Claimant Wins Boat Purchase Dispute Against First Defendant

The court ruled in favour of the claimant, awarding $460,981 after determining the first defendant was the seller under the agreement for the purchase of a boat, despite the seller's incorrect identification in the agreement.

District Court New South Wales

Medium Neutral Citation: [NAME] v [NAME] & Ors [2020] NSWDC 709 Hearing dates: 11 November 2020 Date of orders: 20 November 2020 Decision date: 20 November 2020 Jurisdiction: Civil Before: Russell SC DCJ Decision: (1) Judgment for the plaintiff [NAME] against the first defendant [NAME] 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. Catchwords: CONTRACT – identity of the seller in an agreement for the sale of a boat – whether the circumstances gave rise to an anticipatory breach and repudiation – performance of contract impossible after possession of the boat was taken by a [COMPANY] and sold to a third party – purchasers made substantial instalment payments on the purchase price UNJUST ENRICHMENT – whether the defendant seller has been unjustly enriched by receipt of instalment payments of the purchase price for the boat – whether the plaintiff was entitled to recover monies paid due to a mistaken belief Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), r 6.20 Cases Cited: [COMPANY] v [COMPANY] of Australia [1992] HCA 48; (1992) 175 CLR 353 Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 Ryder v Frohlich [2004] NSWCA 472 Woodar Investment Development Ltd v Wimpey Construction [1980] 1 All ER 571 Texts Cited: Mason and Carter, Restitution Law in Australia, par 1120 Radan and Gooley, Principles of Australian Contract Law, (2nd Edition), par 21.53 Category: Principal judgment Parties: [NAME] (Plaintiff) [NAME] (First Defendant) [COMPANY] (Second Defendant) [NAME] (Third Defendant) Representation: Counsel: [redacted] N [NAME] (First Defendant, self-represented)

Solicitors: [redacted] File Number(s): 2019/185171

Judgment

Introduction 1. The plaintiff [NAME] sued three defendants by an Amended Statement of Claim filed on 28 July 2020. The proceedings arise out of the attempted purchase of a 1984 Cheoy Lee 66 Motor Cruiser known as "Prego" ("the Boat").

2. The Boat was owned by the Second Defendant [COMPANY] ("[NAME]"). Before the sale could be completed, the Boat was seized by [COMPANY] ("the [COMPANY]") which held a security over the Boat for a loan advanced to [NAME].

3. The Boat was being purchased by a partnership consisting of [NAME] and Mr [NAME]. Both partners paid monies towards the purchase of the Boat. Those monies were paid to the first defendant [NAME], who was the sole director of [NAME]. 4. [NAME] was joined to the proceedings as a third defendant. Rule 6.20 of the Uniform Civil Procedure Rules 2005 (NSW) provides that all persons jointly entitled to the same relief must be joined as parties to the claim, but that if such a person does not consent to being a plaintiff, they must be joined as a defendant. [NAME] was therefore joined as a matter of formality only, and no relief was sought against him.

5. It was established by affidavit evidence (PX 4) that [NAME] had ample notice of the proceedings, but had indicated that he did not wish to take part in them.

6. By the time the matter came on for trial [NAME] had been wound up and was deregistered. Thus no relief was sought against [NAME]. That left the proceedings on foot between [NAME] as plaintiff and [NAME] as the first (and only active) defendant.

Bases of Claim brought against [NAME] 1. [NAME]'s claim against [NAME] 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 [NAME], that [NAME] had paid a total of $202,500 to [NAME] towards the purchase of the Boat. It was also established by the evidence, and not disputed by [NAME], that [NAME] had paid an additional $182,000 to [NAME] towards the purchase of the Boat.

3. While the payments made by the two partners were not equal, [NAME] 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 [NAME] was given by affidavits (PX 1, PX2 and PX 3). The evidence-in-chief of [NAME] 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. [NAME] and [NAME] had worked together in business and were personal friends. Both were interested in boats and became aware of [NAME] having the Boat on the market for sale. [NAME] and [NAME] 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 [NAME] at [NAME], where [NAME] 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, [NAME] was living and working in Dubai in the United Arab Emirates. [NAME] conducted all of the negotiations with [NAME]. The evidence established, and [NAME] accepted, that [NAME] was at all times speaking on behalf of the partnership. 2. [NAME] drew up a written document headed "Purchase of 66' Vessel". The original draft version was on the letterhead of [NAME] and said that the purchase price was $900,000. This document described the "Seller" as "[NAME]" and the "Purchasers" as "[NAME]" and "[NAME]". That version was signed by [NAME] but not by [NAME] or [NAME] (DX 1, pp 70-72). Attached to that document were the account details of the [COMPANY] account conducted by [NAME] in his own name with the [NAME] [COMPANY].

