Westpac Banking Corporation v Southern Environmental Services Pty Ltd

The cross-claim

1. Southern Environmental filed an amended cross-claim on 13 November 2017 and a further amended cross-claim on 10 December 2018, claiming delivery of the manipulators and damages for their "unlawful detention" and conversion, together with interest and costs, pleading that the cross-defendants had failed to deliver up the manipulators as demanded by Southern Environmental in its letter of 1 June 2016, and had detained the manipulators and converted them for their own use, thereby occasioning loss to Southern Environmental.
2. Southern Environmental repeated for the purposes of the cross-claim the statement of claim filed on 26 October 2015 insofar as it was admitted by Southern Environmental, and repeated pars 18(a), (b), (d) and (e) of the defence filed on 4 December 2015. In the cross-claim, Southern Environmental had also repeated par 18(c), but this was not maintained in the amended or further amended cross-claim.
3. Southern Environmental particularised its loss by being deprived of possession of the manipulators by the cross-defendants' conversion of them, as it was stated that they had been: "… unable to deliver the drum manipulators to Westpac or negotiate any sale of the drum manipulators so as to satisfy or reduce its liability to Westpac under its Commercial Hire Purchase Agreement."
4. In addition, Southern Environmental particularised the lost rental income of the manipulators to Southern Engineering of $44,000.00 per month (inclusive of GST), being the sum of $704,000.00 to the date of the cross-claim and continuing.
5. In the alternative, Southern Environmental pleaded that it was entitled to the payment of a hiring charge reflecting the fair market rental value of the drum manipulators from 12 January 2015. It particularised its claim of the fair market rental value of the manipulators as at 12 January 2015 as being no less than $19,705.20 per month.

The defence to the cross-claim

1. The cross-defendants filed a defence to the further amended cross-claim on 14 February 2019. As to Southern Environmental's repeated pleadings in pars 18(a), (b), (d) and (e) of its defence, the cross-defendants responded as follows: "(b) … (i) admit that [the manipulators] were large items of machinery but otherwise deny paragraph 18(a) of the Defence; (ii) admit that as at 27 November 2014 [the manipulators] were located on premises (Gloucester Premises) leased by Southern Engineering Services Pty Limited (in liquidation) (Lessee) and were in the possession of its liquidators, but otherwise deny paragraph 18(b) of the Defence; (iii) say that by reason of the termination of the hire purchase agreement the First Defendant no longer had any claim to [the manipulators] after 27 November 2014; (iv) do not admit paragraph 18(d) of the Defence; (v) deny paragraph 18(e) of the Defence; (vi) say further that the Cross-Claimant has overstated the worth of [the manipulators ] as at December 2014; and (c) otherwise deny paragraph 18 of the Defence."
2. The cross-defendants recited the administrators' notice of disclaimer to Southern Environmental in respect of the manipulators on 2 September 2014, the liquidators' notice of disclaimer of the lease over the Gloucester premises on 19 December 2014, and the liquidators' emailed notice to Southern Environmental on 18 December 2014 that the premises would be vacant from the following day.
3. The cross-defendants pleaded that, in accordance with cl 12.3 of the Gloucester lease, the lessee "must have removed any goods and anything that the Lessee fixed to the property and make good any have made good any damage caused by the removal" at the end of the lease. Further, anything not removed would become the lessor's property, and the lessor could "keep it or remove and dispose of it and charge to the lessee the cost of removal, making good and disposal".
4. The cross-defendants pleaded that the manipulators were abandoned on the Gloucester premises and it was necessary for Gloucester to remove them in order to lease the Gloucester premises to a new tenant, being QE, which took vacant possession on 12 January 2015. Gloucester engaged the services of Klondu to remove and store the manipulators. They were fixed to the premises. Klondu incurred costs dismantling and removing them. Klondu has continued to possess them since removing them.
5. The cross-defendants further pleaded that on 13 July 2016, they had offered to either deliver up the manipulators to the plaintiff, or purchase them from the plaintiff.
6. The cross-defendants were granted leave to file in court an amended defence to the further amended cross-claim on the first day of the hearing, 25 March 2019, which added a defence of jus tertii. The cross-defendants denied that Southern Environmental had any right to demand access to or possession of the manipulators and pleaded that Westpac had a superior right to possession as compared to Southern Environmental.
7. Alternatively, the cross-defendants pleaded that: "… if, at 19 December 2014 or at any time since that date, the Cross-Claimant had a right to possession of [the manipulators], it abandoned that right by electing to: (i) not take any steps to recover [the manipulators] between 2 September 2014 and 1 June 2016; (ii) not make any demand of either Cross-Defendant in respect of [the manipulators] until 1 June 2016; and (iii) assert and act on the basis that the Cross-Claimant no longer had any claim to [the manipulators] and was not in a position to demand access to or possession of [the manipulators], at all times from 19 December 2014."
8. In further answer to the whole of the statement of claim, the cross-defendants pleaded that if Southern Environmental had a right to demand access to or possession of the manipulators after 27 November 2014, then since it was made aware by the liquidators' email of 18 December 2014 that the Gloucester premises were being vacated on 19 December 2014, that the manipulators were at those premises and would be left behind by the lessee, it owed a duty to Gloucester, as lessor, to notify it of its claim to an ownership interest in the manipulators; and/or to arrange for the removal of the manipulators. The breach of duty was: "… the proximate or real cause of the cross-defendants being induced to treat [the manipulators] as… abandoned … [and] further or alternatively, not subject to any right of the Cross-defendant to demand access to or possession of [the manipulators] and … is estopped from asserting that it has any title to [the manipulators] as against the cross-defendants."

