Stanton v Wallace & Ors

Bases of Claim brought against Mr Wallace

1. Mr Stanton's claim against Mr Wallace was based in contract, or in the alternative upon unjust enrichment. A claim based upon misleading or deceptive conduct under the Australian Consumer Law was abandoned at trial.
2. It was established by the evidence, and not disputed by Mr Wallace, that Mr Stanton had paid a total of $202,500 to Mr Wallace towards the purchase of the Boat. It was also established by the evidence, and not disputed by Mr Wallace, that Mr Hutchinson had paid an additional $182,000 to Mr Wallace towards the purchase of the Boat.
3. While the payments made by the two partners were not equal, Mr Stanton sued for the entire amount of $384,500, on the basis that all of this amount was a partnership asset, and that if a judgment was recovered, it would form part of the partnership property to be dealt with on any final account between the partners.

The Evidence

1. The evidence-in-chief of Mr Stanton was given by affidavits (PX 1, PX2 and PX 3). The evidence-in-chief of Mr Wallace was given by affidavit (DX 1). Both were cross-examined. On most important matters there was no difference between their versions.

Agreement for Purchase of the Boat

1. Mr Stanton and Mr Hutchinson had worked together in business and were personal friends. Both were interested in boats and became aware of Viking having the Boat on the market for sale. Mr Stanton and Mr Hutchinson formed a business plan to buy the Boat and operate it as a charter vessel in Sydney Harbour and in North Queensland. The Boat was located in port at Port Macquarie, where Mr Wallace conducted a marine engineering business. He and other business associates were refurbishing the Boat. Their original plan had been to charter the Boat, but that was abandoned and they decided to sell the Boat. At the time negotiations were conducted for the purchase of the Boat, Mr Stanton was living and working in Dubai in the United Arab Emirates. Mr Hutchinson conducted all of the negotiations with Mr Wallace. The evidence established, and Mr Wallace accepted, that Mr Hutchinson was at all times speaking on behalf of the partnership.
2. Mr Wallace drew up a written document headed "Purchase of 66' Vessel". The original draft version was on the letterhead of Viking and said that the purchase price was $900,000. This document described the "Seller" as "Neil Wallace" and the "Purchasers" as "David George Hutchinson" and "James Mackenzie Stanton". That version was signed by Mr Wallace but not by Mr Hutchinson or Mr Stanton (DX 1, pp 70-72). Attached to that document were the account details of the bank account conducted by Mr Wallace in his own name with the ANZ Bank.
3. There was later correspondence by email between Mr Hutchinson and Mr Wallace concerning amendments to that first draft of the agreement (DX 1, pp 73-79).
4. At the request of Mr Hutchinson, the final form of the agreement recorded Mr Hutchinson as the only purchaser. However, Mr Wallace gave evidence that he accepted that the purchase was made by Mr Hutchinson on behalf of the partnership between Mr Hutchinson and Mr Stanton.
5. The final form of the agreement (DX 1, pp 84-85) was again on the letterhead of Viking. It was dated 16 September 2016 and recorded that the purchase price was $900,000. This was to be paid in three instalments as follows: "Payment 1: Deposit due 23/9/16 $300,000 On receipt of deposit 33% equity in vessel. Payment 2: Payment due 23/11/16 $300,000 On receipt of payment 66% equity in vessel. Payment 3: Payment due 3/2/17 $300,000 On receipt of payment 100% equity in vessel, this payment can be made as balance owed or taking over existing bank loan."
6. The document also provided for a payment of $10 for "Purchase of Coral Sea Pacific Charters shares". This was the charter business which Mr Wallace and his associates had intended to conduct using the vessel, but which they abandoned.
7. Page two of the agreement contained the following: "Both the seller and purchaser here by [sic] agree to the payment schedule on page one of this document for the purchase of 66' vessel and Coral Sea Pacific Charters Pty Ltd. Formal documents are being drafted to finalise vessel purchase."
8. Mr Wallace gave evidence that Mr Hutchinson had said that his solicitors would draft more formal documents. However, that never happened. Mr Wallace accepted in evidence that the document he drafted which was dated 16 September 2016 was the binding agreement for sale and purchase of the Boat.
9. The seller was described on the agreement as follows: "Neil Wallace [XXXXXX] Dr Port Macquarie NSW 2444"
10. Mr Wallace signed underneath this description. In evidence Mr Wallace agreed that the address under his name on the document was his home address in Port Macquarie. Viking conducted business from the marina in Port Macquarie and also from an industrial unit in the town, and not from his home address.
11. The purchaser was described as "David George Hutchinson" of an address in Manly.

