryman and that it is a moral and not a legal issue ( Davies' case). Whether this be so or not, it does seem that in distinguishing between what is fair and what is not fair the Judge must apply standards which appear to him to provide a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement. In doing so he would always have to bear in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement." (at 271-2).

[86]

74 These specific allegations of unfairness have to be considered in the context of all of the circumstances surrounding the creation of the arrangement and the fact that the arrangement contemplated an evolving process leading up to the selection of an appropriate site, the fulfilling of the other conditions contemplated and the entering into of the dealership documentation. Included within these circumstances are the following matters which should, in my opinion be taken into account: 1. Mr Cavacuitti represented himself as being an experienced businessman possessing a high level of financial acumen with many years of business experience. 2. In the course of evidence Mr Cavacuitti said that if the November 1998 documentation had been identical with the April 1998 documentation he would have signed it notwithstanding that he had not at the time located a site suitable both to himself and Toyota from which to permanently conduct the dealership. He would have undertaken the risk involved. He would have done this knowing that it would have been difficult to trade out of the Polo Flats site. 3. As and from April 1998 Mr Cavacuitti was aware that Toyota required that the site selected be a minimum of 2,500 sq metres, close to existing dealers in the Cooma CBD, near other motor dealerships with a good street frontage, level land, comfortable offices and a good sales environment. 4. Mr Cavacuitti said in evidence that he had "a reasonable idea of the Cooma-Monaro market". 5. In the course of his discussions with Mr Smith on 17 April 1998 Mr Cavacuitti did not raise with him the fact that his interest in pursuing the dealership with Toyota was contingent or dependent upon him being able to conduct other business activities from the site. 6. The arrangement fell apart ostensibly because of the terms and conditions of the documentation and not because of Mr Cavacuitti's inability to obtain a suitable site within the price range which he had fixed by reference to the capitalisation report. 7. No complaint was made by the applicants that Toyota had misrepresented in any way the availability of a site within the Cooma-Monaro area which fulfilled its requirements and the applicants were entirely "at risk" in terms of their decision to participate in the arrangement and to carry out the activities which were necessary to be undertaken in fulfilment of the arrangement.

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Judgment (112 paragraphs)

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