MacFarlane v Heritage Corporation

[1]

[1] McMURDO P: I agree with Williams JA that the appeal should be dismissed. I also agree with his Honour's reasons in which the facts and issues are set out. I wish to add the following brief observations.

[2]

[2] Only one ground of appeal was pursued in oral argument, that the learned primary judge erred in ordering that "[t]he obligation to return the boat is not conditional upon the transfer of trade dollars to [the first appellant]". The appellants' argument is that his Honour's order that the contract be rescinded required that the parties must be returned to their original positions. The parties would not be in their original positions if the appellants were obliged to return the boat without the respondent also being obliged to transfer the 189,000 trade dollars to the first appellant.

[3]

[3] His Honour made the contentious order only after first ordering that the respondent forthwith transfer to the first appellant 189,000 trade dollars.

[4]

[4] The learned primary judge's reasons for judgment set out why his Honour made those orders. His Honour described the second and third appellants as "shrewd and sharp witted traders who have made good use of trade exchanges and trade dollars to profit"[1] and observed that the second appellant's testimony was nearly all unsatisfactory[2] and that he had "proclivities for not paying creditors".[3] His Honour preferred the evidence of the respondent to that of the second and third appellants and Mr Lipscombe, the CEO of Contrabart, noting:

[5]

"I scarcely believed a word any of those three gentlemen said. ... I have no doubt that the [appellants'] business consists of preying upon people like the [respondent] ... who can be persuaded to exchange items of valuable property for trade dollars, the value and utility of which are grossly exaggerated in the negotiations. I formed the distinct impression that the [appellants'] evidence was evasive and, indeed, deceitful."[4]

[6]

[5] His Honour noted that the members of the Contrabart trade exchange pay a small monthly fee payable partly in trade dollars and partly in money and a commission of ten per cent on the acquisition of property or services payable in money by the purchaser.[5] His Honour observed that the appellants owed Contrabart about $3.5 million and that the first appellant does not pay the usual ten per cent transaction fee on its trade dollar dealings with Contrabart and may pay nothing, adding:

[7]

"There is a distinct inference ... that Contrabart issues trade dollars to the first [appellant] gratuitously to increase the available pool of trade dollars to encourage trade in them."[6]

[8]

[6] His Honour stated that the second appellant was discharged from bankruptcy in 1995 after coming to an arrangement with his creditors in 2000 in which he could offer only one cent in the dollar. He then had debts of just over $4,400,000, a little over $2.5 million of which was owed to Contrabart, arising from an advance of trade dollars by Contrabart to one or more of the appellants.[7]

[9]

[7] Those facts suggest a close relationship between Contrabart and the appellants and raise the real possibility that the appellants may be unenthusiastic in meeting their obligations to the respondent. In the context of these findings which are not the subject of appeal, it is unsurprising that his Honour ordered that the appellants' obligation to return the Ishmael upon rescission of the contract was not conditional upon the ordered transfer of trade dollars to the first appellant through Contrabart.

[10]

[8] Section 87 of the Trade Practices Act 1974 (Cth) ("the Act") gives wide powers to a court which has found the respondent to have suffered loss or damage as a result of the appellants' fraudulent, misleading or deceptive representations in contravention of s 52 of the Act. A court may "make such order or orders as it thinks appropriate",[8] (including all or any of the orders mentioned in sub-section (2))[9] if the court considers that the order or orders concerned will

[11]

(d) prevent or reduce the loss or damage suffered, or likely to be suffered, by [the respondent]."[10]

[12]

[9] His Honour was empowered under s 87 of the Act to make the contentious order. It follows that the appeal should be dismissed with costs to be assessed.

[13]

[10] In the event that the appeal was dismissed, the respondent orally applied for an order that should the appellants decline or refuse to sign a transfer of ownership of the boat, the registrar of this court be empowered to do so. On the material before this Court, I can see no reason to make that order. The dismissal of the appeal means that his Honour's order obliging the appellants to "do all things necessary and sign all necessary documents to transfer property and ownership in the vessel Ishmael to the [respondent]" remains. If it becomes necessary, that order can be enforced in the usual way.

