Computer World (Victoria) Pty Ltd v Internet Centre of Excellence 2000 Pty Ltd

REASONS FOR JUDGMENT 1 On 5 November 2004, in an action for breach of trust, and misleading or deceptive conduct, McInnis FM found for Internet Centre of Excellence 2000 Pty Ltd ("ICE 2000") [2004] FMCA 765. ICE 2000 was the applicant below and is the respondent to this appeal. His Honour ordered Computer World (Victoria) Pty Ltd ("Computer World"), the appellant, to pay an amount of just over $62,000 by way of damages, together with costs fixed in the sum of $28,000. He dismissed a cross-claim filed on behalf of Computer World. 2 The trial occupied several days. It was conducted without pleadings. The facts were essentially quite simple. ICE 2000 conducted a retail computer sales outlet on behalf of the Computer World until approximately April 2002. Computer World permitted ICE 2000 to use its signage, and supplied it with stock. ICE 2000 would account to Computer World in relation to sales of stock, and receive commissions from it. 3 As part of the arrangement between the parties, ICE 2000 deposited an amount of $50,000 with Computer World pursuant to what was described as "a credit facility", dated 6 December 2001. It is unnecessary to set out the terms of that document in their entirety. However, the relevant parts are as follows: "Re credit facility, We, the undersigned, Computer World (Vic) Pty Ltd, agree to grant you credit facility for the purchase of computers and associated goods ("goods") on the following terms and conditions: 1. That you deposit an amount of $50,000 ("security amount") (the receipt of which is acknowledged) into a separate interest bearing account to be opened in the name of Computer World (Vic) Pty Ltd and titled Internet Centre of Excellence 2000 Pty Ltd Trust Account. 2. The security amount can only be drawn upon by Computer World (Vic) Pty Ltd in the event the Internet Centre of Excellence 2000 Pty Ltd fails to pay for goods purchased within the trading terms." 4 The credit facility was executed by Mr Murugesu Yuvarajah on behalf of Computer World, and by Mr Baris Hasturk on behalf of ICE 2000. Mr Hasturk was, at that time, an employee of ICE 2000. It was common ground that a cheque for $50,000, described as "the security amount", was provided by ICE 2000 to Computer World, and banked. However, the proceeds of that cheque were not put into a separate interest bearing account in the name of Computer World and "titled an Internet Centre of Excellence 2000 Pty Ltd Trust account", as specified in the credit facility, but rather into Computer World's general account. The money was used by Computer World in the course of its ordinary business dealings. 5 Ultimately the relationship between the parties broke down, and ICE 2000 sued to recover the $50,000 (less a minor adjustment of several hundred dollars), together with interest on that sum. Computer World's cross-claim related to non-payment for goods supplied by it to ICE 2000. As previously indicated, his Honour dismissed the cross-claim. There is no appeal from that part of his Honour's orders. Nothing further need therefore be said about the cross-claim. 6 The primary issue at trial was whether the $50,000, which was paid into Computer World's general account, and used for ordinary business purposes, was trust money. The credit facility, in its terms, suggested that the parties regarded it as such. Insofar as it represented a written agreement between them, the security amount was impressed with the character of a trust. 7 Before his Honour Mr Yuvarajah gave evidence that, although he had signed the credit facility, it had been "a mistake". He claimed that there was an oral agreement between Mr Hasturk and himself to the effect that, notwithstanding the terms of the credit facility, the $50,000 need not in fact be deposited in a separate interest bearing account, as specified, but could instead be used by Computer World as ordinary working capital. 8 McInnis FM found that the credit facility created either an express or implied trust of the security amount in favour of ICE 2000. He rejected the evidence of Mr Yuvarajah that a separate oral agreement had been reached with Mr Hasturk which relieved Computer World of its obligations under the credit facility to establish a separate interest bearing account as a trust account in favour of ICE 2000. He regarded the terms of the credit facility as clear and unambiguous. He also found Mr Yuvarajah not to be a credible witness. He said that it was implausible that Mr Yuvarajah would have signed the credit facility, as he claimed, "by mistake". 