Trad Financial Services Pty Ltd & Anor v Trad & Anor

Judgment 1HIS HONOUR: The second plaintiff, Mr Damian Trad, is a director and shareholder of the first plaintiff, Trad Financial Services Pty Ltd ("Trad Financial Services"). He is the second cousin of the first defendant, Mr Carl Trad. Mr Carl Trad is the sole director and shareholder of the second defendant, Koenigsegg Australia Pty Ltd ("Koenigsegg Australia"). 2The plaintiffs say that in July 2005 they made a loan of $650,000 to Carl Trad by making two payments on his direction. The plaintiffs say that the loan was made for the purpose of Carl Trad's purchasing a black Koenigsegg motor vehicle that had been imported to Australia by a dealer, Galleria Veloce Pty Ltd ("Galleria Veloce"). A Koenigsegg is a fast, exotic and expensive vehicle produced in Sweden. The plaintiffs plead that it was agreed that the vehicle would be owned jointly by them and Carl Trad and that Carl Trad agreed to repay the principal plus interest when he re-sold the vehicle and agreed to share equally any profit on the resale. 3Damian Trad arranged for two bank cheques to be provided, one for $300,000 and one for $350,000. These cheques were handed to Carl Trad. The first cheque for $300,000 was drawn on 12 July 2005 and was payable to a Mr Paul Torbay. The second cheque was drawn on 28 July 2005 and was payable to Galleria Veloce. Damian Trad says that these cheques were drawn on Carl Trad's direction and constitute the loan to him. 4Carl Trad denies borrowing any money from Damian Trad or Trad Financial Services. He says that the cheques were loans by Damian Trad or Trad Financial Services to Galleria Veloce or its director, Mr Dimitrios Papadimitriou, known as Jim Papas. 5Damian Trad deposed that from mid-August 2005 he pressed Carl Trad to sell the black vehicle and to repay the loan, but was continually put off with excuses as to why Carl Trad had not been able to sell the vehicle. 6Receivers were appointed to Galleria Veloce on 22 March 2006 following which there was a dispute between Carl Trad and Galleria Veloce as to who was entitled to the black vehicle. That dispute was settled on 30 October 2007, but there is no evidence that Damian Trad was aware at that time of the resolution of the dispute. GE Commercial Corporation (Australia) Pty Ltd ("GE") claimed to have title or the right to sell the vehicle pursuant to a fixed and floating charge given by Galleria Veloce. Pursuant to the settlement it agreed to release its claim to the vehicle and to withdraw a REVS notice it had filed with respect to the vehicle. 7The black vehicle was not registered for on-road use in Australia. It was damaged in February 2008 when being driven by Carl Trad during an exhibition race in Adelaide. Carl Trad gave evidence that the vehicle was later shipped back to Sweden for repair, but he was told that the chassis had been cracked and the vehicle was written off. He said that he was offered and received $110,000 as the salvage value for the vehicle. 8Damian Trad deposed that a few days before 27 June 2011 it was drawn to his attention that Carl Trad was proposing to sell a second Koenigsegg, an orange vehicle, by auction. 9The orange vehicle was purchased in the name of Koenigsegg Australia, but it did not provide any funds for its purchase. 10Damian Trad contended that Carl Trad did not have the resources to purchase the second Koenigsegg, that is, the orange vehicle. He believed that the second vehicle was purchased with proceeds generated by the sale of the first vehicle, or from moneys borrowed on the first vehicle, or from the proceeds of insurance of the first vehicle, and in that way the purchase of the second vehicle was sourced from the funds provided by the plaintiffs in 2005. 11The plaintiffs pleaded that they had the same property and interest in the orange vehicle as they had in the black vehicle, or, alternatively, that the first and second defendants held the orange vehicle on a constructive trust for the plaintiffs because the proceeds of sale, disposal or insurance of the black vehicle were applied in a manner contrary to the parties' agreement that those proceeds would be used to repay the plaintiffs' loan, but were instead used to buy the orange vehicle. As well as seeking repayment of $650,000 plus interest, the plaintiffs seek an order that the first and second defendants deliver up the orange vehicle to them, or, alternatively, a declaration that the defendants hold the orange vehicle on trust for the plaintiffs and an order that it be sold and the moneys owing to the plaintiffs plus interest be deducted from the net proceeds of sale and the balance distributed equally between Trad Financial Services and Koenigsegg Australia. 12The defendants say that none of the moneys used to acquire the second Koenigsegg vehicle was sourced from the black vehicle. The defendants contend that even if Carl Trad is found to have borrowed the sum of $650,000 from Damian Trad or Trad Financial Services, those parties have no interest in the orange Koenigsegg vehicle. 13I have concluded that on the balance of probabilities the advances made by the plaintiffs were by way of loan to Carl Trad. But I have concluded that the plaintiffs have no proprietary interest in the orange vehicle of which Koenigsegg Australia is the legal owner. There will be judgment for Trad Financial Services against Carl Trad for the loan plus interest as set out at para [86] below, but the balance of the plaintiffs' claim will be dismissed.