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DISTRICT COURT OF QUEENSLAND
Rich v Auswide Constructions Pty Ltd (No 2)  QDC 330
ALEXANDER DAVID WILLIAM RICH
AUSWIDE CONSTRUCTIONS PTY LTD ACN 114 157 925 as trustee for the Auswide Constructions Trust
18 December 2020
2 and 3 December 2020
Barlow QC DCJ
CONTRACTS – PARTICULAR PARTIES – PRINCIPAL AND AGENT – RELATIONS BETWEEN PRINCIPAL AND THIRD PERSONS – WHAT ACTS OF AGENT BIND PRINCIPAL – DISPOSITIONS BY FACTORS AND MERCANTILE AGENTS – defendant purchased the vessel from a third party – the vessel was returned to the third party for repairs – third party sold the vessel to the plaintiff – whether the third party was a mercantile agent – whether the mercantile agent was acting in the ordinary course of business – whether the plaintiff purchased the vessel in good faith
Factors Act 1892 (Qld), s 3(1), s 3(4)
Sales of Goods Act 1896 (Qld), s 24
Second-hand Dealers and Pawnbrokers Act 2003 (Qld), s 2, s 6, s 29
Associated Midland Corporation v Sanderson Motors Pty Ltd  3 NSWLR 395, applied
Astley Industrial Trust Limited v Miller  2 All ER 36, applied
Cahn v Pockett’s Bristol Steam Packet Co  1 QB 643, cited
Fabre v Arenales (1992) 27 NSWLR 437, cited
Heap v Motorists’ Advisory Agency Ltd  1 KB 577, cited
Jones v Dunkel (1959) 101 CLR 298, cited
Magnussen v Flanagan  2 NSWLR 926, considered
McKenzie v McKenzie  3 WLR 472, cited
Mercedes-Benz Financial Services Australia Pty Ltd v State of New South Wales  NSWSC 1458, cited
Mitchell v Jones (1905) 24 NZLR 932, applied
Oppenheimer v Frazer & Wyatt  1 KB 519, applied
Oppenheimer v Frazer & Wyatt  2 KB 50, applied
Oppenheimer v Attenborough & Son  1 KB 221, considered
Roache v Australian Mercantile Land & Finance Co Ltd (1966) 67 SR (NSW) 54, applied
Robinson Motors Pty Ltd v Fowler  Qd R 374, cited
Staffs Motor Guarantee Ltd v British Wagon Co Ltd  2 KB 305, applied
Self-represented plaintiff with Stephen Arulogun as McKenzie friend
A Marinac (solicitor) for the first defendant
Pacific Maritime Lawyers for the first defendant
Was Mr Rich dealing with a mercantile agent?6
Did Andrew Eustice or Chateau Bateau have possession of the vessel with the owner’s consent?8
Capacity in which possession was obtained9
Ordinary course of business17
Did Mr Rich purchase in good faith?20
Addendum – the “McKenzie friend”30
- On 8 June 2018, the defendant (Auswide) entered into a contract to purchase a sports cruiser boat, purportedly from the owner at the time of that boat, Oasis Credits Pty Ltd. Auswide paid $80,000 for the boat and, in addition, traded in its own vessel, for which it was given credit of $20,000. The sale was conducted through a marine broker trading as Platinum Boat Sales, which operated from a location in Main Beach, Queensland.
- The vessel was then registered, with the Department of Transport and Main Roads (the Department), in the name of Jerome James Charles Heron, who was a director of Auswide.
- The main individual representing Platinum Boat Sales in respect of the sale of the vessel was a man known to the directors of Auswide as Benjamin Eustice. Another person with some (although less) involvement in that sale was Benjamin Eustice’s father, Andrew Eustice. As well as apparently carrying on business under the name Platinum Boat Sales, Benjamin Eustice (with the apparent assistance of Andrew Eustice) also carried on business under the name Chateau Bateau. Benjamin Eustice was a licensed second-hand dealer. According to documents in evidence, Platinum Boat Sales and Chateau Bateau had different Australian Business Numbers but purported to carry on business under the same second-hand dealer licence number that was registered to Benjamin Eustice. For the purpose of this proceeding, it seems to me that no clear distinction was made between the two business names, except that the sale to Auswide was under the name of Platinum Boat Sales while the plaintiff, Mr Rich, dealt with the Eustices operating under the name Chateau Bateau. Nothing appears to turn on the use of both names.
- A few weeks after purchasing and taking possession of the vessel, Auswide returned it to the custody of Platinum Boat Sales, under an arrangement made with Benjamin Eustice. According to evidence from both Jerome Heron and John Heron, this arrangement was made so that Benjamin Eustice could arrange for repairs to be undertaken to certain equipment on the vessel. At Benjamin Eustice’s suggestion, Auswide moored the vessel at the Versace marina at Main Beach where, Benjamin Eustice told the Herons, a mechanic could undertake the repairs.
- On 19 July 2018, the plaintiff, Mr Rich, entered into a contract for the purchase of the same vessel, purportedly from Auswide, under an Offer to Purchase and Sales Agreement in which the broker was said to be Chateau Bateau and the purchase price was $125,000. Mr Rich had dealt with Andrew Eustice in negotiating the sale of the boat and Andrew Eustice apparently prepared the contract. Mr Rich paid the sum of $125,000 into the bank account specified in the contract, in the name of the Sharland Family Trust. Andrew Eustice also offered Mr Rich, who accepted, the use, for three months, of the mooring where the vessel was then moored. That mooring was apparently the same as where Auswide had left the vessel. Mr Rich left the vessel at that mooring, although he did go to see it, started the engine and tested some of the equipment on it on at least two occasions. He never removed it from the mooring.
- On 27 July 2002, Andrew Eustice, on behalf of Mr Rich, lodged with the Department an application to transfer the registration of the vessel from Jerome Heron to Mr Rich. That application was purportedly signed by Mr Heron on behalf of the “disposer” and was also signed by Andrew Eustice as representative of Mr Rich. The Department subsequently issued a registration certificate for the vessel in Mr Rich’s name. Mr Rich has, at all times since, maintained that registration in his name and paid the necessary registration fees.
- Mr Rich gave evidence that he was originally from the United Kingdom where, in his experience (having owned several boats there), there was a practice that a vessel be sold by or with a bill of sale and he believed that such a bill had the effect (in the UK) of giving a form of indefeasible title to the vessel. At the time of the purchase he was not sure whether that was a requirement in Queensland, but Mr Rich continued that practice in buying boats in Australia. So he sought and obtained from Andrew Eustice a bill of sale of watercraft. Curiously, that document provided that Chateau Bateau (not Auswide) sold the vessel to Mr Rich for $125,000, Chateau Bateau warranted that it was the legal owner of the boat and the boat was free from all liens and encumbrances, the seller had full right and authority to transfer the boat and the seller “warranted and defended” the title of the boat against all claims and demands of all persons. It is not clear who signed that document on behalf of Chateau Bateau as seller, but Mr Rich signed it as purchaser. He gave evidence that he found it rather strange that Chateau Bateau was stated to be the seller, but he had already bought the boat so he didn’t have any issues or concerns with it.
- Mr Rich gave evidence that, on 9 August 2018, he arrived at the marina and discovered that the vessel was no longer there. He spoke to Andrew Eustice, who told him that it had had to be moved urgently because there was a problem with the stopcock, but it would be back the following Monday, 13 August. When it was not back at the marina on 13 August 2018, Mr Rich reported it to the police and to his insurance company as having been stolen.
- Auswide’s directors had, in the interim, decided to take back the vessel and conduct the repairs themselves. They collected the keys from the office of Platinum Boat Sales, took the boat and moored it at the private pontoon of one director, John Heron, for that purpose and to conduct other works on it.
- Mr Rich later found the vessel at Mr Heron’s pontoon and subsequently demanded that it be returned to him. Auswide refused to do so and still retains possession of it. Auswide contends that it bought and retained ownership of the vessel and it did not sell it to Mr Rich, nor authorise Andrew Eustice or Chateau Bateau to sell it to him.
- That led Mr Rich to bring this proceeding, in which he seeks a declaration that he is the owner of the vessel. He also seeks damages for loss of use of the vessel and for what he says is damage caused to it by Auswide. Auswide counterclaims for a declaration that it is the owner and consequential orders.