9 His Honour regarded the evidence presented by both parties as unsatisfactory. He noted that ICE 2000 had not called Mr Hasturk as a witness. There was some hearsay evidence from Ms Anne Gardner, on behalf of ICE 2000, to the effect that Mr Hasturk had "since returned to his homeland of Turkey", and that his whereabouts at the time of the trial were unknown. In these circumstances, his Honour declined to draw a Jones v Dunkel inference against ICE 2000. 10 After judgment in this matter was delivered, Computer World discovered that Mr Hasturk had not in fact gone to Turkey, but had at all material times been in Melbourne and available to give evidence. Moreover, he was easily capable of being contacted by ICE 2000 because he retained the same mobile telephone number that he had used when employed by that company. 11 By notice of motion dated 11 April 2005, Computer World sought leave to lead further evidence on the appeal to this Court. Essentially, that further evidence is contained in an affidavit sworn by Mr Hasturk in which he deposed to his understanding of the arrangement he had entered into with Mr Yuvarajah at the time that the credit facility was signed. 12 Mr Hasturk's affidavit discloses that he first learned of the proceedings between Computer World and ICE 2000 on 23 November 2004, several weeks after McInnis FM delivered judgment. He deposes that he was responsible, on behalf of ICE 2000, for all negotiations with Computer World in November and December 2001. He says that he can recall discussions regarding "a security deposit of $50,000". He says that the deposit was paid so that ICE 2000 could obtain stock from Computer World, and that it was regarded essentially as a line of credit. 13 Importantly, Mr Hasturk deposes: "9. The only agreement in writing between the two parties that I am aware of is the contract concerning the $50,000 security deposit. 10. I remember a verbal agreement, the exact terms which I cannot recall, with Murugesu Yuvarajah regarding a $50,000 security deposit. This money was to be held by Computer World until the termination of trading between the parties. If either party terminated the contract then the basic understanding was that the security deposit less any outstanding stock unpaid for by Ice2000. [sic.] 11. The contract which I presented to Murugesu Yuvarajah was a formality which I had drafted using a solicitor as per my instructions from Ice2000 management. I can not recall anything about establishing a separate trust account for the $50,000. 12. To the best of my knowledge I do not believe that Mr. Yuvarajah had any understanding of creating a separate trust account. There had never been any discussions about creating a separate trust account for the security deposit." 14 His affidavit continues: "15. I have remained in Melbourne, Australia at all times since 1990. I have always been available to be contacted since then. 16. I have not returned to Turkey to live nor have I ever considered doing so. Any such suggestion is entirely refuted and completely false. 17. My contact details have remained the same since my departure from Ice2000. they [sic.] have not changed since December 2001. My mobile phone number has remained 0419 200 040 and I could easily been [sic.] contacted by management at Ice2000 should they have attempted to do so. 18. Nobody from Ice2000 has attempted to make contact with me since my departure." 15 Computer World relies upon s 27 of the Federal Court Act 1976 (Cth) as the basis for the receipt by this Court of this further evidence. Pursuant to that section, the power of the Court to receive further evidence on appeal is discretionary. The discretion is a wide one, but must be exercised judicially: CDJ v VAJ (1998) 197 CLR 172 at 185. Factors such as finality, discoverability of the evidence and its likely effect on the orders made are usually relevant to the exercise of the discretion. 16 Computer World submits that had the evidence of Mr Hasturk been led before his Honour, it may well have caused him to accept the evidence of Mr Yuvarajah, rather than rejecting that evidence. That in turn might have led his Honour to find that there was a collateral agreement of the type alleged by Computer World, rather than a trust, as his Honour ultimately found. Computer World also submits that, had his Honour been aware that Mr Hasturk was available to give evidence, but had not been called by ICE 2000, he may well have been prepared to draw a Jones v Dunkel inference against ICE 2000, rather than refusing to do so. 17 This submission, despite its apparent force, nonetheless faces several difficulties. Even if it be assumed that Mr Hasturk's evidence may have led his Honour to accept Mr Yuvarajah's account of what had occurred, the legal consequences of accepting that evidence would still be problematic. On one view of Mr Hasturk's evidence, the $50,000 was paid to be held for a special purpose. It would therefore fall within the principles developed by the House of Lords in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 580-82 per Lord Wilberforce, and in Twinsectra Ltd v Yardley [2002] 2 AC 164. Under those principles, the $50,000 would be trust money, as his Honour in fact found. 