[14]

[11] WILLIAMS JA: After a trial lasting some three days the respondent, the plaintiff in the original proceeding, obtained judgment against the appellants-defendants in the following terms:

[15]

"1. Declare that the contract exchanged between the Plaintiff and the First Defendant dated 31 May 2002 has been rescinded and is void ab initio.

2. Order that the contract dated 31 May 2002 be set aside.

3. Order that the First, Second, and Third Defendants forthwith do all things necessary and sign all necessary documents to transfer property and ownership in the vessel Ishmael to the Plaintiff.

4. Order that the Plaintiff forthwith transfer to the Defendant 189,000 trade dollars.

5. The obligation to return the boat is not conditional upon the transfer of trade dollars to the First Defendant.

6. Order that the contract of sale between the First Defendant and the Second and Third Defendants be set aside.

7. Defendants to pay the Plaintiff's costs of and incidental to the action to be assessed on the standard basis."

[16]

[12] The Notice of Appeal relied on a number of grounds but in the outline of argument only three were pursued by the appellants; they were:

[17]

(a) the plaintiff did not effectively rescind the contract;

[18]

(b) the return of the vessel should have been conditional upon the return of the trade dollars;

[19]

(c) where restitutio in integrum was not possible, the primary judge should not have made orders rescinding or setting the contract aside.

[20]

[13] In oral argument senior counsel for the appellants indicated that his submissions would be limited to ground (b); he assured the court that there was nothing useful he could add in support of the appeal beyond that one point.

[21]

[14] The learned primary judge made extremely adverse findings with respect to the credibility of the witnesses for the defendants and made extensive findings of fact. The questions of law raised by the appeal must be considered in the light of all those findings.

[22]

[15] The respondent relied on provisions of the Trade Practices Act 1974 ("the Act") and it is obvious that in formulating the orders the learned primary judge granted relief pursuant to that statute. He recognised in paragraph [78] of his reasons that, inter alia, recission of the contract of 31 May 2002 and consequential orders were sought pursuant to s 87 of that Act. Later in paragraph [85] he said:

[23]

"The exercise of power given by the section is unfettered save by the requirement that any order be required to compensate the plaintiff in respect of the defendant's [sic] contravention of s 52 which has caused the plaintiff loss."

[24]

[16] Section 87(2)(a) of the Act empowers the court to make an order declaring the whole or any part of a contract "to be void and, if the Court thinks fit, to have been void ab initio". As Gummow J pointed out in Marks v GIO Australia Holdings [1998] HCA 69; (1998) 196 CLR 494 at 535 the "principles regulating the administration of equitable remedies afford guidance for, but do not dictate, the exercise of the statutory discretion conferred by s 87". He went on to say:

[25]

"Orders under provisions of s 87(2) which vary the contracts or declare them void ab initio may be granted on terms. Such remedies, like their equitable analogues, are not directed to providing a measure of damages by way of monetary compensation."

[26]

[17] See also Creative's Landscape Design Centre Pty Ltd v Platz [1989] ATPR 40,980, at 50,697.

[27]

[18] Bearing that approach in mind the submissions contained in the appellants' written outline with respect to grounds (a) and (c) must fail.

[28]

[19] The only remaining question is whether the learned primary judge erred in not making the return of the vessel conditional upon the transfer of 189,000 trade dollars. In order to answer that it is necessary to say something about the facts as found at first instance.

[29]

[20] The first appellant, Heritage Corporation (Aust) Pty Ltd, is a company carrying on the business, inter alia, of trading in goods and other commodities. The other appellants are directors of that company. The first appellant is a member of a number of trade exchanges, and in particular Contrabart Trade Exchange operated by Contrabart Trade Exchange Pty Ltd ("Contrabart'). That company facilitates bartering or counter-trading using as the medium of exchange for trading goods and services credit units called in this instance "trade dollars". Members of the exchange who transact business express the value of their transaction in trade dollars. As a result of the transaction, notice of which is given by a document called a transaction slip to Contrabart, a number of trade dollars will be debited to the account of the buyer and credited to the account of the seller. Members of the trade exchange pay Contrabart a small monthly fee and are obliged to pay a commission of 10% on the acquisition of property or services. The monthly fee is payable partly in trade dollars and partly in legal tender. The commission is payable wholly in legal tender.