- In his statement of claim, Mr Rich contends that Auswide was not the true owner of the vessel at the time of its sale to Mr Rich, because Auswide had purportedly bought it from a company that had never owned the vessel and because the true owner was Chateau Bateau. However, he did not call any evidence to prove that to be the case. I therefore proceed on the basis that, following its purchase of the vessel until at least the day that Mr Rich purportedly bought it, Auswide was the true owner, having an unencumbered legal interest in it.
- The question for me to determine is whether Auswide’s interest in the vessel was terminated by the purported sale to Mr Rich.
- The usual position, where a person who is not the owner of goods has purported to sell the goods to another person, without the owner’s authority or consent, is that the buyer acquires no better title to the goods than the seller had.
- However, Mr Rich relies, in substance, on subsection 3(1) of the Factors Act 1892. That subsection provides as follows:
When a mercantile agent is, with the consent of the owner, in possession of goods or of the documents of title to goods, any sale, pledge or other disposition of the goods, made by the agent when acting in the ordinary course of business of a mercantile agent, shall, subject to the provisions of this Act, be as valid as if the agent were expressly authorised by the owner of the goods to make the same: Provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same.
- Subsection 3(4) provides that the consent of the owner shall be presumed in the absence of evidence to the contrary.
- A “mercantile agent” is defined in section 2 of that Act as “a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.”
- Mr Rich contends that, when he purchased the vessel under a contract in the name of Auswide, Chateau Bateau (represented in his case by Andrew Eustice) was a mercantile agent in possession of the vessel with the consent of Auswide as owner and therefore the contract, even though not executed by Auswide or with its knowledge or consent, was sufficient to pass ownership of the vessel to him. He contends that he was acting in good faith in purchasing the vessel and had no notice that Chateau Bateau or Andrew Eustice did not have authority to sell the vessel to him.
- In his closing address on behalf of Auswide, Dr Marinac submitted that there are five principal issues. Unless Mr Rich succeeds on all, he cannot succeed in his claim. Those issues comprise the five separate elements arising under subsection 3(1) of the Act. They are:
- (a)first, whether Mr Rich was dealing with a mercantile agent in negotiating the sale of the boat – in particular, whether Andrew Eustice was such an agent;
- (b)secondly, if the court finds that Andrew Eustice was a mercantile agent, whether he had possession of the vessel with the consent of the owner;
- (c)thirdly, whether he had possession in his capacity as a mercantile agent, rather than in some other capacity;
- (d)fourthly, whether, in selling the vessel to Mr Rich, Mr Eustice (or Chateau Bateau) was acting in the ordinary course of business of a mercantile agent; and
- (e)fifthly, whether Mr Rich acted in good faith in buying the vessel.
- I agree that these are the issues that I need to consider and that Mr Rich must succeed on all in order to prove his ownership of the vessel.
- Another issue raised by Dr Marinac was whether, even if Mr Rich validly obtained ownership of the vessel, in leaving it at the marina with the keys in it, he effectively left it under the control of the Eustices, thereby constructively giving them possession of the vessel in their capacity as mercantile agents, so that, when someone in the Eustices’ office gave the keys to Auswide’s representative so that it could remove the vessel from the marina, they made a disposition of the vessel to Auswide which was effective to return ownership to it because of subsection 3(1).
- Additionally, of course, if I find that Mr Rich is now the true owner of the vessel, there is the issue of the damages he claims.
- I shall address these issues in turn.
Was Mr Rich dealing with a mercantile agent?
- Mr Marinac submitted that there was no proof that Andrew Eustice was a mercantile agent at the time. Mr Marinac contrasted Andrew Eustice with Benjamin Eustice. There is in evidence a licensing register extract report obtained on 15 October 2020 which shows that, between 14 September 2017 and 14 September 2019, Benjamin Andrew David Eustice was a licensed second-hand dealer, apparently conducting business under the name Chateau Bateau from two locations in Main Beach, including the location at the marina where Mr Rich and Auswide dealt with Messrs Eustice. There is no evidence that Andrew Eustice himself was ever licensed as a second-hand dealer.
- Dr Marinac drew to my attention to provisions of the Second-Hand Dealers and Pawnbrokers Act 2003, which relevantly provide that a person must not carry on a business of dealing in second-hand property unless the person is a second-hand dealer. “Second-hand dealer” is relevantly defined as meaning a person who carries on the business of dealing in second-hand property and holds a second-hand dealer’s licence.
- Dr Marinac submitted that Andrew Eustice held himself out to Mr Rich as one of the persons in control of Chateau Bateau. If that were the truth, then he would be an “associate” of the licensee and Benjamin Eustice would have been obliged to inform the Chief Executive of that fact. The definition of “mercantile agent” in the Factors Act is a mercantile agent having in the customary course of business as such agent authority to sell goods. There is no evidence that Andrew Eustice had such authority or was legally operating in the customary course of business as a mercantile agent in selling the vessel to Mr Rich. Dr Marinac noted that Mr Rich’s evidence was that Andrew Eustice had told him that he had set up the business with his son, Benjamin, and they were now selling vessels on the Gold Coast. As there was no evidence that Andrew Eustice was Benjamin Eustice’s employee, he was not properly, nor in the customary course of business, an agent with authority to sell goods and therefore he was not a mercantile agent. Accordingly, Mr Rich fails at the first hurdle.
- Mr Rich said that he searched the licence register and saw that Benjamin Andrew David Eustice was a licensed second-hand dealer conducting business at the address where Mr Rich had met Andrew Eustice and under the name Chateau Bateau, which was one of the two names Mr Rich saw at the premises (the other was Platinum Boat Sales). He assumed that the person referred to was in fact Andrew Eustice, who simply used his second given name.
- The Factors Act does not require that a mercantile agent be licensed in any particular manner. The fact that the Second-Hand Dealers and Pawnbrokers Act requires a person to have such a licence in order to carry on a business of dealing in second-hand property does not mean that a person without such a licence could not be a mercantile agent for the purposes of the Factors Act. Even if that person was breaching the Second-Hand Dealers and Pawnbrokers Act in carrying on such a business, if the person carried on such a business and, in the customary course of that business, had authority to sell goods for the owners of the goods and to act as those owners’ agent for that purpose, then it seems to me that the person is a “mercantile agent” for the purposes of the Factors Act.
- The fact that Andrew Eustice may or may not have been an “associate” of the licensee (Benjamin Eustice), for the purposes of the Second-Hand Dealers and Pawnbrokers Act, seems to me to be irrelevant to the question whether he was a mercantile agent for the purpose of the Factors Act. It is clear that Andrew Eustice, whether as a partner with his son or in some other capacity, was working with his son in the ordinary course of a business selling second-hand vessels. In my view, Andrew Eustice was a mercantile agent. In that capacity, together with Benjamin Eustice, he carried on the ordinary course of business under the names Platinum Boat Sales and Chateau Bateau.
- Dr Marinac submitted that Mr Rich ought to have called either Benjamin or Andrew Eustice (or both) to give evidence to demonstrate that Andrew Eustice was a mercantile agent, as well as other matters. Dr Marinac submitted that, because Mr Rich had not called them, I ought imply that their evidence would not have been useful to Mr Rich’s case. I disagree. Neither Benjamin nor Andrew Eustice was a person whom one might expect the plaintiff in this case ordinarily to call. The implication that Dr Marinac sought the court to draw arises only where there is no explanation for a party’s failure to call a witness. It seems to me that, where the witnesses are alleged to be a fraudster who has defrauded one or both parties to this litigation and the fraudster’s son, one can readily infer from the evidence a reasonable explanation for Mr Rich not calling those witnesses. In particular, it is highly likely that Andrew Eustice, if called, would refuse to answer questions on the basis that they may tend to incriminate him. I have been informed that he is the subject of criminal charges relating to this and other frauds allegedly committed by him. It is highly unlikely that he would give any relevant evidence.
- In any event, it seems to me that, if an inference were to be drawn, it might be drawn against either party, as neither party chose to call either of the Eustices.
Did Andrew Eustice or Chateau Bateau have possession of the vessel with the owner’s consent?