3. There was later correspondence by email between [NAME] and [NAME] concerning amendments to that first draft of the agreement (DX 1, pp 73-79).

4. At the request of [NAME], the final form of the agreement recorded [NAME] as the only purchaser. However, [NAME] gave evidence that he accepted that the purchase was made by [NAME] on behalf of the partnership between [NAME] and [NAME].

5. The final form of the agreement (DX 1, pp 84-85) was again on the letterhead of [NAME]. 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 [COMPANY] loan."

1. The document also provided for a payment of $10 for "Purchase of Coral Sea Pacific Charters shares". This was the charter business which [NAME] and his associates had intended to conduct using the vessel, but which they abandoned.

2. 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 [COMPANY]. Formal documents are being drafted to finalise vessel purchase." 1. [NAME] gave evidence that [NAME] had said that his solicitors would draft more formal documents. However, that never happened. [NAME] 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.

2. The seller was described on the agreement as follows: "[NAME] [XXXXXX] Dr [NAME] 2444" 1. [NAME] signed underneath this description. In evidence [NAME] agreed that the address under his name on the document was his home address in [NAME]. [NAME] conducted business from the marina in [NAME] and also from an industrial unit in the town, and not from his home address.

2. The purchaser was described as "[NAME]" of an address in Manly.

Payments made towards Purchase of Boat 1. [NAME] gave evidence that he required the purchase price to be paid into his personal [NAME] [COMPANY] account. He did not want it paid into the [NAME] account. 2. [NAME] had borrowed $550,000 from the [COMPANY] to assist in the purchase of the Boat (DX 1, par 26). [NAME] personally guaranteed the loan. Of this amount, $380,000 was paid to the vendor of the Boat, $120,000 was paid to [COMPANY] to assist in establishing the charter business, carrying out refurbishments to the Boat and making initial loan repayments, and $50,000 was paid to [NAME] to cover costs incurred in carrying out work on the Boat.

3. In accordance with the requirement of [NAME] that [NAME] and [NAME] pay monies into [NAME]'s [NAME] account, the following payments were made:

1. On 23 September 2016 [NAME] paid $150,000 to [NAME].

2. On 6 October 2016 [NAME] paid $75,000 to [NAME].

3. On 18 October 2016 [NAME] paid $70,000 to [NAME].

4. On 14 November 2016 [NAME] paid $5,000 to [NAME].

1. From December 2016 onwards [NAME] and [NAME] paid marina fees for the Boat. They also paid for insurance on the Boat.

2. There was a second sequence of payments made by [NAME] and [NAME] as follows:

1. On 16 December 2016 [NAME] paid $25,000 to [NAME].

2. On 5 January 2017 [NAME] paid $2,000 to [NAME].

3. On 20 January 2017 [NAME] paid $35,000 to [NAME].

4. On 22 January 2017 [NAME] paid $20,000 to [NAME].

5. On 2 February 2017 [NAME] paid $2,500 to [NAME]. 1. [NAME] and [NAME], as partners, paid a total of $384,500 towards the purchase of the Boat.

2. The payments of $35,000 on 20 January 2017 and $20,000 on 22 January 2017 were made by [NAME] on his credit card. [NAME] gave evidence that he spoke by telephone to [NAME] and authorised [NAME] to debit these amounts to his credit card. [NAME] gave evidence that [NAME] was in the [NAME] office with him, and that [NAME], operating on [NAME]'s credit card, made the payments. I do not need to resolve that factual dispute. [NAME] gave evidence that he processed the credit card payments through a [NAME] machine, as this was his only means of receiving payments by credit cards.

3. It is clear that while these payments may have been received by [NAME], they were not applied for [NAME]'s purposes in discharging the loan to the [COMPANY]. The evidence did not establish where the money went, but it certainly did not go to pay off the [COMPANY] loan. 4. [NAME] 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.

5. In those circumstances, it is understandable that [NAME], as he said in his evidence, required the purchase monies for the Boat to be paid to his private [NAME] account, rather than to [NAME]. He was after all a guarantor for the [COMPANY] loan to [NAME], which was significantly in arrears.

Who was the Seller under the Agreement for Purchase of the Boat? 1. [NAME] asserted at trial that the Boat was being sold by [NAME] and not by himself. [NAME] gave evidence, which I accept and which was not challenged, that he never discussed [NAME] being the owner or seller of the Boat, and that at all times he was of the view that [NAME] was the owner of the Boat and was selling it. [NAME] gave evidence which I accept that [NAME] 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, [NAME] searched [NAME]'s name on the Personal Property Securities Register (PX 1, par 27). There was no challenge to the evidence of [NAME] recited above.