Payments made towards Purchase of Boat

1. Mr Wallace gave evidence that he required the purchase price to be paid into his personal ANZ Bank account. He did not want it paid into the Viking account.
2. Viking had borrowed $550,000 from the Bank to assist in the purchase of the Boat (DX 1, par 26). Mr Wallace personally guaranteed the loan. Of this amount, $380,000 was paid to the vendor of the Boat, $120,000 was paid to Coral Sea Pacific Charters Pty Ltd to assist in establishing the charter business, carrying out refurbishments to the Boat and making initial loan repayments, and $50,000 was paid to Mr Wallace to cover costs incurred in carrying out work on the Boat.
3. In accordance with the requirement of Mr Wallace that Mr Stanton and Mr Hutchinson pay monies into Mr Wallace's ANZ account, the following payments were made: 1. On 23 September 2016 Mr Hutchinson paid $150,000 to Mr Wallace. 2. On 6 October 2016 Mr Stanton paid $75,000 to Mr Wallace. 3. On 18 October 2016 Mr Stanton paid $70,000 to Mr Wallace. 4. On 14 November 2016 Mr Hutchinson paid $5,000 to Mr Wallace.
4. From December 2016 onwards Mr Stanton and Mr Hutchinson paid marina fees for the Boat. They also paid for insurance on the Boat.
5. There was a second sequence of payments made by Mr Stanton and Mr Hutchinson as follows: 1. On 16 December 2016 Mr Hutchinson paid $25,000 to Mr Wallace. 2. On 5 January 2017 Mr Hutchinson paid $2,000 to Mr Wallace. 3. On 20 January 2017 Mr Stanton paid $35,000 to Mr Wallace. 4. On 22 January 2017 Mr Stanton paid $20,000 to Mr Wallace. 5. On 2 February 2017 Mr Stanton paid $2,500 to Mr Wallace.
6. Thus Mr Stanton and Mr Hutchinson, as partners, paid a total of $384,500 towards the purchase of the Boat.
7. The payments of $35,000 on 20 January 2017 and $20,000 on 22 January 2017 were made by Mr Stanton on his credit card. Mr Stanton gave evidence that he spoke by telephone to Mr Wallace and authorised Mr Wallace to debit these amounts to his credit card. Mr Wallace gave evidence that Mr Hutchinson was in the Viking office with him, and that Mr Hutchinson, operating on Mr Stanton's credit card, made the payments. I do not need to resolve that factual dispute. Mr Wallace gave evidence that he processed the credit card payments through a Viking Eftpos machine, as this was his only means of receiving payments by credit cards.
8. It is clear that while these payments may have been received by Viking, they were not applied for Viking's purposes in discharging the loan to the Bank. The evidence did not establish where the money went, but it certainly did not go to pay off the Bank loan.
9. Mr Wallace agreed in evidence that there was a default in payment on the loan in December 2015. There were further defaults in March, April, May, June, July, August, September and December 2016. There were defaults in January, February, March, April, May and June 2017.
10. In those circumstances, it is understandable that Mr Wallace, as he said in his evidence, required the purchase monies for the Boat to be paid to his private ANZ account, rather than to Viking. He was after all a guarantor for the Bank loan to Viking, which was significantly in arrears.

Who was the Seller under the Agreement for Purchase of the Boat?