The issues

1. The hearing of the matter occurred over a period of six days. The parties crystallised the facts in issue to seven questions, although the submissions sometimes raised and addressed other factual and legal matters outside those agreed issues. The agreed issues were as follows: "Issue 1: Whether, between 5 January 2015 and 14 June 2017, Southern Environmental had any right in respect of the manipulators which entitled it to require Gloucester and/or Klondu to deliver up possession of the manipulators to it? If so, what was the content of that right? Issue 2: If Southern Environmental had such a right, did it abandon that right? Issue 3: Did Southern Environmental, from 18 December 2014: a. owe Gloucester a duty to notify Gloucester of any claim to an ownership interest in the manipulators and/or to arrange removal of the manipulators? b. breach any such duty? Issue 4: If the answers to issues 3(a) and (b) are 'yes': a. Does that have any significance in relation to the claim of Southern Environmental? b. Is Southern Environmental estopped from asserting that it has any claim to possession of the manipulators as against Gloucester and Klondu? Issue 5: In light of the answers to issues 1 - 4, did Gloucester and/or Klondu convert the manipulators by reason of the movement of those manipulators from the premises of Gloucester to the premises of Klondu in January 2015 or through retaining possession of the manipulators and not disclosing their possession of the manipulators throughout the period up to June 2016? Issue 6: If the answer to issue 5 is yes, is Southern Environmental entitled to compensation and in what measure? In particular: a. Did Southern Environmental suffer any loss? b. Is Southern Environmental entitled to damages representing a 'hiring charge' for the goods? Issue 7: If the answer to issue 6(b) is yes, what was the fair market rental value of the manipulators in the period from 5 January 2015 to 14 June 2017?"
2. Before turning to the parties' submissions, I will review the relevant evidence beyond the overview that I have so far provided. Whether it is necessary to determine issues 6 and 7 depends upon the conclusions I reach in respect of issues 1 to 5, so initially at least, I only review the evidence relevant to the first five questions.

