Custom Credit Corporation Ltd v Delairco Holdings Pty Ltd & Anor [1991] QSC 361

$c. 91 /3<o/ IN THE SUPREME COURT OF QUEENSLAND No. 1427 of 1991 Before Mr. Justice Ambrose BETWEEN: AND: Counsel Solicitors CUSTOM CREDIT CORPORATION LIMITED (Plaintiff) DELAIRCO HOLDINGS PTY. LTD. (First Defendant) HAIGH'S FOTO ART PTY. LTD. (Second Defendant) REASONS FOR JUDGMENT - B.W. AMBROSE J. Delivered the 18th day of December 1991 Mr. D.J.S. Jackson Q.C. for the Plaintiff Mr. K.F. Boulton for the First Defendant Corrs Chambers Westgarth for the Plaintiff Thompson King & Partners T/a for Keith Hunter & Associates for the First Defendant Hearing date: 20th and 21st November 1991 -- 1 of 11 -- IN THE SUPREME COURT OF QUEENSLAND BETWEEN: AND: No. 1427 of 1991 CUSTOM CREDIT CORPORATION LIMITED (Plaintiff) DELAIRCO HOLDINGS PTY. LTD. (First Defendant) HAIGH'S FOTO ART PTY. LTD. (Second Defendant) REASONS FOR JUDGMENT - B.W. AMBROSE J. Delivered the 18th day of December 1991 This is an application by a finance company ("the lessor") pursuant to O. 18A of the Rules of the Supreme Court of Queensland for an order that a dealer in photographic equipment ("the vendor") complete the purchase of photographic equipment which the lessor purchased from or through the vendor to lease to a customer of the vendor ("the lessee"). The lessor of the equipment purchased it from or through the vendor for a sum of $1.4 million. The lessor then leased it to the lessee for a period of years at a significant monthly rental. The lessor took from the lessee various types of security for the performance of the lease agreement. -- 2 of 11 -- 2 In addition the lessor, the lessee and the vendor all executed a written "buy-back agreement". The agreement recites that it was in consideration of the lessor leasing the photographic equipment to the lessee at the request of both the lessee and the vendor that - "2. The vendor hereby expressly covenants with thelessor that upon any breach or default under the said lease or any agreement collateral thereto by thelessee, the vendor shall purchaser from the lessor thesaid equipment for the purchase price set out in cl. 4 hereof on the terms more particularly set out herein." The lessee was wound up on the application of the Deputy Commissioner of Taxation by order made on 1st October 1991. There were various notices etc. which the lessor was required to give to the vendor under the buy-back agreement before the vendor became obliged to purchase the leased equipment from the lessor. In my view upon the material these steps were taken. Upon the evidence I am satisfied that in the events which have happened the vendor is obliged to purchase from the lessor the speciality photographic equipment which the lessor leased to the lessee for the sum of $800,000. It seems clear on the material that the lessee was in breach of its contractual obligations with the respect to payment of instalments to the lessor from at the latest about mid-1991. Correspondence placed before me suggests that in the early stages the vendor raised no objection to performing its obligations under the buy-back agreement. Indeed letters passing between the vendor and the lessee in August 1991 and between the lessor and the vendor at about that time indicate that the vendor raised no objection to complying with the terms of the buy-back agreement and purchasing for the sum of $800,000 the specialised equipment -- 3 of 11 -- 3 which the lessor had leased to the lessee. At this stage not one of the complaints raised upon this hearing to oppose summary judgment was even hinted at. The vendor however failed to comply with the terms of the buy-back agreement and by writ of summons issued on 21st August 1991 the lessor sought relief from both the vendor and the lessee. Subsequent to that time however the lessee was wound up and so the lessor currently seeks an order for specific performance of the buy-back agreement against the vendor, who is the first defendant. Upon the hearing of the application a good deal of material was read by both parties, and an officer of the lessor who had sworn affidavits to support this application was called for cross-examination. The first defendant opposes the order sought and has raised many objections to the granting of summary relief. The two substantial objections pursued upon the application for summary relief were - (1) That the court has no jurisdiction to grant upon the application of the lessor, the seller under the "buy-back agreement" specific performance of a contract merely for the sale of goods, and (2) That in various respects both prior to the execution of the buy-back agreement on 23rd November 1988 and subsequently when that agreement was varied on 14th January 1991, the lessor had acted unconscionably and had made a false representation and engaged in misleading or deceptive conduct within s. 52 of the Trade Practices Act 1974 (Commonwealth). In an affidavit from Mr. Miller the managing director of the first defendant it is deposed that the first defendant is entitled to and intends to seek an order pursuant to s. 87 of the -- 4 of 11 -- 4 Trade Practices Act that the deed of variation is void and of no effect. It is asserted that the lessee's default in making lease payments was caused by a failure of the lessor in possession of the lessee's premises under collateral security arrangements to appropriate moneys for the purposes of complying