2. I find that [NAME] was the seller under the agreement for the following reasons: 1. [NAME] told [NAME] that he was the seller of the Boat.

2. While the agreement was on the letterhead of [NAME], that company was not mentioned anywhere in the operative words of the agreement. 3. [NAME], who drafted the agreement, described himself in the document as the "Seller".

4. The address for the seller was the residential address of [NAME] and not the business address of [NAME]. 5. [NAME] signed the document as the seller, and did not add any words against his signature to indicate that he was signing on behalf of [NAME]. 6. [NAME] drafted the document, and if there is any ambiguity in the document, it should be construed against him. 7. [NAME] had provided his own personal [NAME] [COMPANY] details in an earlier draft of the document sent to [NAME]. 8. [NAME] required all payments to go to him personally rather than to [NAME].

9. The first two payments made by [NAME] of $75,000 and $70,000 were clearly paid to and received by [NAME] in his own name and were not transferred to [NAME].

10. The subsequent payments of $35,000 and $25,000 by [NAME] were made by credit card which was accepted through the [NAME] machine. However, there was no evidence to show that these funds were ever used by [NAME]. They were certainly not used to pay off the [NAME] loan to the [COMPANY] or to rectify the substantial defaults on that loan at the time the payments were made.

Seizure of the Boat by [COMPANY]

1. In mid-2017, as a result of the defaults of [NAME] in making payments due under its loan agreement with the [COMPANY], the [COMPANY] seized the Boat pursuant to its rights under the security granted over the Boat by [NAME].

2. In August 2018 the [NAME] loan was still in default and the [COMPANY] sold the Boat at auction pursuant to its rights under the security agreement.

3. As a result of the intervention of the [COMPANY], it was no longer possible for the sale of the Boat to [NAME] and [NAME] to be completed. [NAME] and [NAME] 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. [NAME] 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 [COMPANY], the seller became unable to transfer ownership of the Boat to the plaintiff and [NAME]. 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."

1. 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.

2. 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.

3. 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.

1. 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 [COMPANY] and it was sold to a third party. Since the contract could no longer be performed, there was an anticipatory breach and repudiation by [NAME] and the purchasers were then entitled to sue for damages.

2. The damages established by the evidence in this case amount to $384,500, being the instalments of the purchase price paid by [NAME] and [NAME].

Unjust Enrichment 1. [NAME] pleaded (Amended Statement of Claim, par 47) that [NAME] 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 [COMPANY], [NAME] 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 [NAME] has been unjustly enriched by receipt of payments totalling $384,500, and [NAME] is entitled to recovery of that amount. Such recovery is on behalf of the partnership between [NAME] and [NAME]. [NAME] acknowledged that he is under an obligation to account to [NAME] for any payment of damages received. 4. [NAME] argued that the agreement for sale of the Boat was with [NAME] as the seller. I have rejected that submission above. However, even if [NAME] was the seller under the agreement, [NAME] 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 – [COMPANY] v [COMPANY] of Australia [1992] HCA 48; (1992) 175 CLR 353.

5. I have found that [NAME] was told by [NAME], and believed, that [NAME] was the owner and the seller of the boat. If he was not, then the monies paid by [NAME] were paid in the mistaken belief by [NAME] that he was under a legal obligation to pay them and that [NAME] was legally entitled to payment. [NAME] would be entitled to a judgment for the $202,500 which he paid. There is no evidence about the belief of [NAME], so the court could not include the additional $182,000 which he paid in any judgment.

Issues raised by [NAME] 1. [NAME] 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. [NAME] raised complaint that [NAME] was not at the hearing and that the matter could not be properly determined without him. [NAME] did all he could to invite [NAME] 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 [NAME] from the absence of [NAME]. Further, it would have been possible for [NAME] to take steps to compel [NAME] to attend the hearing as a witness, but he did not do so. 3. [NAME] complained that [NAME] and [NAME] 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 [COMPANY]. 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 [NAME]. Little was paid to the [COMPANY] and the loan remained in arrears resulting in the [COMPANY] seizing and selling the Boat.

4. None of the matters raised by [NAME] in his Defence, or his oral evidence, or his submissions, afford him a defence to the claim brought by [NAME].

5. There will be judgment against [NAME]. 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 [NAME] against the first defendant [NAME] 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.

********** 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: 20 November 2020