1. Mr Wallace asserted at trial that the Boat was being sold by Viking and not by himself. Mr Stanton gave evidence, which I accept and which was not challenged, that he never discussed Viking being the owner or seller of the Boat, and that at all times he was of the view that Mr Wallace was the owner of the Boat and was selling it. Mr Stanton gave evidence which I accept that Mr Wallace told him that he was the owner of the boat and he was the one selling it (PX 1, pars 25, 26). Based upon these conversations, Mr Stanton searched Mr Wallace's name on the Personal Property Securities Register (PX 1, par 27). There was no challenge to the evidence of Mr Stanton recited above.
2. I find that Mr Wallace was the seller under the agreement for the following reasons: 1. Mr Wallace told Mr Stanton that he was the seller of the Boat. 2. While the agreement was on the letterhead of Viking, that company was not mentioned anywhere in the operative words of the agreement. 3. Mr Wallace, who drafted the agreement, described himself in the document as the "Seller". 4. The address for the seller was the residential address of Mr Wallace and not the business address of Viking. 5. Mr Wallace signed the document as the seller, and did not add any words against his signature to indicate that he was signing on behalf of Viking. 6. Mr Wallace drafted the document, and if there is any ambiguity in the document, it should be construed against him. 7. Mr Wallace had provided his own personal ANZ Bank details in an earlier draft of the document sent to Mr Hutchinson. 8. Mr Wallace required all payments to go to him personally rather than to Viking. 9. The first two payments made by Mr Stanton of $75,000 and $70,000 were clearly paid to and received by Mr Wallace in his own name and were not transferred to Viking. 10. The subsequent payments of $35,000 and $25,000 by Mr Stanton were made by credit card which was accepted through the Viking Eftpos machine. However, there was no evidence to show that these funds were ever used by Viking. They were certainly not used to pay off the Viking loan to the Bank or to rectify the substantial defaults on that loan at the time the payments were made.

Seizure of the Boat by National Australia Bank

1. In mid-2017, as a result of the defaults of Viking in making payments due under its loan agreement with the Bank, the Bank seized the Boat pursuant to its rights under the security granted over the Boat by Viking.
2. In August 2018 the Viking loan was still in default and the Bank sold the Boat at auction pursuant to its rights under the security agreement.
3. As a result of the intervention of the Bank, it was no longer possible for the sale of the Boat to Mr Hutchinson and Mr Stanton to be completed. Mr Stanton and Mr Hutchinson had made substantial payments towards the purchase price of the Boat, but the Boat could not be transferred to them, as it had been seized and sold to a third party.

Anticipatory Breach and Repudiation of the Agreement

1. Mr Stanton pleads (Amended Statement of Claim, par 40) that while the obligation to transfer ownership of the Boat had not fallen due at the time the Boat was seized by the Bank, the seller became unable to transfer ownership of the Boat to the plaintiff and Mr Hutchinson. Accordingly the seller committed an anticipatory breach of the obligation to transfer ownership of the Boat and repudiated the seller's obligations under the agreement.
2. In Woodar Investment Development Ltd v Wimpey Construction [1980] 1 All ER 571 at 589 Lord Scarman said: "If an anticipatory breach is relied on, the renunciation must be 'an intimation of an intention to abandon and altogether to refuse performance of the contract', or to put it in other but equally clear words, 'the true question is whether the acts and conduct of the party evince an intention no longer to be bound by the contract' … The emphasis upon communication of a party's intention by his acts and conduct is a recurring theme in the abundant case law."
3. The anticipatory breach may be established by reference to an act of abandonment of the contract by the party concerned or where the party demonstrates an intention to fulfil in a manner inconsistent with the obligation under the contract. Conduct amounting to repudiation may be motivated by impossibility of performance or by an unwillingness to perform - Radan and Gooley, Principles of Australian Contract Law, 2nd Edition, par 21.53.
4. In Foran v Wight (1989) 168 CLR 385 Justice Brennan held that an intimation of non-performance of an essential term amounted to repudiation which releases a party who acts on it from performance. This party does not have to terminate the contract.
5. In Ryder v Frohlich [2004] NSWCA 472 the Court of Appeal said at [104] that the three sets of circumstances giving rise to a discharge of contract are: 1. Renunciation by a party of his liabilities under it; 2. Impossibility created by his own act; and 3. Total or partial failure of performance.
6. In the present case the performance of the contract for sale of the Boat became impossible after possession of the Boat was taken by the Bank and it was sold to a third party. Since the contract could no longer be performed, there was an anticipatory breach and repudiation by Mr Wallace and the purchasers were then entitled to sue for damages.
7. The damages established by the evidence in this case amount to $384,500, being the instalments of the purchase price paid by Mr Stanton and Mr Hutchinson.