The evidence

1. The evidence for both parties comprised affidavit evidence from a range of deponents, mostly relevant to the issue of damages. Evidence for Southern Environmental in relation to the first five questions was given primarily by Mr Wenham. James McCallum, who was the Division Manager for SECT between February 2011 and about April 2013, and National Accounts Manager for Southern Engineering from then until August 2014, gave evidence as to Messrs Johnson and Kuiper's likely knowledge of the manipulators, from their employment at Southern Engineering, although his evidence was primarily relevant to issues 6 and 7.
2. Mr Wenham's evidence was that, following receipt of the administrators' notice of disclaimer of the lease of the manipulators dated 2 September 2014, he attempted to sell either the SECT part of Southern Engineering or the manipulators separately, with the assistance of the administrators, who later became the liquidators. The liquidators' role in these endeavours was corroborated by a communication on their behalf to a representative of Gloucester, dated 20 November 2014.
3. By late November 2014, it became apparent that they were unable to find a buyer for the manipulators, although Mr Wenham remained hopeful into December. He gave various reasons as to why, at that point or thereafter, he did not retrieve the manipulators from the Gloucester premises. As earlier noted, in his letter to Westpac on 15 December 2014 requesting that it withdraw its first notice of termination, Mr Wenham explained that he was unable to return the manipulators because, apart from the difficulty associated with their size, he did not have access, which was controlled by the liquidators.
4. Mr Wenham gave uncontested evidence that when he received the liquidators' email on 18 December 2014, he immediately telephoned Gloucester's managing agent, Mr Stefanou, who was the person he normally dealt with on behalf of Gloucester, and advised him that he did not have the men or trucks to remove the manipulators at that time. Mr Stefanou responded: "My clients know their position". In evidence, Mr Wenham appeared to accept that he did not instruct his solicitors to write to Gloucester because at the time he accepted that Westpac had the better right to possession. He did not contact Gloucester again, until Southern Environmental's letter to the cross-defendants dated 1 June 2016.
5. Mr Wenham gave evidence that, following Westpac's rejection of his request to withdraw the first notice of termination on 8 January 2015, he believed that Westpac would retrieve the manipulators. As noted earlier, in a letter dated 7 July 2015 to Westpac's solicitors, a solicitor acting for him stated that Mr Wenham had "assumed that your client has taken responsibility for the equipment".
6. On about 22 December 2015, Mr Wenham met with New South Wales police to seek their assistance to recover the manipulators. He told police that he had tracked down their location. Mr Wenham's evidence was that he wanted to "transport them to a secure site in Unanderra so as to enable a decision to be made as to the best way of disposing of the manipulators, with the concurrence of the Westpac Bank". However, annexed to his affidavit is a police document titled "Fraud Report Form", that had been filled out by Mr Wenham. In response to the question, "What is your aim in reporting this matter to the police?" he answered: "To recover the goods: three 'manipulators' together transported and reinstalled at an address to be nominated with the supporting structure and in good working condition as Guarantor."
7. In his evidence, consistent with that intention, Mr Wenham said that in 2016, he wanted to recover the manipulators so that he could deploy them in an income-generating capacity through an arrangement with Mr Leussink, from Leussink Engineering Pty Ltd. However, Westpac advised the police that they owned the manipulators, prompting the police to decline to become involved. It was not suggested that Westpac was aware of this plan, let alone that it had approved it or had changed its intention to retrieve the manipulators.
8. In a signed police statement dated 24 February 2016, Mr Wenham gave a different explanation for not having removed the manipulators when he received the liquidators' emailed advice of 18 December 2014. The statement reads: "Southern Environmental was unable to make arrangements for the removal of the equipment because the authority of Westpac Bank was required."
9. A sentence containing a somewhat similar, but in one respect significantly different, proposition, appeared in an affidavit affirmed by Mr Wenham on 1 June 2016. Although Southern Environmental's counsel did not read that sentence in these proceedings, Mr Wenham conceded in cross-examination that the sentence was part of his affidavit, as affirmed, as to his belief following the liquidators' notice of 18 December 2014. The sentence reads: "[Southern Environmental] was unable to protect its interest in the Drum Manipulators as it did not have authority from [Westpac] to do so."
10. The reference to Southern Environmental being unable to "protect its interest", in that context, appears to refer to it being unable to retrieve the manipulators, but also bespeaks an unspecified "interest" in them, which may or may not extend beyond an obligation to return them to Westpac. In his evidence, Mr Wenham explained that he believed that in December 2014, both Southern Environmental and Westpac had interests in the manipulators.