- Dr Marinac submitted that, if the court finds that Andrew Eustice is a mercantile agent, Mr Rich had to show that he had possession of the vessel with the owner’s consent. Unless Mr Rich proved who was the owner of the vessel, he could not succeed. Mr Rich had, at various times, suggested in his evidence that he believed that Mr Eustice, Chateau Bateau or Auswide, or possibly another person, was the owner of the vessel at the time that Mr Rich entered into his contract. Therefore he has not proved who was the owner and therefore he has not proved that Mr Eustice was in possession of the vessel with the owner’s consent.
- This submission is, with respect, without any substance. Auswide itself submits that it was the owner of the vessel at the time. There is a contract of sale of that vessel to Auswide that preceded the contract of sale from Auswide to Mr Rich. There is no evidence (as opposed to Mr Rich’s speculation) that any person other than Auswide was the owner of the vessel at the relevant time.
- Auswide returned the vessel to the custody of the persons operating the businesses of Platinum Boat Sales and Chateau Bateau. Because it did so, Andrew Eustice had access to it and was enabled to purport to cause it to be sold by Auswide to Mr Rich. In that sense, although the vessel was provided by Auswide to the agency at the suggestion of Benjamin Eustice (rather than Andrew Eustice), it was placed into the possession of the agency licensed to Benjamin Eustice, an agency in which Andrew Eustice had an involvement, at the very least as a sales person. Having been placed by Auswide, as the owner, in the possession of the mercantile agency (and therefore in the possession of any person involved in that business), it was in that business’s possession with the consent of the owner. Andrew Eustice had possession of the vessel as a person involved in that agency.
- Therefore the vessel was in the possession of Chateau Bateau, including of Andrew Eustice, with the consent of the owner.
Capacity in which possession was obtained
- The defendant submitted that, even if the Eustices or Chateau Bateau had possession of the vessel with the owner’s consent at the time that Andrew Eustice purported, on behalf of Auswide, to sell it to Mr Rich, they did not have that possession in their capacity as mercantile agents, but rather they were no more than a bailee of the vessel for the purpose of having certain defects repaired. In Dr Marinac’s submission, their capacity as mercantile agents, so far as the defendant was concerned, ceased upon the completion of the sale to the defendant. Thereafter, the defendant allowed them to take back the vessel in order for them to have repairs carried out to it, as Benjamin Eustice had promised to do before the sale. In holding the vessel for that purpose, they were simply bailees of the plaintiff and not mercantile agents.
- Before considering this issue, it is necessary to determine the relevant facts. Evidence about the circumstances in which the vessel came to be at the marina after the sale to Auswide had been completed was given by Jerome and his father, John Heron. Jerome Heron said that, after purchasing the vessel, he and his family used it for about a month, but they could not use it for overnight trips because the generator was not working and there were issues with the fridge and the sea cock. He believed he rang Benjamin Eustice and told him and Mr Eustice suggested that he take the boat to the marina and Mr Eustice would arrange repairs, which would take about three days. Jerome Heron and his brother took the vessel to the Versace marina, as directed by Mr Eustice. They left it there for about two weeks. The repairs still had not been done. The vessel was then collected by John Heron and Jerome Heron’s brother and returned to the family’s private pontoon.
- Jerome Heron also said that, at the time Auswide purchased the vessel, there was some discussion with Benjamin Eustice, who said something along the lines of, “If there are any issues, you’re welcome to bring it back and we’ll happily repair it.” He relied on the word of Benjamin Eustice, who assured him that if there was anything wrong, they should just take the vessel back to the Eustices for repairs.
- John Heron is not and was not then a director of Auswide. However, he described himself as the oldest member of the family group and a director of some of the companies in the Auswide group. He said that, when Auswide took delivery of the boat, there were some problems with it: the generator and the fridge did not work and the seacock was closed. Benjamin Eustice promised them that he would have them fixed by sending a mechanic to the family home. That did not happen. Mr Heron spoke to Benjamin Eustice and to Andrew Eustice on one occasion. Benjamin Eustice told him that, if they took it back and put it at a wharf where a mechanic could look at it, he would arrange a mechanic to fix the issues, which would take about three days. He believed his sons took the vessel to the marina. After one or two weeks, the repairs had not been done. He and his son John, or perhaps John alone, went to the office of Platinum Boat Sales and were given the keys. He and John then took the vessel from the marina to the family’s pontoon on the river.
- John Heron also said that, when Auswide bought the vessel, he was aware of the defects. After taking it for a sea trial before purchasing it, he discussed the problems with Benjamin Eustice, who said something like, “That’s nothing. It’s probably not connected properly. These are minor problems. We will get them fixed for you.”
- I accept the evidence of both Jerome and John Heron as to the sequence of events. Before agreeing to buy the vessel, they took it for a sea trial. They discovered that there were three faults with the vessel. They discussed those faults with Benjamin Eustice and were told that the Eustices would arrange to have them fixed after the sale. Later, they arranged with Benjamin Eustice that they should take the vessel to the Versace marina for the purpose of Platinum Boat Sales arranging to have the faults fixed, as promised. They left the keys at the office of Platinum Boat Sales. About two weeks later, they collected the keys from that office and took the vessel from the marina and returned it to their family pontoon.
- In this respect, Dr Marinac referred to a line of authority concerned with the English and New South Wales equivalents of s 3 of the Factors Act, stemming from a decision of the Commercial Court in the King’s Bench Division in Oppenheimer v Frazer & Wyatt. In that case, Channell J said, at 527:
It seems to me that the true rule is that where there is a consent of the owner of the goods to the possession of the goods by the mercantile agent as a mercantile agent – and that is the important part of the matter – that then the statute applies, provided the other conditions are fulfilled …
And his Lordship continued, at 528:
… the doctrine is laid down as clearly as it can be that if there is an entrusting to the person in his character of mercantile agent – because it is not necessary that he should carry on that business generally – that then the fact that the entrusting is procured by fraud does not take it out of the statute.
- The former passage was quoted, in the Court of Appeal, by the President, without demur, although without express approval, as the capacity in which the fraudulent possessor of the goods held them was not in issue, either a trial or on appeal.
- In the same decision of the Court of Appeal, Fletcher Moulton LJ (at 70) quoted the following passage from an earlier decision of Collins LJ sitting in the Queen’s Bench Division:
But, if a mercantile agent, or one of the persons whose disposition is made as effectual as that of a mercantile agent, has obtained possession by the consent of the owner, even though it were under a contract voidable as fraudulent … he is able to pass a good title to a bona fide purchaser. However fraudulent the person in actual custody may have been in obtaining the possession, provided that it did not amount to larceny by a trick, and however grossly he may abuse confidence reposed in him, or violate the mandate under which he got possession, he can by his disposition give a good title to the purchaser.
- Notably, the English section had identical wording to the Queensland section.
- Neither Channell J’s decision nor that of the Court of Appeal in Oppenheimer was decided with respect to a situation in which the capacity in which the fraudster obtained the goods was an issue. Nevertheless, Dr Marinac submitted that Channell J’s decision is supported by another decision of the King’s Bench Division. In that case, a motor vehicle dealer, Mr Heap, agreed to sell a truck that he owned to the defendant, a finance company, and the defendant agreed to hire the truck back to Mr Heap under a separate hire purchase agreement. Mr Heap, then having possession of the truck, fraudulently sold it to Staffs, as if he were still the owner. MacKinnon J held that, in having possession of the truck pursuant to the hire purchase agreement, Mr Heap was not in possession of it as a “mercantile agent”, but as a bailee and therefore the sale of the truck by him to Staffs was not rendered valid as against the defendant by the equivalent to subsection 3(1) of the Queensland Factors Act.
- MacKinnon J referred to and quoted the extract from the decision of Channell J in Oppenheimer that I have set out above. His Lordship then went on to say:
Because one happens to entrust his goods to a man who is in other respects a mercantile agent, but with whom he is dealing not as a mercantile agent but in a different capacity, I do not think that it is open to a third party who buys the goods from that man to say that they were in his possession as a mercantile agent and that therefore he had power to sell them to a purchaser and so give him a good title to them. The claimant must be able to assert not only that the goods were in the man’s possession as a mercantile agent, but also that they were entrusted by the owner to him as a mercantile agent. As Channell J said, it is the consent of the owner of the goods to the possession of them by the mercantile agent as a mercantile agent that is the important part of the matter.
- Later, his Lordship referred to a decision of the New Zealand Court of Appeal, which considered the equivalent in that country to s 27(1) of the Sale of Goods Act 1896 (Qld). That section provides:
When a person, having sold goods, continues or is in possession of the goods, or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for the person, of the goods or documents of title under any sale, pledge, or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale, has the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same
- Although dealing with a different statutory provision to subsection 3(1) of the Factors Act, the Court of Appeal made a distinction between a seller and a bailee that may be relevant to my consideration of the latter section. The factual situation in that case was very similar to that in Staffs Motor. The owner of a horse sold and delivered the horse to a buyer, who subsequently leased it back to him. The seller, having regained possession of the horse, sold it to another person. The original buyer sought from the subsequent buyer either recovery of the horse or its value. The later buyer (the defendant) relied on s 27 to argue that, as the seller was in possession of the horse, he had passed property in it to the defendant.
- The Court of Appeal held that the seller, having given up possession to the plaintiff, later obtained possession under a different agreement as bailee and was not in possession as a seller continuing to have possession of the sold goods. He had given up possession of the horse and the relationship of buyer and seller between them was at an end. He later obtained possession, not as seller but as bailee and therefore he could not transfer good title to the defendant. Perhaps most relevantly to this case, Williams J, having described the result, said:
[Subsection 27(1) of the Act] does not, in my opinion, apply where a sale has been absolutely final by delivery, and possession has been obtained by the vendee. After this point the whole transaction is at an end. The sale has been completed. The property has been vested in the purchaser, and he holds it as his own, as if there had been no sale. After that, if he lends the goods to the person who was his vendor, he lends them in exactly the same way as he would to anyone else. If you lend a chattel to a person he cannot dispose of it so as to give a good title to a third person as against you. If the construction contended for by the respondent were adopted, this result would follow: a man goes to a jeweller and buys a watch, paying for it and getting possession of it there and then. He afterwards takes it back to the jeweller for repairs. The jeweller in that case, accordingly to the contention of the respondent would be able to sell it and give a good title to a third person. That is, of course, absurd.
- The other members of the court agreed, making their own similar comments.
- This distinction, between a person who receives goods in the capacity of mercantile agent and a person who is a mercantile agent but receives goods in some other capacity, is also clearly made in more recent times by courts in New South Wales. However, one must treat those decisions with some circumspection as to their application to the Queensland section because the equivalent of subsection 3(1) of the Factors Act reads slightly differently. The New South Wales section relevantly reads:
Where a mercantile agent is entrusted as such with the possession of any goods …
- It has been held by the New South Wales Supreme Court that “entrustment” involves the obtaining of possession of the goods by the agent from, or at least with the consent of, the true owner. In this respect, whilst the wording of the section is different from the corresponding section of the English legislation, the court said that the law is the same, broadly speaking, as in England.
- That case again involved a motor vehicle purchased by a finance company, leased by it to another company which then sold it to a motor dealer as if the lessee were the owner. The finance company sought to recover possession of the vehicle from the motor dealer. It was successful, on the basis that it did not give possession of the vehicle to the lessee as a mercantile agent.
- In the course of his reasons, Clarke J said that the entrustment of the relevant goods must be to a mercantile agent in his capacity as such and it follows that the agent must obtain possession from or with the consent of the owner in his capacity as mercantile agent. His Honour cited a number of English and New South Wales authorities for that proposition. In particular, his Honour relied on a decision of the Court of Appeal in which Jacobs JA said the following:
In my view s. 5 of the Factors (Mercantile Agents) Act, 1923, only applies where a mercantile agent is entrusted with the possession of goods or the documents of title to goods in his capacity as a mercantile agent on behalf of the person so entrusting him with possession, usually the owner. I think that this follows from the use of the words ‘as such’. If it were otherwise no owner of goods could deal with any mercantile agent who was not his own agent, without running the risk that if he handed the goods over for any purpose whatsoever he might lose his right to them by force of s. 5. There seems no reason why the section should be given this extended meaning. It was intended to cover cases where an agent sold without the authority of his principal or upon a condition beyond the authority given to him by his principal, or otherwise pledged the goods or disposed of them without or beyond the authority. The section does not deal with every mercantile agent just because he is a mercantile agent. It deals with the mercantile agent in his relationship with the principal who entrusted the goods to him.
- In the same case, Holmes JA said:
People dealing with agents would always be at peril if they were confined to having to discover and observe the actual authority of the agent and not be entitled to rely upon the agent’s ostensible authority. From early times therefore exceptions upon the common law rule were engrafted in favour of persons dealing with brokers or factors. The principle is stated quite clearly by Lord Ellenborough as long ago as 1812 in Pickering v Busk: “strangers can only look to the acts of the parties, and to the external indicia of property, and not to the private communications which may pass between a principal and his broker: and if a person authorised another to assume the apparent right of disposing of property in the ordinary course of trade, it must be presumed that the apparent authority is the real authority …”
This passage illustrates the view which was taken both in respect of brokers and factors who were the agents of the person who had put the goods into their possession, that is to say, who had entrusted them with the goods for the purpose of sale …
… if one looks at the judgment of Scrutton LJ in Folkes v King there is a passage which taken by itself may need some explanation. His Lordship said: “The purpose of the act seems to be that an ostensible mercantile agent, ostensibly in possession of goods, can give a good title, in the ordinary course of business, to a bona fide purchaser, provided that he proves that the owner intended the agent to have possession of the goods.”
In the context in which this passage appears it is quite clear that his Lordship is speaking only of a case in which an owner is giving possession to a mercantile agent as agent. I do not think that His Lordship intended it to have any wider application.
In all of these cases however the point is that the owner of the goods however he was deceived was constituting, he thought, the rogue albeit a mercantile agent or factor, as his agent. The question that ultimately arose in each of them, therefore, was whether a purchaser from the agent was entitled to rely upon the agent’s ostensible authority. It was clear, however, that the owner had intended to confer upon the agent some authority and consequently the cases fitted into the pattern under which protection was given to a person who took from a factor and who was entitled to rely upon the factor’s ostensible authority, so long as he acted without notice and in good faith.
- In Associated Midland Corporation v Sanderson Motors Pty Ltd, Clarke J also referred to decisions other than Roache in support of the proposition that goods must be entrusted to a mercantile agent in his capacity as mercantile agent in order for the relevant section of the Factors Act to apply. Those cases were Astley Industrial Trust Limited v Miller and Belvoir Finance Co Ltd v Harold G Cole & Co Ltd. Most relevantly for present purposes, in the former of these two cases, Chapman J said (at 42) that it is:
… well settled and unchallenged law that the statutory power to pass title which is vested in a mercantile agent depends on his having possession in his capacity as a mercantile agent and on the true owner having consented to his having possession in that capacity.
- These and other decisions, both in England and elsewhere, make it clear that subsection 3(1) of the Factors Act applies only where the mercantile agent has possession of goods, with consent of the owner, in the agent’s capacity as a mercantile agent. That is particularly distinguishable from someone who conducts the business of a mercantile agent receiving goods in another capacity, such as hire purchaser or, perhaps depending upon the circumstances, bailee in order to have the goods repaired. Most relevantly to this distinction, in Astley Industrial Trust v Miller, Chapman J said the following about the contention that a person who is in fact a mercantile agent and who has in fact possession of someone else’s property with that person’s consent is clothed with ostensible or apparent authority to make any sale:
Counsel for the defendant’s construction would, for example, lead to this result: if I take my car into the local garage to have a puncture repaired or to be greased, or to have a general check-up before going on holiday, I would be at risk of the garage not only purporting to sell it, but actually passing good title if, besides carrying out repairs and servicing for customers, they professed the business of buying and selling motor cars (whether second-hand or new). This would seem a startling conclusion … the authorities seem to be all one way on this point, namely, in favour of counsel for the plaintiff’s argument and against counsel for the defendant.
- In this case, Auswide initially took possession of the vessel, having purchased it from Platinum Boat Sales as mercantile agent for the true owner. Auswide later returned the vessel to the possession of Platinum Boat Sales for the purpose of that business causing repairs to be effected to the vessel. In giving and taking possession of the vessel on that occasion, clearly Auswide was not giving possession for the purpose of the mercantile agent selling the vessel. Rather it was giving it to it as bailee for the purpose of effecting those repairs.
- On the other hand, the only reason that the vessel was put into the possession of Platinum Boat Sales on that occasion was so that it could fulfil its promise, made in order to effect the sale to Auswide, to repair the minor defects that were present in the vessel at the time of sale. It is possible that this fact takes this case out of the more common situation where someone who is a mercantile agent receives goods as bailee, hire purchaser or lessee, rather than as mercantile agent for sale. This may be so because the only reason for the bailment was to enable the agent for the sale to fulfil its pre-contractual promise to the purchaser to have the goods repaired after the sale was completed. It is arguable that, in retaking possession of the vessel for that purpose, the mercantile agent continued to possess it in that capacity.
- This requires me to consider the next question, that is whether the purported sale of the vessel by Chateau Bateau to Mr Rich was a sale in the ordinary course of Chateau Bateau’s business as mercantile agent.
Ordinary course of business
- It seems to me, for the purpose of determining whether this case is distinguishable from those involving bailees or lessees, that I should ignore the fact that Auswide took possession of the vessel for a period before returning it to Platinum Boat Sales for the purpose of repairs being carried out. Auswide’s position is, in effect, the same as if, having contracted to purchase and paid for and received ownership of the vessel, it had left the vessel in the possession of Platinum Boat Sales for the purpose of that firm carrying out the repairs which it had promised in order to secure the sale to Auswide.
- In such a case, it seems to me that the mercantile agent who, in the ordinary course of its business, makes a promise to have repairs effected on goods as a condition of sale or as an incentive to the purchaser to complete a sale, is acting in the ordinary course of that mercantile agent’s business.
- There are several authorities on what is meant by a mercantile agent acting in the ordinary course of business of a mercantile agent. An early decision, which has subsequently been applied in Australia, is another decision concerning the diamond owner Mr Oppenheimer. Lord Alverstone CJ noted that, when a person is dealing with an agent in possession of goods, the person must consider what kind of agent that agent is and what his customary course of business would be when acting in the capacity of agent. For example, his Lordship stated that particular agents such as auctioneers would not be expected to pledge goods entrusted to them in the ordinary course of their business. His Lordship said that the person must act in the transaction as a mercantile agent would act if he were carrying out a transaction which he was authorised by his principal to carry out. When a person is dealing with an agent, in determining whether that agent is acting in the ordinary course of business, one might consider whether the transaction is taking place outside business hours or under circumstances under which a mercantile agent in the trade would not ordinarily transact business.
- Lord Justice Buckley made similar comments. His Lordship said that the words in the section mean acting within business hours, at a proper place of business and in other respects in the ordinary way in which a mercantile agent would act, so that there is nothing to lead the person dealing with the agent to suppose that anything wrong is being done or to give him notice that the disposition to him is one which the mercantile agent had no authority to make. Lord Justice Kennedy, while not deciding the point, was inclined to the same view.
- Those reasons for judgment were adopted and applied in more recent times. In Magnussen v Flanagan, Foster J quoted from the passages to which I have referred and went on to say:
I feel that the effect of those expressions as to the meaning to be attributed to these vital words of the section is at least that in determining whether a sale has been made “in the ordinary course of business of a mercantile agent”, the court does not concern itself with precise details of the procedure which is involved in the particular type of business. The court should approach the matter, from the point of view of the purchaser dealing with the mercantile agent, on the basis of whether the nature of those dealings would apprise the purchaser that there was something unusual in the matter and indicating some want of authority on the part of the agent.
- His Honour found that a purported sale of a motor vehicle was within the ordinary course of the business of the agent in that case, notwithstanding that the agent did not have possession of the certificate of registration.
- Similar descriptions of what is the ordinary course of an agent’s business have been made by courts as long ago as 1863.
- In my view, it would be apparent to a potential purchaser from boat brokers such as Platinum Boat Sales and Chateau Bateau that it would be in the ordinary course of business of such brokers to agree to have any minor defects in a boat the subject of negotiations for sale corrected or repaired at the expense of the brokers of their principal and, for that purpose, to retain possession of the vessel, in the ordinary course their business as boat brokers, for a short period of time.
- In my view, therefore, in retaking possession of the vessel from Auswide for the purpose of repairing the defects as promised in order to persuade Auswide to purchase the vessel, Platinum Boat Sales (that is, the Eustices) received the vessel in their capacity as boat brokers or mercantile agents in the ordinary course of that business. This distinguishes the facts of this case from those in which it has been held that a bailee of goods, including for the purposes of repairing them, even if otherwise carrying on a business of buying and selling such goods, does not have possession of the goods as mercantile agent and in the ordinary course of business of a mercantile agent when given them for the purpose of repairs.
- Dr Marinac also submitted that the purported sale to Mr Rich was not in the ordinary course of business because, having been undertaken by Andrew Eustice, who did not have a second-hand dealer’s licence, it was in breach of the Second-hand Dealers & Pawnbrokers Act. Mr Rich should have known that because, among the other searches that he undertook before purchasing the vessel, he checked the register to ensure that Chateau Bateau was a registered second-hand dealer and found that the registered dealer was Benjamin Eustice and not Andrew Eustice.
- For the reasons set out in my discussion of the first issue, I disagree that viewing the results of that search would have put Mr Rich on notice that the sale was not in the ordinary course of the business of Chateau Bateau. Briefly, the business name and addresses were registered to Benjamin Eustice, who was the licensee and Andrew Eustice was obviously involved in the business as a sales person. There would not have appeared to be anything unusual about such a situation, in the eyes of a proposed purchaser dealing with Andrew Eustice.
Did Mr Rich purchase in good faith?
- The onus is on Mr Rich to prove the proviso to subsection 3(1), that he acted in good faith and did not have notice of any lack of authority on the part of Mr Eustice or Chateau Bateau.
- The concept of “good faith” is not defined in the Factors Act. One must then look to the general law to understand its meaning and content.
- In the area of bankruptcy, it has been said that good faith “involves the state of mind of the payee. … [it] goes beyond mere personal honesty: it requires more than absence of dishonesty, more than absence of a conscious attempt to defraud.”
- It has also been said that there is an absence of good faith if the purchaser “did suspect that the thing was not altogether right.”
- In the context of the New South Wales equivalent to s 3 of the Factors Act, Clarke J said the following:
Good faith connotes ‘honesty’ and whilst negligence of itself, would not establish an absence of good faith, lack of reasonable care may, when coupled with other facts and circumstances, lead to an inference that the purchaser was suspicious and refrained from inquiring because of a fear that he would become aware of irregularity.
The concept is, in this sense, and although an element separate from notice, tied in with it.
This latter element will not be established unless the purchaser satisfies the court that he did not have actual notice of some want of authority: see Heap v Motorists’ Advisory Agency Ltd.
I have said actual notice because the courts have steadfastly resisted the notion that, in commercial transactions, constructive notice, in the sense of negligently failing to make inquiry, is available to defeat a claim or defence: …
A party will not, therefore, fail to establish absence of notice simply because he, on becoming aware of facts which would have caused a prudent purchaser to enquire further, negligently or carelessly failed to make further inquiries. It will be otherwise if he knows of facts which tell of lack of authority or if he consciously refrains from further inquiry.
- Finally, in the only decision in this State, so far as I am aware, in which this section of the Factors Act has been considered, Lucas ACJ (with whom the other members of the court agreed) said the following:
The word ‘notice’ here means actual notice, that is to say, knowledge of the sale or deliberately turning a blind eye to it. …
… if there had been something obviously suspicious about O’Malley’s title, the appellant would have been bound to follow it up. …
… failure to make inquiries in a case of this nature [is] relevant more to the question whether the person who acquired the chattel acted in good faith.
- The defendant relies in particular upon certain statements made by Mr Rich in an affidavit sworn earlier in this proceeding. There Mr Rich swore the following:
- On 19 July 2018 I entered into an offer with a purchase and sales agreement to purchase (“sales agreement”) The Vessel for the sum of $125,000 AUD from the boat brokerage by the name of Chateau Bateau as is where is.
- The proprietor and broker of the sale was Benjamin Andrew Eustice (‘Andrew Eustice’) of Chateau Bateau and Platinum Boat Sales who were confirmed by Queensland Police and Private Investigators as being the physical legal owners of The Vessel after purchasing and finalising payments from Tanya Ruming legitimately in or around 10th April 2019. …
- Andrew Eustice stated that he had been involved in a financial arrangement between Auswide, the Sharland Family Trust (of which Andrew Eustice and Cheryl were Trustees) and Chateau Bateau along with various other parties whereby he (Andrew Eustice) was authorised to broker the sale of The Vessel for Chateau Bateau on behalf of Auswide and others who were acting as interim financiers for another selling party on this and other vessels.
- The conversation took place in his offices as [sic] Southport, Queensland over several meetings on and around the 19th July 2018. …
- At the same time on or around the 19th July 2018 in multiple face to face conversations with Andrew Eustice, I was advised that Auswide were intermittently financing The Vessel along with others as the seller of this particular Vessel was caught up in some situation where they had needed to sell The Vessel fast for a pending divorce case urgently and thus required funds which were provided by Auswide.
- Andrew Eustice also advised me that he had a practice of registering The Vessel in various names to give them some confidence whilst the transaction was pending completion through a daisy chain of ownership, but legal ownership was never transferred via a bill of sale and the property remained that of the Sharland Family Trust which he proved by showing me The Vessel was unencumbered on the PPSR Register and his purchase receipt.
- Andrew during various conversations after I had paid for and completed upon The Vessel suggested that I should get involved in these kinds of deals too as I could make quick money. I refused and said I just wanted to get my vessel completed and, in my name, so I can enjoy it for the summer. At this point, I did start to question his honesty as the deals appeared too good to be true so I was glad that everything was legally transferred into my name and a bill of sale was executed in my favour giving me legal title after I had taken charge of the vessel. …
- On 19 July 2018 at the Chateau Bateau premises, Andrew Eustice showed me a copy of the PPSR registries search verifying that The Vessel had no active encumbrances and confirmed via papers which he showed me that Chateau Bateau via the Sharland Trust was the legal owner of The Vessel although he confirmed it may well pass through several parties prior to final settlement of which Auswide was one, which is normal for boat transfers and I have seen this many times so it was not disconcerting. …
- Because of the nature of the transaction, prior to entering into the sales agreement to purchase The Vessel, I made inquiries online at www.qld.gov.au and was satisfied that the broker (Andrew Eustice on behalf of Chateau Bateau) was properly and validly licensed to conduct the brokerage of marine Vessels.
- I performed a licence check online and was able to confirm that Andrew Eustice and Chateau Bateau were approved to conduct this sort of business, and that the licence was approved, and up to date as secured by the state of Queensland. I have acted bona fide.
- I also confirmed that the details of the purported seller on the contract I was signing was a legally registered company in the state of Queensland at the recorded address and confirmed the directors of the company.
- On 19 July 2018, after my various checks, I made the full payment of $125,000.00 AUD by way of electronic funds transfer from my Westpac bank account in satisfaction of the full and final payment of The Vessel. This was done in accordance with the terms of the sales agreement to the account of the Sharland Family Trust.
- In his evidence-in-chief, Mr Rich explained why he requested a bill of sale when he already had an executed contract. He said that it was a requirement in England, because it proves there some sort of indefeasible title. Therefore, it is something that he has fastidiously undertaken with every single boat purchase since, and he did not realise until March 2019 that a bill of sale has very little effect in Australia. He said it was not something he was chasing to prove title, but was just to dot the I’s and cross the T’s and have everything done properly. He received the bill of sale on 27 July 2018.
- I pointed out to Mr Rich, in the course of his examination-in-chief, that the bill of sale nominates the seller as Chateau Bateau, not as Auswide. His response was:
So at this stage, I did find it rather strange but I’d already bought the boat so I didn’t have any issues or concerns about it. Not only that, your Honour, around the 23rd of July, 24th of July, the broker, Mr Andrew Eustice, had approached me by a phone call and offered me some other deals around how I could get involved like Auswide and – I don’t know if I can say this but – like Auswide were involved where I could buy - - -
- At that stage, Dr Marinac objected to Mr Rich continuing with that line of evidence. Mr Rich went on:
So he’d approached me like, other people were involved in a kind of daisy chain of contracts where they’d had the opportunity to buy a boat in their company cheap as traders because they were able to see opportunities for people that needed to sell boats, and then that money would be lent by another party - - -
- Dr Marinac objected again. Mr Rich did not continue with that line of evidence.
- Despite objecting to Mr Rich giving evidence about the proposed deal of which he had been informed by Andrew Eustice, Dr Marinac cross-examined him on his evidence about those matters. He was asked who he thought owned the boat at that point in time. He said he had no honest idea but he assumed it would have been Auswide that had ownership at that point because that was who was on the sales contract. Later, after several months of trying to investigate what had happened after Auswide reclaimed the vessel, Mr Rich said he investigated what had happened and discovered from police evidence that Andrew Eustice had officially bought the boat from someone called Tania Rimmingwood. He then said that he was not told by Andrew Eustice at the time of purchase about any financial arrangement between Auswide, the Sharland Family Trust, of which Mr Eustice and Cheryl were trustees, and Chateau Bateau along with various other parties. He said some days later Mr Eustice approached him and advised him of “this daisy chain of contracts that we could get involved with and I could make money from it.” Part of his affidavit that became exhibit 3 was then put to him to suggest that it was wrong of him to say that it was only on 23 or 24 July that Andrew Eustice offered him some form of deal. In particular, Dr Marinac put to him that, in his affidavit, he had sworn that Mr Eustice had told him about the arrangements referred to in his affidavit on or around 19 July rather than several days later. Mr Rich insisted that “on or around 19 July” includes the period in the days after that date. He said:
… at no point would I have entered into purchasing a boat and paying $125,000 if he had mentioned, at that point, that there was a sequence or chain of events. It was only after that event that he brought up – around the 23rd, I believe it was – where he stated to me: “you know what? What we’re doing with Auswide and other people is a strategy where you can buy and sell a boat”. And that was the offer made to me, and I said: “I have just sold my boat, and I’m using that money to buy a house. I’m not interested in it.”
- Mr Rich said in his evidence that this sequence was supported by the text messages exchanged between him and Andrew Eustice on 23 July 2018. It is appropriate to set out the text messages on that day insofar as they appear to be relevant.
23 July 2018, 14:52
[Rich] Sweet, thanks. Let me know on the rest when you know.
23 July, 2018 16:23
[Eustice] Yes I will send through all Regos tomorrow for transfers
[Eustice] Okay will do tomorrow I normally do four or five together but I will send through bill of sale for you
[Rich] Cheers. Have a good night.
- Mr Rich said that, shortly before the text message at 16:23, Mr Eustice called him and told him about deals that were very good with daisy chains where he could invest in property. Mr Rich went on to say:
We had spoken that day, and he had advised me at that point about this daisy chain of contracts, and at this point I got worried. I was, like, quite cautious, because the boat wasn’t in my name, and he started to tell me all these stories that I put in my affidavit very clearly. Then I said – I basically pushed him to get the boat into my name, because at the time I thought that was important to have it, and I didn’t want it to be delayed, or have any problems. And then he said: ‘okay, let me get the Bavaria into your name tomorrow, and then we’ll talk. Cheers mate, thank you’. And that was referring particularly to that same conversation. I was completely taken aback by it, as I mentioned in my statement.
- Mr Rich also said that his reference, in paragraph 16 of his affidavit, to being advised that there could be several contracts in place on the boat, he interpreted as meaning that Chateau Bateau was putting out other contracts to sell the boat, seeking offers and there were a couple of other buyers in the wings, which is why Mr Rich wanted to ensure that he had completed the purchase of the boat and it was registered in his name.
- In his re-examination, Mr Rich explained the circumstances in which he came to draw the affidavit and, in essence, that he did so in a form of stream of consciousness. He contended that on 19 July 2018, when he bought the vessel, he did not know any of the prior history, but thought there was a couple of people who were potentially buying it if he did not do so promptly.
- Dr Marinac submitted that I should not believe Mr Rich’s evidence in the witness box, but rather I should believe the evidence he gave in the affidavit. Dr Marinac submitted that the effect of that evidence was that, before Mr Rich purchased the vessel, Andrew Eustice informed him of a “daisy chain of contracts” and an alleged financial arrangement between Auswide, the Sharland Family Trust and Chateau Bateau. In Dr Marinac’s submission, that information should have been sufficient to alert Mr Rich to the possibility that something was not quite right concerning the ownership and sale of the vessel. Those were facts which would have caused a prudent purchaser to enquire further and Mr Rich consciously refrained from undertaking any further inquiry. Rather, he took further steps, as soon as possible, to ensure that he became the registered owner of the vessel: namely, by obtaining a bill of sale and ensuring that his ownership was registered with the Department. He did not enquire further into the nature of the transactions about which Mr Eustice had informed him.
- Having read the evidence given by Mr Rich in his affidavit and having reviewed his evidence at the trial, I did not form the view that Mr Rich was consciously lying in any of his evidence. The evidence, to my mind, demonstrates that, on 19 July 2018, Andrew Eustice informed him of the matters set out in paragraphs 7, 10, 11, 15 and 16 of his affidavit. Having been informed of those things, before he executed the contract he made the further enquiries referred to in paragraphs 17 to 19 of his affidavit. Those checks satisfied him that Chateau Bateau was then the owner of the vessel, Auswide was a legally registered company that was in some way an “interim financier” of the vessel and a number of contracts may have to be completed before the vessel could be transferred into his name.
- I am satisfied that, on 23 or 24 July 2018, Andrew Eustice offered Mr Rich the ability to make a profit by being involved in a similar deal and “daisy chain of contracts”: that is, the offers to which he deposed in paragraph 12 of his affidavit and in his evidence-in-chief.
- Mr Rich did say, in his evidence-in-chief, that the arrangements did not seem unusual to him as he was aware that that type of “daisy chain of contracts” occurred sometimes in dealing with the purchase, sale and finance of maritime vessels. He said that a friend of his had also bought a vessel in that manner. That is why he did not think anything of the arrangements to which Andrew Eustice had, rather vaguely, referred.
- The question is whether the fact that Andrew Eustice informed Mr Rich, although in vague terms, that there was a complicated series of transactions concerning the boat but that Mr Eustice was able to transfer to him ownership of the boat, should have put him on inquiry. If so, did he consciously refrain from making further enquiries, meaning that he did not purchase the vessel in good faith?
- I consider that the matters about which Andrew Eustice informed Mr Rich, on 19 July 2018, are matters which would have caused a prudent purchaser to enquire further. At the very least, a prudent purchaser would have asked to see the “daisy chain of contracts” to demonstrate the “daisy chain of ownership” to which Mr Eustice referred. I do not consider that matters relayed to him by Mr Eustice of themselves tell of, or give rise to a suspicion of, lack of authority to sell the vessel, such that Mr Rich would have actual notice that Mr Eustice did not have authority to sell the vessel to him. However, the question is whether I should infer from the circumstances in which the sale progressed and the matters about which Mr Eustice informed Mr Rich, that Mr Rich was suspicious and consciously refrained from enquiring into the arrangement because of a fear that he would become aware of an irregularity.
- In a completely different context (that of a mortgagee exercising a power of sale), acting in good faith in the sale of a mortgaged property has been contrasted with wilful and reckless dealing with the property in such a manner that the interests of the mortgagor are sacrificed. The mortgagee must not recklessly or wilfully sacrifice the interests of the mortgagor and if he does he is to be regarded as not having acted in good faith. If the mortgagee omits to take obvious precautions to ensure a fair price and the facts show that he was absolutely careless whether a fair price was obtained or not, his conduct is reckless and he does not act in good faith.
- By analogy, it might be said that a purchaser from a mercantile agent who, having been informed of matters about which a prudent purchaser might enquire further, deliberately or recklessly failed to make further enquiries, that purchaser is not acting in good faith. However, in my view the circumstances of such a purchaser are substantially different from those of a mortgagee exercising a power of sale. In the case of this section, it seems to me that the test enunciated by Clarke J in Associated Midland v Sanderson is the correct and appropriate one. Thus, the question is whether I should draw an inference, from the lack of enquiry undertaken by Mr Rich, particularly in the circumstance where the vessel was being sold for considerably less than what he considered to be its market value, that he was suspicious and refrained from enquiring because of a fear that he would become aware of an irregularity.
- As I have said, Mr Rich gave evidence that “at no point would I have entered into purchasing a boat and paying $125,000 if he [Andrew Eustice] had mentioned, at that point, that there was a sequence or chain of events”. He also said that he had a friend who owned a boat and who was involved in similar transactions to those referred to by Mr Eustice after he had completed the purchase.
- I have found that, before Mr Rich entered into the contract to purchase the vessel, Mr Eustice mentioned the chain of contracts and that a number of contracts would need to be completed in order to transfer ownership to Mr Rich. That indicates that Mr Rich’s evidence in this respect was incorrect.
- Mr Rich said that he knew Andrew Eustice from past dealings with him when he worked for Ray White Marine, a well-known and reputable marine broker. Mr Rich also knew that Mr Eustice had also worked for another reputable broking firm on the Gold Coast. As far as Mr Rich knew, Andrew Eustice was an experienced and honourable boat broker.
- Notwithstanding Mr Eustice’s past reputation, to Mr Rich’s knowledge, other facts should, in my view, have put him on alert that something in this transaction was not quite right. He considered that the vessel was considerably cheaper than its true market value, he had seen the same vessel advertised for considerably more than he was now being offered it and he was told that there were a number of people with some form of interest in the vessel, all of which would have to be completed or somehow dealt with before ownership could be transferred to him. Notwithstanding these matters, he determined to purchase the boat in any event, without making further enquiries. That is, he made a conscious decision to avoid making further enquiries. Instead, he quickly took steps to obtain ownership and, to his mind, to secure that ownership against all comers, by entering the contract and paying the purchase price promptly, obtaining a bill of sale (thinking that it would give him some form of indefeasible title to the vessel) and obtaining a certificate of registration of the vessel in his name. That is, he determined to take steps to defeat any other interests that may exist in the vessel. I consider that he deliberately turned a blind eye to the questionable nature of the transactions leading to his purchase.
- I therefore conclude that, in purchasing the vessel, Mr Rich was not acting in good faith.
- Given that conclusion, it is unnecessary to consider the sixth issue raised by Dr Marinac.
- The effect of my finding is that Mr Rich fails in his claim and Auswide succeeds in its counterclaim.
- I have recorded above that Mr Rich has maintained the registration of the vessel in his name since July 2018 and, to that end, he has paid registration fees. In the course of Jerome Heron’s evidence, he was asked what steps he would take in relation to that period of registration if the vessel was returned to his registration. He said that he would be happy to reimburse Mr Rich for his costs associated with that. That seems to me to be appropriate.
- It is unclear to me whether the Department would register the vessel in the name of Mr Heron or Auswide simply upon presentation of a declaration by this court that Auswide is the true owner of the vessel. It therefore seems to me appropriate to make an order, in the nature of a mandatory injunction, requiring Mr Rich, upon payment to him of the amounts of the registration fees that he has paid to the Department, to sign and provide to the defendant a Queensland Regulated Ship Registration Transfer Application authorising the transfer of the registration of the vessel to Auswide or its nominee.
- Auswide also seeks orders that the Registrar of Personal Property Securities register a financing change statement to remove the registrations of the security interests registered by Mr Rich and the second defendant. It seeks those orders pursuant to s 182 of the Personal Properties Securities Act 2009 (Cth). It is not clear to me that the court currently has the power to make such orders. Pursuant to s 182, a court may make an order under that section in relation to an “amendment demand”. An amendment demand is provided for in s 178. Under that section, an amendment demand is a demand in writing to the secured party for a financing change statement to be registered to amend the registration as authorised by the table in subsection 178(1). There is no evidence before me that Auswide has made any such formal amendment demand on Mr Rich.
- I consider it appropriate to declare that the defendant or its nominee is the true owner of the vessel “The Shahzadi”, bearing the registration marking “HT000Q”. However, I shall hear from the parties as to the appropriate orders before making any formal orders consequent upon these reasons.
Addendum – the “McKenzie friend”
- Throughout the trial, Mr Rich had a person sitting next to him at the bar table. That person was Mr Stephen Arulogun. Two days before the trial began, I refused to allow Mr Arulogun to represent Mr Rich as his advocate at the trial. However, I gave leave to Mr Rich to have Mr Arulogun assist him during the trial as a “McKenzie friend”. In my reasons for giving that leave, I made it clear that Mr Arulogun could not make submissions on behalf of Mr Rich, nor produce scripts of things that Mr Rich could say, nor give Mr Rich any legal advice.
- Mr Arulogun has a Bachelor of Laws degree from the Queensland University of Technology. He has a Graduate Diploma of Legal Practice from the College of Law. He is not admitted to practise as a legal practitioner in Queensland or elsewhere. He has, apparently, applied to be admitted as a legal practitioner, but that application has been adjourned to a date to be fixed. Mr Arulogun did not tell me about that application, nor the circumstances in which it has been adjourned. It suffices, for present purposes, to say that he is not a legal practitioner. He describes himself as a “litigation process consultant”. It appears that he charges people for providing services in that capacity.
- During the trial, Mr Rich consulted several times with Mr Arulogun. On some occasions, it seemed to me that Mr Arulogun was assisting him in the manner in which a person having the role of “McKenzie friend” may properly assist a litigant in person: such as by helping him find relevant evidence, contacting a person who may have been called as a witness and reminding Mr Rich of topics about which he may give evidence. However, on other occasions Mr Arulogun went beyond that role and, it seemed to me, was involved in providing advice of a legal nature, or a script that Mr Rich could use to make submissions on objections or in his final address. Some aspects of Mr Rich’s final address, which he appeared to be reading from notes, seemed also to be beyond Mr Rich’s apparent understanding of the law.
- Mr Arulogun’s role in this trial, his intended representation of Mr Rich as his advocate at trial and, indeed, his purported business as a “litigation process consultant” concern me greatly. It seems to me that, despite denying that he gave any legal advice, his assistance in both preparing for the trial and in the conduct of the trial, all of which he undertook for reward, may well have gone beyond the bounds of non-legal assistance and advice and strayed into practising as only a person admitted to practise as a legal practitioner is entitled to do.
- As I said in my reasons for refusing leave to Mr Arulogun to advocate on Mr Rich’s behalf, the court should be concerned when an unqualified person regularly seeks to represent a party, or is paid to do so, as that would be contrary to the interests of justice, the proper administration of justice and the protection of parties in litigation.
- In the circumstances, it seems to me likely to be appropriate that I direct the Registrar to refer the following documents to the Legal Services Commission: Mr Rich’s application for leave to have Mr Arulogun be his advocate at the trial, the affidavits in support of that application, my reasons for decision on that application, the transcript of the trial and these reasons for judgment. It will then be up to the Commissioner to decide whether or not to investigate Mr Arulogun’s practices as a “litigation process consultant”. However, before I decide whether or not to do so, I shall invite submissions from the parties and Mr Arulogun.
Although there are two named defendants, the second defendant (apparently another purchaser) has taken no part in the proceeding and the plaintiff seeks no relief against him. Therefore, I shall simply refer to the first defendant as ‘the defendant’.
This is, with some alteration, taken from the opening sentence of the reasons for judgment of MacKinnon J in Staffs Motor Guarantee Ltd v British Wagon Co Ltd  2 KB 305, 310.
Exhibit 1:C1 – Offer to Purchase and Sales Agreement.
Exhibit 1:C3 – Registration Certificate from the Department of Transport and Main Roads.
Exhibit 1:D20 is an extract from the licensing register held by a department of the Queensland government. It shows Benjamin Eustice as the licensee and his business name as Chateau Bateau. A person who carries on a business of dealing in second-hand property is required to hold a second-hand dealer’s licence under the Second-hand Dealers and Pawnbrokers Act 2003 (Qld), s 6.
Exhibit 1:B2 and C1.
John Heron is the father of the directors of Auswide.
In his statement of claim, Mr Rich alleges that the contract was between him and Chateau Bateau as the seller, but the contract itself is, on its face, between Mr Rich and “Auswide Constructions” as seller.
Although it is not clear, this appears to be a trust associated with Andrew Eustice.
Jerome Heron’s brother, not his father.
Sales of Goods Act 1896, s 24(1).
That Act applies regardless of s 24 of the Sale of Goods Act: s 24(2) of the latter Act.
Exhibit 1: D20.
See in particular, s 6 and the definition of “second-hand dealer” in the dictionary.
Second-Hand Dealers and Pawnbrokers Act 2003, ss 2, 29.
Jones v Dunkel (1959) 101 CLR 298.
Fabre v Arenales (1992) 27 NSWLR 437, particularly at 449-450, in which the court gave, as an example of a witness whose absence might not support such an inference, someone who would be asked to admit a serious crime.
T2-21:11 to T2-22:36.
The same brother who was also a director of Auswide.
Being Jerome Heron’s father, not his brother.
T2-69:43 to T2-71:36.
T2-69:43 to T2-71:36; T2-77:1-4; T2-78:19-24.
 1 KB 519.
Oppenheimer v Frazer & Wyatt  2 KB 50, 65.
Cahn v Pockett’s Bristol Steam Packet Co  1 QB 643, 658.
Staffs Motor Guarantee Ltd v British Wagon Co Ltd  2 KB 305.
 2 KB 305, 313-314.
Mitchell v Jones (1905) 24 NZLR 932, a sitting of a five member bench of the Court.
(1905) 24 NZLR 932, 936.
Stout CJ at 935, Denniston J at 936-937, Edwards J at 937, Cooper J concurring.
Factors (Mercantile Agents) Act 1923, s 5(1). Emphasis added.
Associated Midland Corporation v Sanderson Motors Pty Ltd  3 NSWLR 395, 400.
Roache v Australian Mercantile Land & Finance Co Ltd (1966) 67 SR (NSW) 54, 61.
(1966) 67 SR (NSW) 54, 64-65.
(1812) 15 Ea 38, 43; 104 ER 758, 760.
 1 KB 282, 386.
 2 All ER 36, 40-42.
 2 All ER 904, 907-908.
 2 All ER 36, 40.
Oppenheimer v Attenborough & Son  1 KB 221.
 2 NSWLR 926, 934.
Baines v Swainson  4 B & S 270, 278, 285.
Heap v Motorists’ Advisory Agency Ltd  1 KB 577, 590.
Cf Sale of Goods Act 1896, s 3(2).
Re Dalton (a bankrupt)  Ch 336, 354.
Oppenheimer v Frazer & Wyatt  1 KB 519, 530; applied in Mercedes-Benz Financial Services Australia Pty Ltd v State of New South Wales  NSWSC 1458, .
Associated Midland Corporation v Sanderson Motors Pty Ltd  3 NSWLR 395, 401-402.
 1 KB 577, 590, 591.
Robinson Motors Pty Ltd v Fowler  Qd R 374, 379.
Filed 18 December 2019, exhibit 3 in the trial.
Those messages form part of exhibit 1:B1.
T1-64:41 to T1-65:2.
T1-74 to T1-76.
Associated Midland Corporation v Sanderson Motors Pty Ltd, 401E.
Pendlebury v Colonial Mutual Assurance Society Ltd (1912) 13 CLR 676, 680.
That this is a relevant factor that may put a purchaser on guard appears in particular from Robinson Motors Pty Ltd v Fowler  Qd R 374, 379.
Paragraph  above.
McKenzie v McKenzie  3 WLR 472;  P 33.
Rich v Auswide Constructions Pty Ltd  QDC 327.
T1-14:22 to T1-15:11; T1-78:9-39; T2-101:39-44.
T2-102:43 to T2-104:34.
- Published Case Name:
Rich v Auswide Constructions Pty Ltd (No 2)
- Shortened Case Name:
Rich v Auswide Constructions Pty Ltd (No 2)
 QDC 330
Barlow QC DCJ
18 Dec 2020