[30]

[21] The learned primary judge described the activities of the second and third appellants as follows:

[31]

"The second and third defendants are shrewd and sharp witted traders who have made good use of trade exchanges and trade dollars to profit. Their preferred method of business is to acquire valuable goods and sometimes land from relatively unsophisticated folk in exchange for trade dollars. They then sell the property for cash. Occasionally they exchange it for other properties."

[32]

[22] Until May 2002 the respondent, a 40 year old of limited education, was the owner of a 53ft wooden hulled gaff-rigged topsail schooner, the Ishmael. He decided to sell the vessel and invest the proceeds of sale in real estate. He had the vessel valued at $150,000.00 and advertised her for sale at $169,000.00.

[33]

[23] It is sufficient to say that the appellants saw the advertisement, contacted the respondent, and persuaded him to become a member of the Contrabart Trade Exchange. Subsequently a contract was signed between the respondent and the first appellant to exchange Ishmael for 189,000 trade dollars.

[34]

[24] It is not necessary to detail subsequent matters which are fully set out in the reasons for judgment at first instance. Suffice it to say that the learned primary judge found facts which established that the contract of 31 May 2002 was induced by misrepresentations made by or on behalf of the appellants. It was on that basis that the orders referred to above were made.

[35]

[25] Given the rules of trading through Contrabart the respondent could only return 189,000 trade dollars through the machinery set up by Contrabart. It seems clear that the learned trial judge recognised that Contrabart could create problems for the respondent with respect to the return of the 189,000 trade dollars to the appellants. It was inferentially because of such considerations that the learned trial judge did not make the return of the vessel conditional upon the transfer of 189,000 trade dollars. That was not expressly said in the reasons for judgment, but it is clear that was what motivated the learned primary judge in moulding the order as he did.

[36]

[26] Indeed the concern of the learned primary judge was proven to be correct. Since the order was made the respondent has attempted to transfer to the appellants 189,000 trade dollars. That number of trade dollars has been forwarded to Contrabart, but Contrabart has declined to process the transaction unless and until commission (asserted to be 10% in cash) and outstanding fees of $4,664.93 are paid by the respondent. In all the circumstances the respondent has done all that was required of him pursuant to the order in order to comply with his obligations thereunder. As the transfer of the 189,000 trade dollars is pursuant to a court order (and not a purchase transaction covered by the membership agreement between the respondent and Contrabart) there would appear to be no justification for Contrabart claiming commission. If, as the appellants and Contrabart contend, the trade dollars are extremely valuable something should be able to be worked out between the appellants and Contrabart.

[37]

[27] Given what was said above in relation to s 87(2) of the Act it was clearly within the jurisdiction of the learned judge at first instance to mould the order as he did. It was only just and proper that the respondent disgorge the 189,000 trade dollars but, on the contract being declared void ab initio, he was entitled to the return of the vessel without that return being dependant upon the appellants receiving the 189,000 trade dollars.

[38]

[28] The order made was clearly justified pursuant to s 87(2) of the Act and the appellants have not demonstrated any error by the learned primary judge at first instance in formulating the order as he did.

[39]

[29] The appeal should be dismissed with costs to be assessed.

[40]

[30] MULLINS J: I agree with the reasons for judgment of Williams JA and that the appeal should be dismissed with costs to be assessed.

[41]

[1] Reasons for judgment (MacFarlane v Heritage Corporation (Aust) Pty Ltd & Ors [2003] QSC 350; SC No 678 of 2003, 20 October 2003), para [5].

[42]

[8] Section 87(1) of the Act.

[43]

[9] Section 87(2)(c) gives a court power to order the appellants to return property to the respondent.

[44]

[10] Section 87(1A) of the Act.

At a glance

Court

Decision date

Before

Catchwords

Source

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Judgment (44 paragraphs)

Parties

Cases Cited (1)