11. In his June 2016 affidavit, Mr Wenham stated that he believed that the manipulators remained at the Gloucester premises until he was advised on 26 May 2015 by a private investigator retained by Westpac to locate them, that they were not there and that their whereabouts were unknown. He told the investigator: "Well, Westpac should have acted sooner on my letter of December last year in which I told Westpac that the liquidator was vacating the premises". Mr Wenham's affidavit evidence was that, following his receipt of the second notice of termination, he made inquiries through former employees of Southern Engineering in order to locate the manipulators, and in about June 2015 he was informed that between 20 December 2014 and 5 January 2015, they had been moved to the premises of Klondu.
12. The witnesses for the cross-defendants on the first five issues were Cesare Cignarella and Robert Donsante. They gave evidence as to the relationship between the cross-defendants, and their knowledge of the ownership of the manipulators or inquiries made on behalf of the cross-defendants, if any, as to their ownership.
13. Gloucester was one of three companies comprising a partnership, known as the Darcy partnership, created by a deed apparently executed in 2015. In December 2014, Mr Cignarella was the sole director and shareholder of one of the other two companies and Louis Mifsud was the sole shareholder and one of two directors of the third company. The partnership properties were managed by RMM Management Pty Ltd, trading as Property Invest. The director of Property Invest was Mr Mifsud. Property Invest engaged WHK as the managing agent for the Gloucester property when Southern Engineering was the lessee. WHK was managed by Harry Stefanou.
14. Klondu was owned and operated by both Mr Cignarella and Mr Mifsud until about March 2015, when Mr Mifsud's shares were bought out by Mr Cignarella.
15. Mr Cignarella gave evidence that the day after the liquidators' notice that they were vacating the Gloucester premises (which I note is likely to have been on 20 December 2014), he attended the premises with Mr Mifsud to arrange the removal of the manipulators. Mr Mifsud told him to take them away and store them "until we can find out who owns them". Mr Cignarella said it took two of his men five days to remove them, using cranes, trucks and electricians, and there was no arrangement for him to be financially reimbursed for this task. His motive in moving them was his financial interest through the Darcy partnership in clearing the premises for a new tenant. He directed that the manipulators be taken to Klondu's premises. He said that "two, three months later", QE offered him work utilising the manipulators, so he installed them in an operational capacity at Klondu and commenced using them in Klondu's business, because it was an opportunity to "recoup their losses of removing [the manipulators]".
16. In evidence, Mr Cignarella was taken to emails between Klondu staff suggesting that the manipulators were being prepared for use by Klondu in January 2015 and were in use by 26 February 2015, which he accepted to be the case. He also accepted that his use of the manipulators generated income beyond recouping his losses.
17. In his affidavit, Mr Cignarella said that following the vacating of the Gloucester premises by the liquidators, "no-one had made a claim to ownership of [the manipulators], so I considered them to have been abandoned by the (now insolvent) tenant". In evidence, he said that he left it to Mr Mifsud to make inquiries as to who owned the manipulators. He made no inquiries himself, even though he thought that Southern Engineering were the owners, he knew that Southern Engineering was the previous lessee of the premises and he knew people associated with that company. There was no evidence from Mr Mifsud. Mr Cignarella said he was unaware of any reason preventing Mr Mifsud from being called to give evidence.
18. An affidavit sworn by Robert Donsante was read in the hearing. Mr Donsante stated that between February 2014 and 27 March 2015, he was the Chief Financial Officer for Property Invest. Thereafter, he was the General Manager for Klondu. On about 20 December 2014, he attended the Gloucester premises together with, amongst others, Mr Mifsud, Mr Cignarella, Mr Stefanou, Michael Johnson and Lincoln Kuiper. The purpose of the meeting was an inspection of the premises in light of the termination of Southern Engineering's lease. Mr Johnson said he wanted the manipulators removed, other than the two original manipulators which QE had purchased at the auction. Mr Cignarella said he would remove them.
19. Tendered in evidence was an email sent on behalf of the liquidators to Mr Donsante and Mr Stefanou on 20 November 2014 that identified four items of property on the Gloucester premises, described generally as "some large third party financed and owned items on site", that the liquidator was attempting to move off the Gloucester premises. One was described thus: "Drum manipulators (property of two separate financiers who have not yet provided permission for the items to be sold)". Mr Donsante agreed that the email made him aware that Southern Engineering did not own the manipulators and said that he would have passed the email along to "the owners", meaning Mr Mifsud and Mr Cignarella.
20. Southern Environmental relied on evidence to the effect that in 2015, Westpac had made inquiries through retained investigators to attempt to discover the whereabouts of the manipulators and were rebuffed in their efforts by the cross-defendants. The relevance of this evidence in Southern Environmental's case was that it was evidence of the alleged determination of the cross-defendants to avoid any person or agency claiming an interest in the manipulators discovering their whereabouts and retrieving them.

