Esanda Finance Corporation Ltd v Meehan & Anor [2010] QDC 374

DISTRICT COURT OF QUEENSLAND CITATION: Esanda Finance Corporation Ltd [2010] QDC 374 PARTIES: Esanda Finance Corporation Ltd (plaintiff) v David John Meehan (first defendant) and John Thomas Dolan (second defendant) FILE NO/S: 1861/2008 DIVISION: Civil PROCEEDING: Claim ORIGINATING COURT: District Court, Southport DELIVERED ON: 8 October 2010 DELIVERED AT: Brisbane HEARING DATE: 30 April, with further submissions received until 27 May 2010 JUDGE: Rackemann DCJ ORDER: Judgment for the second defendant CATCHWORDS: CIVIL – Claim by financier for monies had and received – unjust enrichment for total failure of consideration or Quistclose trust – where vendor under uncompleted contract for the sale of a motor vehicle retained a part payment funded by purchaser’s financier – whether vendor entitled to retain the funds as against the financier Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 COUNSEL: Mr Pincus for the plaintiff Mr Webb for the second defendant SOLICITORS: Norton Rose for the plaintiff Robbins Watson solicitors for the second defendant -- 1 of 5 -- 2 [1] The second defendant (Dolan) was the vendor of a stretch limousine under an agreement with the first defendant (Meehan) as purchaser. The plaintiff (Esanda) was Meehan’s financier. The transaction did not proceed to settlement, because Meehan did not pay all of the purchase price. In particular, he did not pay a sum of $20,500, which was described as a deposit, but which was to be paid upon delivery of the motor vehicle. Consequently, neither possession nor title to the vehicle passed to Meehan. [2] Dolan had been paid the sum of $74,500, representing the purchase price less the unpaid deposit. Meehan has not pursued recovery of that money, so Dolan has retained it. [3] The part of the purchase price which was paid came from Esanda, as Meehan’s financier. Esanda subsequently received, from Meehan, some repayments but there is still a residual debt of some $60,111.22 as between Esanda and Meehan. Meehan has been made bankrupt and Esanda now seeks the return of its money from Dolan, rather than Meehan. Its case is pleaded on a number of bases, namely: (i) monies had and received; (ii) money unjustly enriching Dolan at the expense of Esanda, by reason of a total failure of consideration; and (iii) a Quistclose style trust. 1 [4] Dolan had, and has had, no contractual dealings with Esanda. Indeed, at the time the payment was received, he had had no dealings at all with Esanda and was even unaware that they were Meehan’s financier. In the circumstances he denies any obligation to Esanda and asserts that there is nothing unjust about his retention of the money as against Esanda. If he is pursued by Meehan, or Meehan’s trustee in bankruptcy, he will examine what defences or claims for setoff he might have as against Meehan. [5] While the case for the plaintiff is pleaded on three alternative baes, the argument in support of those is essentially the same or similar. It was contended that: (i) when Dolan received the money he knew or ought to have known it was received for a particular purpose; (ii) that purpose is pleaded as a payment of the balance purchase price and is described more expansively in the supplementary submissions for the plaintiff as for the purpose of being “applied by Dolan as the substantial part of the purchase price for the vehicle upon completion when Meehan paid the “deposit.” (iii) Dolan held the funds so received on trust to apply them for that purpose; (iv) that purpose failed because Meehan did not pay the “deposit” and the transaction was not completed; 1 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. -- 2 of 5 -- 3 (v) for the same reason there was a total failure of consideration, as between Esanda and Dolan in respect of the money paid by Esanda; (vi) Esanda will not likely be able to recover from Meehan, given the state of his bankruptcy; (vii) in the circumstances, Dolan has been unjustly enriched at Esanda’s expense; and (viii) equity would be satisfied by Dolan’s repaying to Esanda the sum of $60,111.22, being the monies it advanced less that which has been repaid to it by Meehan. [6] This calls for an examination of what Dolan knew, or ought to have known, in relation to the funds deposited into his account and the proper characterisation of the basis upon which those funds were received by him. [7] Dolan’s evidence, which I accept, was to the effect that: (i) he had had no dealings with Esanda prior to receipt of the money; (ii) he had, upon the request of Meehan, taken the vehicle to the premises of a finance broker (Ezy Finance) for an inspection2 , but did not know of any involvement by Esanda; (iii) that day, and in the office of the finance broker, he signed an invoice, prepared in the broker’s office but addressed to Meehan, which specified the price of the vehicle, the amount of the deposit “to be paid on delivery” and the balance. 3 The invoice also contained a request for funds to be forwarded to Dolan’s bank account, the details of which were specified; (iv) Meehan later informed Dolan that money had been deposited into his account. 