Mercedes-Benz Financial Services Australia Pty Limited v State of New South Wales & Anor

Judgment 1HIS HONOUR : The question in this case is which of two innocent parties has title to a Ferrari motor vehicle known as a Ferrari 612 Scaglietti Sessanta. The vehicle was seized by the police. The first defendant (the State of NSW) has filed a submitting appearance. It does not claim the car. The parties have agreed to interim arrangements for storage of the vehicle until the determination of who has title to it. The contesting parties are the plaintiff, Mercedes-Benz Financial Services ("MBFS") and the second defendant, Mr Rakesh Tulshyan. 2Mr Tulshyan is a resident of Singapore. He purchased the vehicle on 28 February 2008 from the Ferrari franchised dealer, Italia Motori. The vehicle was one of only 60 manufactured throughout the world to commemorate 60 years of the manufacture of Ferrari cars. Mr Tulshyan did not take personal delivery of the car. He placed the car on consignment for sale by a licensed motor car dealer, Chanti Pty Limited that traded under the name European Car Specialists ("ECS"). 3Mr Tulshyan dealt with a salesman at ECS called Jimmy Nehme. Mr Nehme was the director and shareholder of a company called Via-Me Transport Pty Ltd ("Via-Me Transport"). 4MBFS is in the business of providing finance for the acquisition of luxury motor vehicles. Mr Nehme was an existing customer of MBFS. Without telling Mr Tulshyan, Mr Nehme arranged for Mr Tulshyan's Ferrari vehicle to be purportedly sold by ECS to MBFS. Via-Me Transport entered into a hire purchase contract with MBFS on 4 November 2008. MBFS paid $400,000 to ECS on 5 November 2008. The invoice for the purchase of the car received by MBFS, apparently from ECS, stated a purchase price of $600,000. It referred to a deposit of $200,000 and stated that a balance of $400,000 was due. It was common ground that the $200,000 deposit was not paid. Nothing was paid to Mr Tulshyan. I was told that ECS is being wound up. 5Mr Tulshyan claims that he remains the owner of the car. MBFS contends that it acquired title. It relies on two grounds. It says that ECS had authority under the consignment agreement to sell the vehicle for the price it did. It contends that the facts that ECS did not receive the whole of the stated price of $600,000, and did not account to Mr Tulshyan for the money it did receive, do not mean that ECS lacked actual authority from Mr Tulshyan to sell the car. Alternatively, MBFS contends that it obtained good title pursuant to s 5(1) of the Factors (Mercantile Agents) Act 1923. 6That section provides: " 5 Powers of mercantile agent (1) Where a mercantile agent is entrusted as such with the possession of any goods or the documents of title to goods, any sale pledge or other disposition of the goods made by the agent in the ordinary course of business of a mercantile agent shall, subject to the provisions of this Act, be as valid as if the agent were expressly authorised by the owner of the goods to make the same: Provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same. " 7There was no dispute that ECS was a mercantile agent entrusted with possession of the vehicle. 8An alternative claim by MBFS relying on s 26(2) of the Sale of Goods Act 1923 was not pressed. MBFS accepted that if it could not succeed under s 5(1) of the Factors (Mercantile Agents) Act , it could not succeed under s 26(2) of the Sale of Goods Act . 9Mr Tulshyan says that the invoice on which MBFS paid was not from ECS, but was concocted by MBFS' agent, Mr Jeremy Turner, who was employed by a related company of MBFS. There was ultimately no issue that Mr Turner was MBFS's agent in the transaction. Mr Tulshyan says the $400,000 was not paid under a contract of sale between ECS and MBFS. Alternatively, Mr Tulshyan submitted that ECS was not authorised to sell the car under the consignment agreement. He submitted that ECS did not dispose of the vehicle in the ordinary course of business, MBFS did not act in good faith in acquiring the vehicle and had notice that ECS did not have authority to sell. 10Mr Tulshyan relied on serious irregularities committed by Mr Turner. Mr Turner asked ECS to change its invoice to state that the purchase price included luxury car tax of $125,266.15 when he knew it did not. The invoice Mr Turner submitted to the settlements department of MBFS was either wholly prepared by him (as Mr Tulshyan submitted) or was amended by him to state that the vehicle was a demonstrator and not a used vehicle. To Mr Turner's knowledge the invoice submitted by him to the settlement department of MBFS was false in stating that the vehicle was a demonstrator and that luxury car tax was included in the price. 11The issues are: (a) whether the $400,000 paid by MBFS to ECS was paid under a contract for sale between ECS and MBFS (b) if so, whether a sale by ECS to MBFS was authorised by Mr Tulshyan under the terms of the consignment agreement between him and ECS as orally varied ; (c) whether the sale was made by ECS in the ordinary course of business of a mercantile agent; (d) whether MBFS acted in good faith and without notice that ECS did not have authority to sell the vehicle; and (e) if ECS had authority, or is taken by virtue of s 5 of the Factors (Mercantile Agents) Act to have had authority to make the sale, whether title to the vehicle passed to MBFS where the stated deposit making up part of the purchase price was not paid. 12I have concluded that: (a) there was a purported contract for sale between ECS and MBFS; (b) ECS did not have authority to make the contract with MBFS; (c) the sale was not made by ECS in the ordinary course of business of a mercantile agent; (d) MBFS through its agent Mr Turner did not act in good faith and without notice that ECS did not have authority to sell the vehicle; (e) if ECS had been taken to have authority to sell, title would have passed, notwithstanding the so-called deposit was not paid. By reason of findings (b), (c) and (d) title did not pass to MBFS.