Southern Environmental's right to possession

1. An element of Southern Environmental's claim in conversion was that it was entitled to immediate possession of the manipulators and that they had been converted by the cross-defendants, if not when they were transported to Klondu, then certainly from the time that Klondu installed and used them to produce income. The basis of its claim for damages for the "unlawful detention" of the manipulators is less clear. It is pleaded in the further amended cross-claim as "being deprived of possession" as a result of the manipulators being removed from the Gloucester premises by the cross-defendants and their failure to deliver them up in response to Southern Environmental's letter of 1 June 2016.
2. Southern Environmental's submission was that it had a right to possession of the manipulators from the date of the administrators' notice of disclaimer of Southern Engineering's lease on 2 September 2014. From the date of the first notice of termination on 27 November 2014, assuming it was effective, Southern Environmental still had a better entitlement to possession of the manipulators than any party other than Westpac.
3. At the time the liquidators issued the notice of disclaimer of Southern Engineering's lease of the Gloucester premises, Mr Wenham lacked the means to retrieve the manipulators, and assumed that Westpac would remove them.
4. The cross-defendants submissions as to Southern Environmental's claimed right to possession were that, following the first notice of termination, the only party with a right to possess the goods was Westpac, pursuant to the terms of the hire purchase agreement. As Westpac had the right to immediate possession at the relevant time, being the date of conversion, Southern Environmental's claim in conversion fails: BIS Cleanaway (trading as CHEP) & Ors v Tatale & Anor; Brambles (trading as CHEP) v Tatale & Anor [2007] NSWSC 378 per McDougall J at [38]. In the alternative, if Southern Environmental did have a right to possession of the manipulators after the first notice of termination, it was only in order to return them to Westpac.
5. Southern Environmental noted that Westpac relied on the second notice of termination dated 17 June 2015 when it commenced proceedings against Southern Environmental, and therefore Westpac had accepted that the first notice of termination was not regarded as effective. In any event, it submits, if the first notice of termination was effective, Southern Environmental had a right to possession as against the cross-defendants, until the sale of the manipulators in 2017, since cl 9.5(b) of the hire purchase agreement provided that, if it was terminated and the lessee failed to return the manipulators, then: "… an extension of the Lease will occur from expiry at the same rate of Rental as set out in the Document and upon the terms of the Document including the terms relating to the Residual Value." Clause 3.4(a) of the hire purchase agreement required the lessee to keep the manipulators in its sole possession.
6. The cross-defendants submitted that, until its amended cross-claim was filed on 13 November 2017, this had also been the position of Southern Environmental, as stated in its cross-claim at par 5, consistent with par 18(c) of its defence: "By reason of the termination of the hire purchase agreement [Southern Environmental] no longer had any claim to [the manipulators] and was not in a position to demand access to or possession of [the manipulators]".
7. Southern Environmental withdrew the pleading in its amended cross-claim filed on 13 November 2017 and its further amended cross-claim filed on 10 December 2018. In correspondence between the parties in June 2017 that was tendered in the hearing concerning the change in Southern Environmental's position in this regard, Southern Environmental stated that Mr Wenham's statement in his June 2016 affidavit that he required and lacked the authority of Westpac to protect his interest in the manipulators, was "Mr Wenham's understanding at the time; it is not a statement of the legal position".
8. In its written submissions, Southern Environmental submitted that the adoption of par 18(c) in its defence to the statement of claim and in its cross-claim is irrelevant. Mr Wenham approaching the police to seek assistance with retrieving the manipulators was evidence that it had not abandoned the manipulators.
9. The cross-defendants submitted in the alternative that, if Southern Environmental retained a right to possession of the manipulators after the first notice of termination as lessor to Southern Engineering, it was nevertheless subject to the terms of Southern Engineering's lease for the Gloucester premises, in particular cl 12.3, concerning the rights of the lessor in relation to goods left behind, thus permitting Gloucester to remove and dispose of the manipulators. The cross-defendants' argument was therefore that, by virtue of that clause, Gloucester had a superior right to possession from 19 December 2014 as compared to Southern Environmental. Southern Environmental responded to that argument by submitting that the lease could not allow Gloucester, as lessor, to gain any better right in respect of goods left behind than the lessee had.
10. Further, it was submitted that although the sub-lease of the manipulators by Southern Environmental to Southern Engineering was an agreed fact, the sub-lease as a document was not in evidence. Mr Wenham did not recall having signed it and ultimately agreed he had never seen it, so that its terms as to the rights of Southern Environmental in respect of the manipulators at the end of the lease were unknown. Accordingly, "any ambiguity arising from doubt about what the document contains tells against Southern Environmental having proved its case".
11. Southern Environmental responded that the liquidators' disclaimer of the sub-lease rendered the absence of the lease document irrelevant to the issues in dispute 1. Abandonment
12. On the issue of abandonment, the cross-defendants submitted that Southern Environmental abandoned any rights it had to possession of the manipulators by not taking steps to take possession of them from the date of the administrators' notice of disclaimer of the manipulators, instead electing to allow Westpac to take possession if it wished, and for the same reason it is estopped from saying it was entitled to possession during the period that it did not inform the cross-defendants of its claims. They submitted: "[T]here was no evidence that Klondu or Gloucester were otherwise aware of [Southern Environmental's claim to possession of the manipulators] or, even, the existence of Southern Environmental (as compared to Southern Engineering, the company which was in liquidation)."
13. From the first notice of termination, Mr Wenham could have either pursued the entitlement he claimed he had at that time to possess the manipulators, or he could have left it to Westpac to pursue their interest. There exists "a residual category of abandonment or waiver based on unfairness" which applies to this case, although whether that category exists is undecided: see Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 per Gummow, Hayne and Kiefel JJ at [98]-[100].
14. In its oral submissions, Southern Environmental contended that the failure of Mr Wenham to follow up on his phone call with Mr Stefanou on 18 December 2014 did not constitute an abandonment by him of Southern Environmental's interest in the manipulators, but rather, since he believed that Westpac would retrieve the manipulators, it was unnecessary for him to do anything at that stage. Further, a failure to act cannot be an election by a party to abandon its rights; rather, such a decision must be manifested by an overt act.
15. Southern Environmental submitted that if the cross-defendants believed that the manipulators may have been abandoned, the appropriate remedy was for them to make an application to the Local Court pursuant to the Uncollected Goods Act 1995 (NSW), which would have required them to make inquiries as to the identity of the owner, before an order of the court would have protected their assumption of ownership. However, the cross-defendants submitted that the Uncollected Goods Act did not apply to the manipulators, because it was covered by the terms of the lease. Section 6(1) of that Act provides: "6 When Act available for disposal of uncollected goods (1) This Act is available for the disposal of uncollected goods where there is no agreement between the parties on the means of their disposal. If there is such an agreement, this Act applies to any aspect of the disposal of those goods that is not dealt with in the agreement."