4 Dolan then rang his bank to check that the money had been deposited, but did not inquire as to the source of the funds and was unaware, at that time, that it was Esanda or, indeed, any financier.5 The next bank statement, issued at the end of the month, disclosed that the funds came from Esanda, but he did not check that at the time. As he said, the source of the funds was irrelevant to him at that time;6 and (v) he became aware of Esanda’s involvement when he discovered that it had wrongly purported to register a charge over the vehicle (apparently in the mistaken belief that the transaction had been completed7 ), pursuant to a chattel mortgage which the purchaser had executed in its favour, in anticipation of the purchase. [8] It is now evident that Esanda paid the money into Dolan’s account pursuant to a lending agreement it had with its customer, Meehan. It is also now evident that the 2 T1-19, line 20. 3 T1-20, line 1-35. 4 T1-23, line 58, T1-24, line 18-25. 5 T1-25, line 26. 6 T1-22, line 40-50. 7 T1-21, line 40. -- 3 of 5 -- 4 funds were paid by Esanda in the anticipation, by Esanda, that the transaction would settle and that title in the vehicle would pass to Meehan, with the consequence that Esanda’s position would be protected by the charge under the chattel mortgage. None of that however, was communicated to Dolan at the time. Esanda contented itself simply with depositing part of the purchase price into his account, without accompanying explanation or reservation, in circumstances where the balance of the monies had not been paid and the transaction had not gone to completion. [9] It is also the case, as Dolan himself pointed out, that he had no notice, at the time of receiving the funds, that they came from anyone other than Meehan himself. Whilst it is true that he had, upon request, taken his car to a finance broker for inspection and had signed an invoice, the natural inference was that Meehan was exploring finance options through a broker. That does not necessarily mean that Dolan was on notice that any or all subsequent funds deposited into his account were provided directly to him by Esanda (or indeed by any financier), rather than from Meehan (possibly with the assistance of finance). [10] Even had he been on actual or constructive notice that funds had been directly deposited by a financier of Meehan, that does not necessarily lead to the conclusion that he was on notice that the particular financier in question had deposited the monies for the sole purpose of Dolan applying them to the completion of the purchase of this particular motor vehicle, in order that title pass to the purchaser, with the consequence that the financier would secure its interest under a chattel mortgage. For all Dolan knew, the financier from whom Meehan ultimately obtained his funds, might have been content to advance Meehan an unsecured personal loan, to be used as he wished, 8 with the money being deposited into Dolan’s account simply at Meehan’s direction. [11] Indeed, if anything was to be inferred, the circumstances of a financier depositing monies into Dolan’s account, without qualification or reservation, in advance of payment of the balance of the purchase price, completion of the transaction or the passing of possession or title to the purchaser, are more consistent with a financier who has no particular interest in the completion of the transaction to which its client, Meehan, chose to deploy the money made available by the financier. [12] Counsel for Esanda was unable to identify any authority which supported the contention that a vendor in receipt of monies directly paid by a financier is, by that fact alone, taken to hold the monies on trust for the financier or otherwise to have obligations to account for that money to the financier, if the transaction is not completed. [13] In the circumstances, Dolan was entitled to receive the money simply as a part payment of the purchase price from, or on behalf of, Meehan and not as money paid directly by the financier to Dolan for him to hold, pending completion, to apply for a particular purpose pertaining to the financier. He is entitled to hold that money until and unless he is pursued by Meehan, or Meehan’s Trustee in Bankruptcy. [14] It was submitted, on behalf of Esanda, that Dolan is unlikely to otherwise be persued, because the case manager employed by the Insolvency and Trustees Service of Australia has sworn an affidavit that the Official Trustee’s file had been 8 or perhaps a further loan, under existing borrowing arrangements without the need for additional security. -- 4 of 5 -- 5 “finalised” and no further resources will be applied to the administration in the absence of compelling evidence that Mr Meehan has realisable property which could be utilised to meet the liabilities of Meehan’s estate. That present intention, however, falls short of a disavowment (if that were possible at all), by the Official Trustee, of any potential cause of action against Dolan or any release or discharge, for Dolan’s benefit, of any such liability. Indeed, the outcome of this proceeding might itself now excite the trustees interest. In any event, it does not change the conclusion that Dolan did not receive the money in circumstances which call upon to him to account for it to Esanda on any of the bases pleaded by the plaintiff. [15] I give judgment for the second defendant. -- 5 of 5 --