18 More importantly, Mr Hasturk's evidence would have to overcome the difficult legal hurdle created by the High Court's judgment in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 at [32]-[36]. In that case, the respondents alleged that the "operative agreement" was not contained in a written loan agreement, but was reached earlier, and was wholly oral. Yet it was not said that the written agreement should be rectified. Nor was it said that a defence of non est factum was available, or that the agreement was executed by mistake, or that its execution was procured by misrepresentation. 19 The High Court explained why the law does not permit reliance upon a collateral agreement of the type alleged in circumstances where a written agreement has been executed. First, this ensures that the legal rights and obligations of the parties turn upon what their words and conduct would reasonably be understood to convey, and not upon actual beliefs or intentions. Secondly, in the nature of things, oral agreements will often be disputable. Resolving such disputes can be difficult, time consuming, expensive and problematic. As a consequence, where parties enter into a written agreement, courts will generally hold them to the obligations which they have assumed by that agreement. The obligations of written agreements between parties cannot simply be ignored or brushed aside. 20 The High Court went on to state some general principles. It noted that some contracts are alleged to have been partly oral, and partly written. In such cases, evidence as to the oral terms can be given, but not if those terms contradict the terms of the written agreement. 21 Turning back to the present case, it is far from clear just how Computer World put its case at first instance. On one view, it submitted that the credit facility was nothing more than an acknowledgement of a loan, akin to a receipt. Unfortunately for Computer World, the credit facility simply does not read that way. Indeed, Mr Hasturk regarded it as a contract, albeit "a formality". Nor does the credit facility read as though it contains the terms of a contract that is intended to be partly written and partly oral. Even if it did, the supposed oral agreement between Mr Yuvarajah and Mr Hasturk would directly contradict the written term in paragraph one of the document that the security amount be deposited on trust for ICE 2000. I am unable to accept Computer World's submission that, in some way, it impliedly sought rectification of the written agreement before McInnis FM. Mr Yuvarajah's reference to a "mistake" does not, in context, suggest that any such application was being made. In accordance with the principles so clearly enunciated in Equuscorp (and also stated in earlier cases such as Hoyts v Spencer (1919) 27 CLR 133 and BP Refinery v Hastings (1977) 180 CLR 266), contradiction of a written term, absent rectification, cannot be permitted. 22 It follows that Computer World would not have been assisted had Mr Hasturk's evidence regarding the collateral agreement been led before his Honour. Mr Yuvarajah's credibility might have been enhanced, but the legal consequences of accepting his evidence would not have altered. It therefore follows that the application to rely upon further evidence in this appeal should be rejected. 23 Computer World also relies on several substantive grounds of appeal which do not involve the reception of further evidence. Its notice of appeal contains ten grounds, but a number of them were abandoned during the course of argument. 24 Ground three contends that his Honour erred in failing to draw a Jones v Dunkel inference in relation to the non-appearance of Mr Hasturk, and also of Ms Serif Memis, who was another employee of ICE 2000 at the relevant time. For the reasons set out above in relation to the further evidence ground, a Jones v Dunkel inference in relation to Mr Hasturk could not have assisted Computer World. Such an inference would not overcome the legal impediment to its claim created by the High Court's decision in Equuscorp. 