Estoppel in pais

1. The cross-defendants submitted that estoppel in pais applies; Southern Environmental is estopped by its conduct which caused the cross-defendants to adopt an assumption that the manipulators had been abandoned with no claim made in respect of the manipulators, and to act upon that assumption. The cross-defendants would suffer detriment if Southern Environmental were to set up rights against them that are inconsistent with that assumption. Reliance was placed upon the evidence of Mr Cignarella and the cross-defendants' behaviour subsequent to that notice, including its notice of motion, to force Westpac to either remove the manipulators or otherwise resolve the issue. The cross-defendants relied upon the following passage from Thompson v Palmer (1933) 49 CLR 507; [1933] HCA 61 per Dixon CJ at 547: "The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct … or because knowing the mistake the other laboured under, he refrained from correcting him when it was his duty to do so; or because his imprudence, where care was required of him, was a proximate cause of the other party's adopting and acting upon the faith of the assumption; or because he directly made representations upon which the other party founded the assumption."
2. Southern Environmental submitted in reply that estoppel did not apply, because the cross-defendants were on notice that Southern Engineering did not own the manipulators, as a result of Mr Wenham's conversation with Mr Stefanou on 18 December 2014 and the liquidators' email of 20 November 2014 to Mr Donsante, which he would have passed on to Mr Mifsud and Mr Cignarella.

Jus tertii

1. The cross-claimant submitted that a defence of jus tertii applies, since Westpac had a better claim to possession, thus defeating Southern Environmental's claim. In support of the proposition that jus tertii is available to rebut a claim of conversion, the cross-defendants handed up three text extracts, being: Kit Barker, Peter Cane, Mark Lunney and Francis Trindade, The Law of Torts in Australia (5th ed, 2011) at par 3.3.5; R P Balkin and J L R Davis, Law of Torts (5th ed, 2013) at par 4.14; and Paul Vout, Torts: The Laws of Australia (3rd ed, 2016) at par 33.8.820.
2. Southern Environmental submitted that jus tertii is not a defence to conversion, relying on academic material that included a passage from Carolyn Sappideen and Prue Vines, Fleming's The Law of Torts (10th ed, 2011) at 77-79, and two articles referred to therein.