with the lease agreement. It is asserted that because part of the leased equipment is at the moment in the possession of another ( upon the licence of the lessor) the lessor is not ready, willing and able to deliver the equipment pursuant to its obligations to do so under the buy-back agreement. Mr. Miller has executed a long 45-paragraph affidavit raising numerous matters which counsel for the first defendant contends make it unjust to make an order for specific performance in a summary way. Upon an application of this sort the onus is upon the defendant to show that there is an issue or question in dispute that ought be tried or that for some other reason there ought be a trial of the action. There are a number of assertions made in the affidavit of the managing director of the first defendant concerning activities of the lessor with which the director of the lessee was involved upon which it is sought to found a defence. Indeed it is asserted in that affidavit that the manager of the second defendant, a Mr. Smollen, had informed the first defendant that the plaintiff had been guilty of conduct with respect to the lessee's failure to comply with the terms of the lease which gave the vendor grounds upon which it might avoid its obligations under the buy-back agreement. -- 5 of 11 -- 5 A great deal of the material relied upon by the first defendant in the affidavit of Mr. Miller is hearsay evidence. Moreover it is hearsay evidence casting very grave aspersions on the conduct of the lessor. It is clear in my view that assertions or contentions of unconscionable conduct, or of conduct which is fraudulent, or misleading and deceptive within the meaning of the Trade Practices Act must be particularised. In my view the various matters canvassed by the first defendant concerning improper conduct on the part of the lessor are vague. As far as the principal matter of defence on the merits argued on behalf of the first defendant - that is, unconscionable conduct leading the first defendant to import equipment intended to be leased to the lessee, the matters raised insofar as they are based upon hearsay evidence have been flatly contradicted by affidavits filed on behalf of the lessor, the deponents of which speak positively to the facts. Keeping in mind that no complaint of these matters seems to have been made on behalf of the first defendant prior to the plaintiff's application for summary judgment coming on for hearing - in spite of the fact that some of the alleged unconscionable conduct is asserted to have occurred three years ago - I am unpersuaded by the evidence placed before me that the first defendant has raised any bona fide triable issue. Even the conduct complained of at or about the time of the execution of the deed of variation on 14th January 1991 lacks particularity. More importantly however than the deficiencies in the evidence to which I have referred is the fact that Mr. Smollen who at material times was the manager of the second defendant flatly contradicts the hearsay -- 6 of 11 -- 6 evidence called on behalf of the first defendant as to his giving the first defendant information concerning the conduct of the plaintiff upon which the first defendant contends it proposes to erect a defence. I am left unsatisfied that there is any bona fide issue or question in dispute which ought be tried insofar as the allegations of disentitling conduct on the part of the plaintiff are concerned. It is fair to say I think that the matter of defence most strongly relied upon was the "lack of jurisdiction" to make an order for specific performance of the buy-back agreement in this case. In essence it was contended for the first defendant that the only remedy at law available to the plaintiff was an action for damages. It was said that it is only a purchaser who is given the right to seek an order for specific performance for the sale of goods. Reference was made to the terms of ss. 51 and 53 of the Sale of Goods Act 1896. The observations of Connolly J. in Timmerman v. Nervina Ind. (International) Pty. Ltd. (1983) 1 Qd.R. 1 at p. 7 were relied upon. His Honour there said - "A remedy by way of specific performance is given in terms to the buyer by s. 53 whereas there is no corresponding remedy given to the seller. There is obviously therefore a strong argument for the view that in a case of a straight-out sale of goods the remedy is not available." Whatever else might be said about the "buy-back agreement" and indeed the variation to it, it could never properly be described as "a straight-out sale of goods". The commercial objective of the agreement was obviously to secure in the most -- 7 of 11 -- 7 convenient way for the lessor an indemnity from the vendor against loss to·which the lessor might be subjected should be the lessee fail to comply with its obligations under the lease. The equipment sold by the vendor to the lessor is of a highly complex description. The vendor procured the equipment overseas for the purpose of its use by the lessee in carrying on its business of photographic reproduction. It is plain on the material that there is a limited market for equipment of this sort. It is also plain that whatever the market may be for the equipment, the first defendant as a supplier of such equipment must be far better placed to dispose of it upon what market there is in Australia and South East Asia than would be the lessor which is simply a finance