Unjust Enrichment

1. Mr Stanton pleaded (Amended Statement of Claim, par 47) that Mr Wallace had received the benefit of payments totalling $384,500, and because the seller could not perform the contract due to the seizure and sale of the Boat by the Bank, Mr Wallace had been unjustly enriched by receipt of this amount.
2. If a contract has not been performed at all, other than by payment of the money in respect of which restitution is claimed, the payment will be recoverable, as the defendant is unjustly enriched by the payment, unless the plaintiff merely bargained for the defendant's promise to pay - Mason and Carter, Restitution Law in Australia, par 1120.
3. In the circumstances Mr Wallace has been unjustly enriched by receipt of payments totalling $384,500, and Mr Stanton is entitled to recovery of that amount. Such recovery is on behalf of the partnership between Mr Stanton and Mr Hutchinson. Mr Stanton acknowledged that he is under an obligation to account to Mr Hutchinson for any payment of damages received.
4. Mr Wallace argued that the agreement for sale of the Boat was with Viking as the seller. I have rejected that submission above. However, even if Viking was the seller under the agreement, Mr Stanton would still be entitled to succeed based upon a claim in unjust enrichment. A payer is prima facie entitled to recover monies paid under a mistake if it appears that the monies were paid in the mistaken belief by the payer that he was under a legal obligation to pay them or that the payee was legally entitled to payment - David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353.
5. I have found that Mr Stanton was told by Mr Wallace, and believed, that Mr Wallace was the owner and the seller of the boat. If he was not, then the monies paid by Mr Stanton were paid in the mistaken belief by Mr Stanton that he was under a legal obligation to pay them and that Mr Wallace was legally entitled to payment. Mr Stanton would be entitled to a judgment for the $202,500 which he paid. There is no evidence about the belief of Mr Hutchinson, so the court could not include the additional $182,000 which he paid in any judgment.

Issues raised by Mr Wallace

1. Mr Wallace represented himself at the hearing. His Defence filed on 18 July 2019 pleaded that he was not a party to the written agreement to sell the Boat. I have found to the contrary for reasons set out above.
2. Mr Wallace raised complaint that Mr Hutchinson was not at the hearing and that the matter could not be properly determined without him. Mr Stanton did all he could to invite Mr Hutchinson to participate in the proceedings (see DX 4) and joined him as a defendant when he declined to be added as a plaintiff. I draw no adverse inference against Mr Stanton from the absence of Mr Hutchinson. Further, it would have been possible for Mr Wallace to take steps to compel Mr Hutchinson to attend the hearing as a witness, but he did not do so.
3. Mr Wallace complained that Mr Stanton and Mr Hutchinson failed to make payments due under the purchase agreement, and that if they had done so, there would have been monies available to pay out the Bank. However there was no cross-claim making this allegation, and it was not raised in the Defence. There was no evidence to support the complaint. Indeed, the evidence showed that most of the monies paid towards the purchase price were retained by Mr Wallace. Little was paid to the Bank and the loan remained in arrears resulting in the Bank seizing and selling the Boat.
4. None of the matters raised by Mr Wallace in his Defence, or his oral evidence, or his submissions, afford him a defence to the claim brought by Mr Stanton.
5. There will be judgment against Mr Wallace. Interest is claimed in the Amended Statement of Claim. No calculation was put forward. I will award interest at court rates on the entire amount from the date of the last payment, being 2 February 2017. My calculation is: Start Date End Date Days Rate Amount Per Day Total 02/Feb/2017 30/Jun/2017 149 5.5% $57.9384 $8,632.82 01/Jul/2017 31/Dec/2017 184 5.5% $57.9384 $10,660.66 01/Jan/2018 30/Jun/2018 181 5.5% $57.9384 $10,486.84 01/Jul/2018 31/Dec/2018 184 5.5% $57.9384 $10,660.66 01/Jan/2019 30/Jun/2019 181 5.5% $57.9384 $10,486.84 01/Jul/2019 31/Dec/2019 184 5.25% $55.3048 $10,176.08 01/Jan/2020 30/Jun/2020 182 4.75% $49.9010 $9,081.97 01/Jul/2020 18/Nov/2020 141 4.25% $44.6482 $6,295.40 Total $76481.27

1. The total amount of the judgment will be $384,500 + $76,481 = $460,981.

Orders

1. The orders are: 1. Judgment for the plaintiff James McKenzie Stanton against the first defendant Neil Wallace for $460,981. 2. Order the first defendant to pay the plaintiff's costs. 3. Dismiss the proceedings against the second and third defendants with no order as to costs.

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