Claim in detinue

1. The cross-defendants submitted that, in order for Southern Environmental to succeed on detinue, it must establish that the cross-defendants failed to comply with a demand to deliver up the manipulators. Southern Environmental pleaded that the cross-defendants had failed to deliver up the manipulators as demanded in its letter dated 1 June 2016. However, the letter did not demand the return of the manipulators to itself, but rather that the cross-defendants co-operate with Westpac in its attempts to collect the manipulators from Klondu's premises, which the cross-defendants did.

Southern Environmental's right to possession

1. Although Westpac issued a second notice of termination, it is not suggested by Southern Environmental that the first notice of termination was deficient and it does not appear so. Mr Wenham's request to Westpac by letter dated 15 December 2014 that the first notice be withdrawn, evidences his acceptance on that date of the effectiveness of that notice, otherwise. I find that the first notice of termination did terminate the hire purchase agreement, so that from 27 November 2014, Westpac was entitled to possession of the manipulators.
2. It was open to Southern Environmental to retrieve the manipulators from the Gloucester premises, as the liquidators had invited it to do, at least up to 19 December 2014, in order to return them to Westpac, as Westpac had demanded. After that date, which was the date of expiry of the lease of the Gloucester premises, Southern Environmental did not have a right to enter the Gloucester premises without permission, but still was entitled to demand delivery up of the manipulators by the cross-defendants so that it could return them to Westpac. The nature of that right was pursuant to its rights and obligations upon the termination of the hire purchase agreement, in particular, cll 9.5(a) and 9.5(c). Accordingly, I reject the cross-defendant's submission that Southern Environmental did not have a right to possession of the manipulators after the first notice of termination.
3. Mr Wenham's position since the first notice of termination has consistently been that Westpac was entitled to retrieve the manipulators, as their owner. In a conversation with Westpac's private investigator on 26 May 2015, in correspondence with Westpac on 7 July 2015 and 25 August 2015 and in conversation with their representative on 10 March 2016, he referred to his expectation that Westpac would, and should, retrieve them, going so far in the latter conversation as to offer to assist them to do so. Southern Environmental's letter to the cross-defendants on 1 June 2016 required that the manipulators be returned to Westpac, not to Southern Environmental. As noted, it was not until the date of the amended cross-claim, when par 18(c) was withdrawn from the cross-claim, that Southern Environmental shifted its position at all, which was after the manipulators had been sold.
4. However, Mr Wenham's position in relation to whether Southern Environmental also had an interest in the manipulators after the first notice of termination, although they were owned by Westpac, has not been consistent. His evidence at the hearing was that, in December 2014, he believed that both Westpac and Southern Engineering had an interest in the manipulators. In my opinion, that contention does not accord with the evidence of his actions and communications between 19 December 2014 and December 2015, when he approached the police for assistance to seize the manipulators from Klondu. Until then, Southern Environmental showed little enthusiasm in either retrieving the manipulators or claiming an interest in them, and not until Southern Environmental's letter of 1 June 2016 did it communicate any claimed interest in them to either cross-defendant.
5. Mr Wenham's explanations to Westpac, the liquidators, Gloucester and to the police for not removing the manipulators from the Gloucester premises in December 2014 or January 2015 were varied, sometimes conflicting and inherently not credible. Mr Wenham's explanation to Westpac on 15 December 2014 for not returning the manipulators, being that he could not access the manipulators because the liquidators controlled the Gloucester premises, was contrary to the liquidators' advice to him on 2 September 2014, inviting Southern Environmental to exercise its rights in respect of the manipulators. Mr Wenham had considerable difficulty in his evidence attempting to explain why he had stated that, ultimately being unable to do so.
6. Similarly, his alternative explanation, in his police statement and in his June 2016 affidavit, that he could not remove the manipulators from the Gloucester premises because he lacked the authority of Westpac to do so, is at odds with Westpac's first notice of termination sent to him the month before which requested him to return the manipulators, his explanation in his letter to Westpac dated 15 December 2014 for not returning them and the explanation he gave to Mr Stefanou on 18 December 2014. In any event, there is no evidence of Mr Wenham at any time having sought authority from Westpac to remove the manipulators, including for his approach to the police to assist him to retrieve them, in December 2015.
7. On 18 December 2014, Mr Wenham told Mr Stefanou that he could not remove the manipulators because he lacked the resources to do so at that time. In his evidence, he explained that he did not then know which other suitably-equipped companies he could have approached to undertake that task, although he accepted that in 2016 he had arranged for Mr Leussink to move them if Westpac needed assistance. I do not accept Mr Wenham's evidence that, in spite of his involvement in the mining machinery industry at an executive level, in November or December 2014 he could not locate a company that had the capacity to dismantle and move the manipulators, or who to approach to assist him to identify companies to approach.
8. Mr Wenham agreed that, given Mr Stefanou's response, he was unaware what Gloucester intended to do with the manipulators, but said that he saw no point in instructing his solicitors to write to Gloucester to put his position in writing in relation to them or to ascertain their intention in respect of them. He said: "I didn't consider it any further. I was fairly - I was convinced that that was a final discussion with him. The way [Mr Stefanou] said it to me, he wasn't interested in me protesting that I didn't have the ability to move [the manipulators] - that was irrelevant from his point of view, in my opinion."
9. Mr Wenham's explanation for not having his solicitors immediately write to Gloucester following his phone call with Mr Stefanou, to place on the record Southern Environmental's interest in them, is not credible, particularly in view of his business experience at a senior level, if he genuinely believed that Southern Environmental had an interest in them, other than to return them to Westpac.
10. Mr Wenham's failure to communicate his continuing interest in the manipulators to Gloucester at any time before he received the investigator's advice on 26 May 2015 that the manipulators were no longer on the Gloucester premises is also inconsistent with the proposition that in that period he believed that Southern Environmental had an interest in the manipulators.
11. Although Mr Wenham was advised in June 2015 that the manipulators had been taken to Klondu's premises, he took no action to retrieve them until December 2015, when he approached the police. His explanation in the police fraud report form of what he intended to do with the manipulators was inconsistent with Westpac's ownership of the manipulators and right of possession of them. It is not suggested that Westpac was cognisant of this plan.
12. When his plan to involve the police fell through, Mr Wenham again accepted that it was a matter for Westpac to retrieve the manipulators. On 10 March 2016, Mr Wenham gave Westpac's agent the address where the manipulators were located, but he still did not advise Klondu of any claim by Southern Environmental in the cross-defendant's use of the manipulators until Southern Environmental's letter of 1 June 2016. In that letter, Mr Wenham did not seek delivery up of the manipulators to Southern Environmental, but rather advised the cross-defendants to cooperate with Westpac's endeavours to recover them.
13. In my opinion, the evidence discloses that, from the time of Westpac's first notice of termination, Mr Wenham and Southern Environmental's position in relation to the manipulators was that he expected Westpac to retrieve and sell them. He informed Westpac that Southern Environmental was not in a position to retrieve and return the manipulators and, subject to his request that it withdraw the first notice of termination, he invited Westpac to exercise its rights instead. Consistently with that position, there was no reason for him to advise Gloucester or Klondu, when he became aware of their involvement, of any interest that Southern Environmental had in the manipulators, because the only interest that Southern Environmental had in the manipulators was the right of possession exclusively in order to return them to Westpac.
14. In December 2015, for a period of three months, Mr Wenham's position changed, evidencing an intention to seize the manipulators from Klondu and attempt to use them to re-enter the mining machine-servicing industry, in association with Mr Leussink. When that plan failed, he reverted to his earlier position, of accepting that Westpac should retrieve the manipulators, which Southern Environmental maintained in its letter to the cross-defendants of 1 June 2016.

The cross-defendant's claim of abandonment

1. Mr Wenham's evidence as to his brief exchange on 18 December 2014 with Mr Stefanou, representing Gloucester, is relevant to Gloucester's understanding of Mr Wenham's interest in the manipulators and Mr Wenham's state of mind at that time relevant to the issue of abandonment, more so for what was not said by him to Mr Stefanou and what was not done by way of follow-up. In his only communication to a Gloucester representative on or after 18 December 2014, Mr Wenham said nothing beyond the fact that he lacked the means to move the manipulators at that time, thus offering no proposal to revisit the issue in the future. Significantly, Mr Wenham's account of the conversation did not include any reference by him to Westpac's ownership of, or interest in, the manipulators or to the existence of Southern Environmental and thus its past relationship to Southern Engineering, in respect of the manipulators.
2. There is no evidence of Mr Wenham having informed the cross-defendants of this information before its letter of 1 June 2016. Accordingly, on the evidence, there is no reason to doubt the claim by the cross-defendants that they were unaware of the existence of Southern Environmental until their receipt of the letter of 1 June 2016.
3. The question then becomes whether the cross-defendants were entitled to assume that the goods were abandoned, not having been contacted by Southern Environmental. The cross-defendants' submission concerning "a residual category of abandonment or waiver based on unfairness" was an undeveloped submission, particularly since it was advanced as a basis which is not yet established in law in this jurisdiction. No authority as to its actual or possible existence, either from Australian or other national common law jurisdictions, was cited. I also note the caution expressed in the passage relied upon from the joint judgment of Gummow, Hayne and Kiefel JJ in Agricultural and Rural Finance Pty Ltd v Gardiner, as to whether such a basis in fact exists. Accordingly, I disregard this submission.
4. On the evidence as it unfolded, there were four ways in which the cross-defendants may have been put on notice that the manipulators had not been the property of Southern Engineering, and therefore may not have been property that might be dealt with by Gloucester pursuant to cl 12.3 of the lease.
5. These were, firstly, Mr Wenham's phone call with Mr Stefanou, which constituted notice to at least Gloucester, if not both cross-defendants. In that conversation, Mr Stefanou referred to his clients in the plural: "My clients know their position". The second possible means was by the cross-defendants being aware that the liquidators had not put the manipulators up for auction with the property of Southern Engineering. Thirdly, Michael Johnson and Lincoln Kuiper from QE could have informed them, based on their own knowledge of the ownership of the manipulators from their prior employment with Southern Engineering, and fourthly, they could have been informed by the email from the liquidators of 20 November 2014 to Mr Donsante, to the effect that the manipulators were the "property of two separate financiers". Mr Donsante said that he would have forwarded the email on to Mr Cignarella and Mr Mifsud, but denied any conversation with them about the ownership or financing of the manipulators.
6. Although there was no direct evidence that officers of the cross-defendants were aware that the manipulators had not been put up for auction or that Messrs Johnson or Kuiper had alerted them to their knowledge of the financial arrangements concerning the manipulators, I am satisfied on the balance of probabilities that officers of each cross-defendant, including Mr Cignarella, were at least on notice that the manipulators had not been the property of Southern Engineering and, in view of the liquidator's email of 20 November 2014, were subject to the interest of at least one financier.
7. The purpose of the meeting at the Gloucester premises, on or about 20 December 2014, which was attended by Mr Cignarella, Mr Donsante, Mr Johnson, Mr Kiuper, Mr Mifsud and Mr Stefanou, amongst others, was partly to determine what to do about the manipulators. Mr Cignarella and Mr Donsante denied that they heard any such discussion. I found both witnesses to be unimpressive. Both Mr Cignarella and Mr Donsante's evidence was contradicted by independent evidence in the form of Klondu documentation as to Klondu's use of the manipulators to generate income. It was conceded by counsel for the cross-defendants that their evidence, in some respects, was "at least careless" and their credibility "not untainted", although he resisted a broader finding of unreliability of each witness's evidence.
8. It is unthinkable, in my view, that at the meeting on or about 20 December 2014, it would not have emerged in their discussion that the manipulators had not been the property of Southern Engineering. In arriving at this conclusion, I also take into account that Messrs Mifsud and Stefanou have not been called by the cross-defendants, in circumstances in which they would be material witnesses.
9. I am not satisfied that Messrs Johnson or Kuiper would have been aware of the existence of Southern Environmental and therefore its interest in the manipulators. Indeed, none of the four potential sources of notice to the cross-defendants that Southern Engineering did not own the manipulators, was also a source of information that Southern Environmental did have a right to possession.
10. I am not satisfied on the balance of probabilities that the cross-defendants avoided Westpac's inquiries in order to avoid the rightful owners claiming their property. The evidence as to whether it would have been apparent to Klondu's officers that the investigators retained by Westpac were representing the interests of Westpac was equivocal and is insufficient to provide an evidentiary basis for that conclusion. In any event, it is not suggested that Westpac's efforts to reclaim the manipulators involved Westpac informing the cross-defendants of Southern Environmental's interest in them.
11. In my opinion, Mr Wenham's decision to not alert the cross-defendants to his right to possession in the manipulators, in circumstances in which there was no evidentiary basis for them to be aware of the existence of Southern Environmental and therefore its interest in the manipulators, in combination with Mr Wenham's awareness from June 2015 of Klondu's use of the manipulators, disentitles Southern Environmental from pursuing its claim in conversion and detinue. To adopt the terms of Dixon CJ in Thompson v Palmer, there was a duty on Mr Wenham to correct the understanding of the cross-defendants as to Southern Environmental's right to possession, as limited as it was, which he chose not to do.
12. From the time that Southern Environmental did communicate an interest to the cross-defendants in its letter of 1 June 2016, they complied with the demand to cooperate with Westpac in its endeavours to recover the manipulators.
13. In view of my determination, it is unnecessary to consider whether the defence of jus tertii was available to the cross defendants.
14. It is also unnecessary to consider the evidence and submissions as to the issue of damages, since it follows that, since Southern Environmental's claim of detinue and conversion is not made out, there is no entitlement to damages.

Conclusion: findings of fact

1. Accordingly, in response to the agreed issues, I make the following findings of fact.
2. I am of the opinion that between 5 January 2015 and 14 June 2017, that is, between the dates when Klondu took possession of the manipulators and their sale by Westpac, Southern Environmental did have a right in respect of the manipulators which entitled it to require either or both of the cross-defendants to deliver up possession of the manipulators to it. The nature of that right was, pursuant to the hire purchase agreement, a right to retrieve the manipulators so that it could deliver them up to Westpac.
3. Southern Environmental abandoned that right by advising Westpac by Mr Wenham's letter of 15 December 2014, that it wished Westpac to directly assume responsibility for retrieving the manipulators, and informed Westpac where they were located at that time and who they should contact,
4. In relation to issue 3, if Southern Environmental had intended to exercise its right to retrieve the manipulators from Gloucester, which I find it did not, it had a duty to inform Gloucester of its right to possession and intention to exercise it, so that it could deliver up the manipulators to Westpac. It breached that right by choosing to not so inform Gloucester.
5. In relation to issue 4, the failure on the part of Southern Environmental to comply with that duty does have significance for its claim, namely, that the claim fails, since it is estopped from pursuing its claim to possession of manipulators against the cross-defendants.
6. In relation to issue 5, accordingly, the cross-defendants did not convert the manipulators.

Orders

1. For these reasons, I make orders as follows: (1) The cross-claim be dismissed. (2) The cross-claimant to pay the cross-defendants' costs of these proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 April 2020