company. The commercial leasing arrangements of which the buy-back agreement is one, were made through the offices of a broker who no doubt for a commission of some kind arranged for the user of such equipment to obtain the finance necessary for its acquisition. A number of documents executed to achieve this result indicate merely that the lessor of the equipment as financier, took a number of steps to secure itself against loss; one of these steps was to enter into the leasing agreement with the lessee only in consideration of the vendor executing the buy-back agreement with the lessor. The goods in my view are sufficiently "special" and on the material the market for them sufficiently limited to make it appropriate that the obligation assumed by the first defendant in consideration of the plaintiff financing the acquisition by the lessee of the specialised photographic reproduction equipment be enforced in specie. The obligations were assumed by the first defendant to -- 8 of 11 -- 8 persuade the plaintiff to finance the acquisition which seems clearly to have been negotiated between the lessee, an expert in the use of such equipment, and the first defendant, a supplier of that equipment. Looking broadly at the commercial transaction of which the buy-back agreement between the plaintiff and the first defendant was only one part, I take the view that having regard to the nature of the equipment, the subject of the agreement, it could not be said that damages would be an adequate recompense to the plaintiff should it take upon itself the task of selling the goods, the subject of the lease, and then attempt to recover from the first defendant the difference between the amount it received upon sale and the amount due to it under the buy-back agreement, increased as it would undoubtedly be by the costs necessarily involved in effecting a sale of such specialised equipment for which there seems to be a very restricted market. I very much doubt that the plaintiff having regard to its business knows very much about that market. It is clear that the first defendant by reason of its business is in a much better position than the plaintiff to maximise the sum of money which might be recovered upon the sale of the equipment - which is now about three years old. I would infer that the first defendant as a supplier and distributor of such equipment would be one of very few organisations in Australia, or for that matter in the Pacific area near Australia, with the capacity to realise the full market value of that equipment. I would infer that this was a matter clearly to the forefront of the plaintiff's mind when the buy- back agreement was negotiated and signed. The price payable by -- 9 of 11 -- 9 the first defendant to the plaintiff under the buy-back agreement clearly has little relationship with market value. The market value might well be more or less than the $800,000 payable by the first defendant to the plaintiff. Having regard to the unwillingness of the first defendant to comply with its obligations under the agreement I suspect that the market value of the equipment is probably less than the amount payable under the buy-back agreement. Al though on its face the buy-back agreement is a contract for sale of the leased equipment its object obviously is not to require the first defendant to buy back the equipment for a price associated with market value. Its object is to secure to the plaintiff an indemnity for the loss suffered as a finance company as the result of the failure of the second defendant as lessee to comply with its obligations under the lease. This of course involves consideration not merely of the purchase price paid by the plaintiff to the first defendant to acquire the goods necessary for the lease, but also the loss of interest and the depreciation in value of the equipment, the subject of the lease. The likelihood is that the rate of depreciation taken into account in arriving at the purchase price payable under the buy-back agreement is related to the depreciation deductable by the plaintiff in respect of the leased equipment under the provisions of the Income Tax Assessment Act. The plaintiff of course as lessor of the leased equipment would, I should think, give serious consideration to this item when arriving at the figures fixed in the buy-back agreement as varied. -- 10 of 11 -- 10 Dixon J. in Dougan v. Ley (1946) 71 C.L.R. 142 said at p. 150 - "In the case of goods obtainable upon the market the damages at law place the disappointed buyer or seller in as good a position as delivery of the articles orreceipt of the price because it enables him to go upon the market." In my view these observations are not apposite for the contract in issue in this case. On the facts before me I am not satisfied that there is a sufficient issue or question in bona fide dispute to require this action to go to trial. Consequently I give judgment for the plaintiff in the action against the first defendant in terms of the minutes of judgment handed up at the hearing of the application. I will, at the request of the parties or one of them, fix a time and place for the plaintiff to deliver to the first defendant the equipment, the subject of the action, and order that the first defendant at that time and place pay to the plaintiff the amount of $800,000. I give the parties liberty to apply. I will hear argument on the question of costs. -- 11 of 11 --