25 In relation to Ms Memis, it would appear that she played some role in the preparation of the accounts by which the various exhibits to ICE 2000's affidavits were created. However, Ms Gardner had the central role in relation to the various accounting issues that were raised, and there is nothing to suggest that Ms Memis' part in what took place was of such significance as to warrant a finding of appealable error. 26 As part of ground three, Computer World claims that his Honour erred in drawing a Jones v Dunkel inference against it in relation to a particular witness who prepared the spreadsheets exhibited to Mr Yuvarajah's affidavits, but was not called ("Pinky"). However, "Pinky" seems to have played a more central role in preparing the accounting documents that were tendered on Computer World's behalf. It was open to his Honour to distinguish between "Pinky" and Ms Memis in that regard. 27 Ground six complains that his Honour misconstrued the nature of the evidence by equating "stock transfers" with "invoices" when these are in fact different concepts. His Honour dealt with this issue at [24] of his reasons for judgment. Regardless of whether stock was transferred from Computer World to ICE 2000 for on-sale to customers, or for display purposes, the transaction and transfer of stock was evidenced by Computer World's "stock transfer" documents. These stock transfers were at times referred to as "invoices", which is effectively what they were, but the debate is somewhat sterile, and merely involves semantics. There is nothing to suggest any error of the kind alleged in his Honour's reasons. 28 Ground seven complains that his Honour misunderstood the nature of the evidence in that ICE 2000 was the only party in a position to generate invoices and associated documentation, and not Computer World. Once again, there is nothing in this point. His Honour was plainly aware of the distinction between Computer World's "stock transfer" documents, and the tax invoices generated by ICE 2000 for sales to customers. 29 Ground eight asserts that his Honour erred in finding for ICE 2000 on its claim pursuant to s 52 of the Trade Practices Act 1974 (Cth). In particular, it alleges that even assuming that Computer World engaged in misleading or deceptive conduct by representing that the security amount would be kept in a separate trust account in favour of ICE 2000, there was no evidence that ICE 2000 relied upon any such representation when Mr Hasturk handed over the cheque for $50,000. 30 There is some substance in this ground. Without Mr Hasturk's evidence, his Honour must have inferred reliance. There was little, if any, evidence upon which such an inference could be based. Mr Hasturk's evidence, if it were to be received, would tend to negate reliance because as he put it, he regarded the credit facility as nothing more than a formality. 31 The difficulty confronting Computer World in relation to ground eight is that it leads nowhere. His Honour found in favour of ICE 2000 primarily on the basis of breach of trust. No issue of reliance arises in relation to that cause of action. Any findings that he made in relation to the alternative claim under s 52 of the Trade Practices Act were dicta, as his Honour specifically noted at [88] of his reasons for judgment. The relief to which ICE 2000 was entitled in relation to its claim for breach of trust was exactly the same as the damages that might have been awarded under s 52. It follows that, irrespective of whether his Honour fell into error on this point, no appealable error is demonstrated. 32 Ground nine complains that his Honour erred in finding contrary to the evidence that Ms Gardner was at all material times the managing director of ICE 2000. Ms Gardner was the managing director from at least 1 April 2002, and possibly earlier, through to February 2003. By the time of the trial, she was a consultant. If his Honour erred in the manner alleged in this ground, it was an error of a minor kind. It did not infect his overall reasons for judgment with appealable error, and did not lead to an incorrect result. 33 Finally, ground ten complains that his Honour acted upon hearsay, particularly hearsay derived from the various affidavits of Ms Gardner. No objection was taken to those affidavits at the time that they were read. Subsequently, during cross-examination of Ms Gardner, counsel for Computer World purported to object to her affidavit evidence except for her analysis of business records which was conceded to be appropriate and unobjectionable. The hearsay objection was never properly particularised, and the matter was never thereafter pursued. This ground cannot succeed. 34 It follows that the application for leave to rely upon further evidence will be refused, and the appeal itself dismissed. The appellant must pay the respondent's costs. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg