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- Unreported Judgment
SUPREME COURT OF QUEENSLAND
Gallagher v Associated Equipment Pty Ltd  QCA 183
PATRICK ROBERT GALLAGHER
Appeal No 49 of 2020
Court of Appeal
Application for Leave s 118 DCA (Civil)
District Court at Brisbane –  QDC 249 (Porter QC DCJ)
1 September 2020
8 May 2020
Morrison JA and Ryan and Wilson JJ
APPEAL AND NEW TRIAL – PROCEDURE – QUEENSLAND – WHEN APPEAL LIES – FROM DISTRICT COURT – BY LEAVE OF COURT – where the applicant seeks leave pursuant to s 118(3) of the District Court of Queensland Act 1967 (Qld), to challenge a judgment that found him to have caused loss by engaging in misleading or deceptive conduct – where the relevant conduct was the provision of a tax invoice by Evolution Piling Pty Ltd, of which the applicant was the director, which was held to have falsely represented that there had been an unconditional sale of four pieces of drilling equipment – where leave to appeal is granted as a matter of discretion and usually only where: (i) there is an important point of law or question of general or public importance, and (ii) there is a reasonable argument that there is an error to be corrected, because it is necessary to correct a substantial injustice to the applicant – whether leave to appeal should be granted
TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – where the learned trial judge made two central findings: (a) the Evolution tax invoice was misleading because it falsely represented that there had been an unconditional sale of the equipment effective to confer title on Slap; and (b) Mr Spong (and therefore Associated) relied upon the Evolution tax invoice, and it caused him to decide to have Associated purchase the equipment from Slap and borrow money to facilitate that purchase – where the appeal seeks to challenge those two findings – whether those grounds of appeal lack merit
District Court of Queensland Act 1967 (Qld), s 118(3)
Arnold Electrical & Data Installations Pty Ltd v Logan Area Group Apprenticeship/Traineeship Scheme Ltd  QCA 100, cited
N R Shaw for the applicant
Shand Taylor Lawyers for the applicant
- MORRISON JA: The applicant, Mr Gallagher, seeks leave pursuant to s 118(3) of the District Court of Queensland Act 1967 (Qld), to challenge a judgment that found him to have caused loss by engaging in misleading or deceptive conduct. The judgment below was in the sum of $115,743.83.
- The relevant conduct was the provision of a tax invoice by Evolution Piling Pty Ltd, of which Mr Gallagher was the director, which was held to have falsely represented that there had been an unconditional sale of four pieces of drilling equipment.
- Leave to appeal is granted as a matter of discretion and usually only where: (i) there is an important point of law or question of general or public importance, and (ii) there is a reasonable argument that there is an error to be corrected, because it is necessary to correct a substantial injustice to the applicant.
Some background facts
- In 2015 Associated Equipment Pty Ltd (Associated) conducted an equipment hire business, assisting clients to obtain equipment hire with an option to purchase. Associated acted as broker, arranging hire agreements with larger financiers, and, at times, as a financier and hirer in its own right. Mr Spong was a director and shareholder of Associated, and involved in its day to day management.
- At the same time, Evolution Piling Pty Ltd (Evolution) was a civil engineering contractor which was in possession of certain drilling equipment. A director of Evolution was the appellant, Mr Gallagher, who had a long career in civil engineering work, particularly tunnelling, on and off-shore drilling, and piling. He started Evolution in 2010, working in the piling and special foundation industry. Evolution went into liquidation in 2016.
- Mr Gallagher employed a Mr Suarez as a manager. Mr Suarez used his own company, Slap Corporation Pty Ltd (Slap).
- All three men knew each other from previous business dealings. Mr Spong knew Mr Suarez in his capacity as a representative of Evolution and also as a representative of Slap.
- In 2015 Mr Suarez began discussions with Mr Spong and Mr Gallagher about the potential purchase of a company called Argon Aluminium Pty Ltd. There were separate conversations between Mr Suarez and Mr Spong, and Mr Suarez and Mr Gallagher. Mr Spong was to arrange the finance for the purchase.
- The original view was that Slap would purchase Argon, and for that purpose obtain finance in Slap’s name. However, that could not be arranged.
- Eventually Mr Spong and Mr Suarez decided to obtain finance by using the sale of certain drilling equipment from one of their entities to another, then putting that equipment forward as security for a loan. Mr Suarez told Mr Spong that the equipment was owned by Slap and could be used as security for finance.
- The evidence concerning just how the arrangement was structured was complicated but the essential steps were: (a) Evolution would sell some of its drilling equipment to Slap; (b) Slap would then on-sell that equipment to Associated; (c) Associated would offer the equipment to a lender as security for a loan, ostensibly to be used to purchase Argon; and (d) Associated would lease the equipment back to Evolution, thus generating a cash flow to service the loan.
- On 11 March 2015 Evolution produced a tax invoice addressed to Slap. It was signed by Mr Gallagher and listed four pieces of drilling equipment.
- Evolution executed a lease agreement with Associated in respect of the drilling equipment, and Mr Gallagher guaranteed Evolution’s obligations under the lease.
- Associated’s case at trial was, relevantly, that the transactions referred to above were effective to transfer title of the equipment from Evolution to Associated, and to create a binding lease and guarantee. It brought the proceedings below seeking to enforce the contract and guarantee, and alternatively contending that Evolution’s tax invoice was misleading or deceptive because Evolution could not pass title in the equipment to Associated.
- Associated succeeded against Mr Gallagher only on the claim based on misleading or deceptive conduct.
- The learned trial judge made two central findings:
- (a)the Evolution tax invoice was misleading because it falsely represented that there had been an unconditional sale of the equipment effective to confer title on Slap; and
- (b)Mr Spong (and therefore Associated) relied upon the Evolution tax invoice, and it caused him to decide to have Associated purchase the equipment from Slap and borrow money to facilitate that purchase.
- The appeal seeks to challenge those two findings.
The approach of the trial judge
- The learned trial judge made a number of findings concerning the acceptability and reliability of the evidence of Mr Spong and Mr Gallagher. None were made as to Mr Suarez as he was not called as a witness by either party.
- Relevant findings included:
- (a)Mr Gallagher and Mr Spong had few direct dealings with each other, such that their respective understandings of what the other person was doing, and why, depended almost entirely on what they were told by Mr Suarez;
- (b)at key moments both Mr Gallagher and Mr Spong did not behave in the way sensible commercial persons would be expected to behave;
- (c)the evidence of Mr Gallagher, as to ownership of one of the four pieces of equipment, was rejected;
- (d)aspects of Mr Spong’s evidence were found to be tentative and unconvincing;
- (e)there were two matters which seriously impugned Mr Gallagher’s reliability; the first was his evidence that he relied on Mr Suarez for assurances about the payment for a particular piece of equipment when he knew that it had never been paid for; that led to a finding that he had a capacity for self-serving recollection; the second was his improbable evidence that he believed the transfer of the equipment would only take place after Argon was transferred to Evolution, when he knew that Argon was owned by Slap;
- (f)along with other examples where his evidence was found to be improbable, inconsistent with contemporaneous documents, incredible or unintelligible, those matters led to a rejection of his evidence; the finding was that he was not a reliable witness, and his evidence was not accepted unless it was consistent with contemporaneous documents;
- (g)as for Mr Spong, the learned trial judge harboured concerns as to his reliability because of his careless disregard for ordinary commercial prudence to such an extent as to make his evidence improbable, and his inability to recall points of detail where he might be expected to have some recollection; and
- (h)accepting those matters to be so, the learned trial judge concluded that he had to treat Mr Spong’s evidence with some care and look for objective corroboration, but there was no basis upon which to entirely reject his evidence; Mr Spong’s overall narrative was accepted, namely that he believed the transactions were to fund Slap so that it could acquire Argon.
Findings as to the tax invoice
- The sequence of the funding by which Associated intended to finance the acquisition of Argon was not conventional. However, there was no finding that the arrangements were other than genuine. However unconventional, the learned trial judge found that the structure had been settled in principle between Mr Spong and Mr Suarez by 5 March 2015.
- On that day Mr Spong sent an email to Mr Suarez setting out the structure of the funding transaction, identifying the four items of equipment, and then continuing:
“THIS EQUIPMENT SHOULD BE OWNED – correct?
Total: $388,409.00 inc. GST less debt apx $20,000 (to be confirmed) = $368,409 @ 85% (this is a high as I can go) = $313,147.65 inc. GST – this equipment will be sold to Associated Equipment and rented back over a 156 week period and then purchased back for $5,000.00 + GST. It can be purchased back prior to this as per below:
Cost per week for rental: $2,449.61 + GST (156 weekly payments) = $2,694.57 inc. Gst
Document Fee: $600.00 + GST
- 1.Master Hire agreement – attached
- 2.Minimum rental term before buyback option is 26 weeks – then you can purchase under traditional finance
Agreed price of equipment at time of sale to associated equipment is $313,147.65 (subject to approval)
50% of payments made inc. GST will be deducted of agreed price within the first 52 weekly payments (i.e. paid $50,000 all up $25,000 will be deducted from purchase price)
65% of all payments made after the 52 weekly
- 3.Personal Guarantee of Director
- 4.Heads of agreement with buyback options detailed
- 5.Direct Debit Authority
- 6.Insurance Certificate of Currency to be supplied noting Associated Equipment P/L
- 7.Tax Invoice to be supplied (made out to below – we will send a pro forma) and current payout letter for equipment under finance:
Associated Equipment Pty Ltd
96 Chirnside Street
Kingsville VIC 3012
Please come back to me regarding the above. Are the weekly payments Ok for Evolutions Budget?”
- That email was directed to Mr Suarez on behalf of Slap and, as the learned trial judge found, proceeded on the basis that: (i) Slap would sell its equipment to Associated; (ii) Associated would borrow the money to buy it; (iii) Slap would therefore obtain the sale proceeds; (iv) Associated would hire the equipment to Evolution; (v) that hire agreement would then enable Associated to repay its loan; and (vi) at the end of the hire agreement Evolution would buy back the machinery.
- The response to that email was one sent by Mr Suarez on 6 March 2015 to Mr Spong:
That equipment is owned and the following are conservative figures for these items;
DRIG-02 Baretta Drill Rig $120,000
VIBR-01 Vibro Head $40,000
XCAV-01 Cat 325 Excavator $40,000
DRIG-01 Huette Drill Rig $250,000
Mate the rest of the proposal is fine and I think the weekly figure is fine. Once again you know if he requires help I will be happy to assist in the payments till he gets on his feet.”
- As the learned trial judge found, that email was in response to Mr Spong’s question about the ownership of the equipment and the necessity for a tax invoice. The email plainly stated that the nominated items of equipment were owned by Slap, including the Huette drill rig.
- Consistently with the figures set out for the equipment in Mr Suarez’s email of 6 March, on 11 March Mr Spong was provided with a tax invoice signed by Mr Gallagher, in these terms:
TAX INVOICE / PROGRESS CLAIM
INVOICE REFERENCE: SLAP-001
Logo Evolution Piling
644 Tomewin Mountain Road
Currumbin Valley QLD 4101 DATE: 11.03.15
ABN: 75148 006 526
Phone: 07)5533 0419
SLAP CORPORATION PTY LTD
27 CASTLEBAR STREET`
KANGAROO POINT QLD 4169
ABN: 33 601 930 732
SALE OF EQUIPMENT AS FOLLOWS
DIRECT BANK TRANSFER PAYMENTS
Our banking details are as follows:
Bank: NAB Account Name: Evolution Piling Pty Ltd
BSB: 084 572 Account 188102198
SIGNED: handwritten signature
NAME: PATRICK ROBERT GALLAGHER
PAYMENT DUE DATE: 11.03.15
INVOICE REFERENCE: SLAP-001
This is a payment claim made under the Building and Construction Industry Payments Act 2004
- The sequence of events between 6 March when Mr Suarez told Mr Spong that the equipment “is owned” and when the tax invoice issued was as follows:
- (a)Mr Spong asked Mr Suarez to “get the years and hours on these machines”;
- (b)Mr Suarez agreed about an hour later saying “Roger”;
- (c)on 10 March Mr Suarez sent an email to Mr Spong outlining some requirements of the letter of finance;
- (d)on 11 March Mr Spong asked Mr Suarez “Make since mate??” and asked Mr Suarez to “let me know ASAP”; although not completely clear, it seems likely that the first question meant “Make sense mate?”;
- (e)Mr Suarez responded three hours later saying, as to the letter of finance approval, “that is all fine just add on there that funds are being [dispersed] as a matter of urgency and patience is now required”;
- (f)three hours later Mr Spong emailed Mr Suarez saying: “Can you please have a tax invoice for the equipment from Evolution Piling to Slap Corporation P/L Slap corporation become the owner and when you sell them to associated equipment the proceeds go straight to the other funder I told them they can charge these assets”;
- (h)about 40 minutes later Mr Suarez sent Mr Spong the Evolution tax invoice;
- (i)Mr Spong emailed Mr Suarez, in an email marked “URGENT PLEASE”, asking Mr Suarez to supply “Tax invoices for purchases of equipment – AS PER ATTACHED (hopefully they are from reputable supplier – so we can demonstrate title flow – either way we will sort it just quicker)”;
- (j)Mr Spong continued to correspond with the NAB as to the investigation of title and whether the NAB would confirm it had no interest in the four items of equipment; and
- (k)Mr Suarez forwarded Mr Spong’s email request for purchase invoices to Mr Gallagher’s daughter, at Evolution, attaching a copy of the tax invoice and asking her to “attend to this urgently please”.
- Ultimately, Mr Spong obtained releases from the NAB in respect of the four pieces of equipment the subject of the Evolution tax invoice. Some of that correspondence had been copied to Mr Gallagher. For example, on 11 March at 3.59 pm Mr Spong emailed the NAB, listing the equipment and asking for confirmation that the NAB had no interest in the assets. Mr Spong added “the business is looking to sell these ASAP and requires this to finalise”. A second email from Mr Spong to the NAB later on 11 March was also copied to Mr Gallagher. That email attached various search results concerning the equipment. Mr Gallagher’s evidence was that he saw the emails, and knew that they were part of Associated’s process to ensure clear title.
Unchallenged factual findings
- The learned trial judge made a number of factual findings which are not the subject of challenge before this Court. Those that are relevant are set out below.
- The Evolution tax invoice was provided to Mr Spong consistently with the email by Mr Suarez to Mr Spong in which he said that the equipment “is owned” by Slap.
- The Evolution tax invoice was signed by Mr Gallagher.
- In response to the Evolution tax invoice Mr Spong asked Mr Suarez for tax invoices relating to purchases of the equipment, adding “hopefully they are from reputable supplier – so we can demonstrate title flow …”. Mr Gallagher knew at the time the tax invoice was sent that Mr Spong was seeking clearances from the NAB as to the title to the equipment.
- Mr Gallagher believed that Evolution would transfer the equipment to Slap, and in return Argon would be transferred to Evolution. However, Mr Gallagher had no understanding of the convoluted transaction put to him by Mr Suarez and was willing to accept whatever Mr Suarez said, no matter how little he understood it, and to sign whatever he was asked to sign in relation to the Argon acquisition.
- The books and records of Slap contain no documentary evidence of payments being made by Slap to Evolution in relation to the sale of the equipment, nor any written agreement for that sale, with the exception of the Evolution tax invoice.
- Mr Gallagher knew that the Huette drill rig had never been paid for by Evolution.
- Slap never obtained title to the equipment, and neither did Associated.
- The Evolution tax invoice was signed by Mr Gallagher and provided to Mr Suarez in the knowledge that it was intended to be used to obtain finance from Associated to fund the acquisition of Argon. Mr Gallagher knew that Mr Spong was making enquiries with the NAB to ensure that there was clear title to the equipment. He did not tell Mr Spong that the Huette drill rig had not been paid for.
The finding that the tax invoice was misleading or deceptive
- Counsel for Mr Gallagher did not contest six factual matters, namely:
- (a)Evolution never had title to the Huette drill rig (one of the items of equipment listed in its tax invoice);
- (b)Evolution did have title to the other three items of equipment listed in the tax invoice;
- (c)no sale contract had been established by which title to the items of equipment passed from Evolution to Associated;
- (d)the Evolution tax invoice was signed by Mr Gallagher and provided to Mr Suarez in the knowledge that it was intended to be used to obtain finance from Associated to fund the acquisition of Argon;
- (e)Mr Gallagher knew from emails copied to him on 12 March, that Mr Spong was making enquiries within the NAB to see that the equipment had clear title; and
- (f)Mr Gallagher never told Mr Spong that the Huette drill rig had not been paid for.
- Nor was it submitted that the approach of the learned trial judge was in error, insofar as he assessed the objective meaning of the delivery of the invoice in the context of the facts surrounding the transaction generally.
- Counsel for Mr Gallagher contended, however, that the context of the dealings between the parties, when viewed as a whole, demonstrated that Mr Spong could not have reasonably laboured under the assumption that the tax invoice represented that there had been an unconditional sale of the equipment effective to confer title on Slap, and the finding that he did was contrary to compelling inferences.
- In that context it was contended that the evidence established that it was apparent to Mr Spong, when he received the tax invoice, that the arrangements between Evolution and Slap had not reached a point of finality. For that reason the finding that the invoice represented that title had passed by that time, and that there had been a complete and effective transaction, was in error. The contextual circumstances did not shed sufficient light on when, how and under what conditions title was expected to pass, and whether Slap had fulfilled its end of the bargain by giving consideration, but, to the contrary, suggested that matters had not been finalised.
- In my view, those contentions should not be accepted. The learned trial judge considered the question of what the tax invoice communicated as to title, in the context of the case generally. For a number of reasons I consider that context to make it plain that the Evolution tax invoice did convey the false representation that there had been a sale conferring title on Slap.
- The unchallenged evidence was that as Mr Spong and Mr Suarez considered the way in which the acquisition of Argon could be funded, early models of the structure and the funding proved to be inadequate. The plan evolved on the basis that the equipment would be sold to Associated which would use the equipment as collateral for a loan. For that purpose Associated had to obtain title from whichever entity owned the equipment. Associated would then hire the equipment to Evolution on a basis which would provide Associated with a cash flow enabling it to repay its loan.
- Mr Gallagher played little part in the actual dealings between the parties in order to develop and implement the arrangements. That was done between Mr Spong and Mr Suarez. Further, it was not contested before this Court that the learned trial judge was right to identify that Mr Spong’s email of 5 March 2015 set out the structure of the funding transaction, at least to the extent that it related to the equipment. Reference to that email reveals these matters:
- (a)the subject matter was a proposal awaiting approval from a funder;
- (b)Mr Suarez was asked to confirm that the listed equipment was appropriate, that referring to the four items of equipment which were eventually the subject of the tax invoice; Mr Spong sought a written payout for one item of equipment and asked the question “this equipment should be owned – correct?”;
- (c)Mr Spong stipulated that “this equipment will be sold to Associated Equipment and rented back …”;
- (d)he attached a master hire agreement with a buy back option after 26 weeks;
- (e)he stipulated that the “agreed price of equipment at time of sale to associated equipment is $313,147.65 (subject to approval)”;
- (f)he stipulated a condition as being “tax invoice to be supplied (made out to below – we will send a proforma) and current payout letter for equipment under finance”; the “below” was Associated; and
- (g)he requested Mr Suarez to “come back to me regarding the above”.
- It was not contested that what the email signified was that Slap would sell the equipment to Associated. Therefore Slap would have to provide a tax invoice to Associated, and could only do so if it had title to the equipment.
- Mr Suarez responded the next day to that email. He told Mr Spong that the equipment “is owned”, and proffered conservative figures for the value, in amounts which reflected those eventually put into the Evolution tax invoice. He told Mr Spong that “the rest of the proposal is fine”. Mr Suarez added “you know if he [a reference to Mr Gallagher] requires help I will be happy to assist in the payments till he gets on his feet”.
- Plainly Mr Suarez asserted to Mr Spong that as at 6 March the equipment was owned by Slap.
- Mr Spong replied to Mr Suarez that day, asking “can we please get the years and hours on these machines”. Mr Suarez agreed to do so.
- The exchanges on 6 March were on a Friday. Matters progressed to the point where on the following Tuesday, 10 March, Mr Suarez wrote to Mr Spong concerning what details should be included in the letter of finance approval.
- The following day, 11 March, Mr Spong emailed Mr Suarez seeking information “ASAP”. This evidently concerned the finance approval, as Mr Suarez responded several hours later “that is all fine just add on there that funds are being dispersed as a matter of urgency and patience is now required”. Later that same day Mr Spong sent a copy of the letter of finance approval to Mr Suarez, and asked directly “Can you please have a tax invoice for the equipment from Evolution Piling to Slap Corporation P/L”. Settlement had evidently not taken place at that point, but was imminent. Mr Spong continued to Mr Suarez: “Slap corporation become the owner and when you sell them to associated equipment the proceeds go straight to the other funder … I told them they can charge these assets”.
- In context, Mr Spong was plainly telling Mr Suarez that a tax invoice was required as between Evolution and Slap, so that Slap Corporation could show it had “become the owner”. The sale from Slap to Associated was also made plain, as the sale is referred to as between Slap and Associated, with the funder to charge the assets.
- It is only after those emails that the Evolution tax invoice, signed by Mr Gallagher, was supplied. That occurred by email at 4.43 pm on 11 March 2015.
- That Mr Spong was concerned with the question of title to the equipment being conveyed from Slap to Associated, is plain from his email at 3.18 pm on 11 March, where he asked for a tax invoice from Evolution to Slap. Mr Spong’s company, Associated, was to purchase the equipment from Slap, and could not proffer the equipment as security for the loan unless it had title. Those matters were expressly stated in the email at 3.18 pm, requesting the Evolution tax invoice. It is supported by a request made about 90 minutes later that day, when Mr Spong asked on an urgent basis for Mr Suarez to provide tax invoices for the purchase of the items of equipment “so we can demonstrate title flow”. That email is inconsistent with any construction of the facts other than that Slap had title to the equipment from Evolution and that the chain of title into the hands of Evolution was being pursued. Mr Spong’s email was sent to Mr Suarez at Slap, as well as Mr Suarez at Evolution. Further support is derived from the fact that soon thereafter Mr Suarez sent that request to “Kelly” (Mr Gallagher’s daughter) at Evolution asking her to attend to it urgently.
- In that context the contents of the Evolution tax invoice falls to be considered. It has a number of features of some significance:
- (a)the invoice reference is “SLAP-001”, and it is addressed to Slap;
- (b)it is dated 11 March 2015, and nominates the payment due date as 11 March 2015; under the heading “Sale of Equipment” it lists the four items of equipment including the Huette drill rig, at the values identified by Mr Suarez on 6 March; and
- (c)it is signed by Mr Gallagher.
- The whole purpose of the Evolution tax invoice was to demonstrate to a lender that Slap had title to the equipment, which title could be conveyed to Associated, which was the borrower. No case was made that the arrangements, however unconventional they might be, were non-genuine or a sham. At the time the tax invoice was produced the arrangements for finance over the equipment had reached an important point. Mr Spong was making urgent searches to show that the NAB did not have a claim over the equipment. That mattered because CBA was the lender under the proposal. It cannot be doubted that CBA would not have lent to Associated had Associated not owned the equipment and therefore been in a position to pledge them as security, or if some other lender still had a residual claim over them.
- In the circumstances the tax invoice plainly represented that title to the equipment resided with Slap. Since it was accepted that Evolution never had title to one of the items of equipment nominated, namely the Huette drill rig, the tax invoice was misleading or deceptive. The learned trial judge’s conclusion in that respect was, in my respectful view, plainly correct.
- I do not consider that conclusion to be affected by Mr Spong’s role in the transaction. It is true that the transaction might be called a “round robin”, but that means nothing unless it is to suggest that in some way the transaction was fraudulent. That was not the case. The title to the equipment was to pass from Evolution to Slap and then to Associated so that Associated could borrow using that equipment as security. Associated was to lease the equipment back to Evolution, with an option to buy. None of that provides a basis to conclude that Mr Spong was not misled by the representation that Slap had unconditional title to the equipment.
- The timing aspects concerning the invoice also do not falsify the conclusion that the invoice was misleading or deceptive. By the time of its issue the transaction was nearing the point at which finance would be extended in return for taking security over the items of equipment. That explains the fact that the invoice was produced the same day it was requested and also reflects the fact that settlement had not occurred. That the invoice listed Evolution’s bank account does not take the matter any further. No one suggests that Evolution created the form of this particular tax invoice solely for this purpose. Inferentially it made use of its existing form for tax invoices. Support for that comes from the fact that the form refers to a progress claim and states that it is a payment claim made under the Building and Construction Industry Payments Act 2004. If a standard form was used, as seems likely, it is also likely that the standard form included the bank account details.
- That the tax invoice included one item of equipment (a Caterpillar excavator) which Mr Spong did not list in the finance application, and which he confirmed had been excluded by that time, also does not take the matter any further. That item of equipment had been owned by Evolution and title passed to Slap. If, for reasons to do with Associated or the financier, that item was not to be made the subject of the security charge, that says nothing about the transfer of title. The misleading aspect of the invoice was the false representation that the Huette drill rig was owned by Evolution and title passed to Slap.
- Some reliance was placed upon other constructions of things said by Mr Spong in emails to the NAB (such as that the business was “looking to sell the equipment” rather than had sold the equipment), but I do not consider these advance the matter. Mr Spong had possession of the tax invoice which had been asked expressly for the purpose of showing that Slap had title which could be passed to Associated. Title in the hands of Associated needed to be established at the moment finance was advanced and the equipment was offered as security. To say prior to that point that the business was looking to sell the equipment rather than had sold the equipment says little about the transfer of title. Mr Spong sought a tax invoice which showed Slap was the owner, and received it.
- This proposed ground lacks merit.
Challenge to the finding of reliance and causation
- Associated’s claim for loss and damage as a result of the misleading or deceptive conduct was in respect of the loss arising from the loan taken from the CBA and paid to Slap in order to acquire the equipment. As the learned trial judge identified, the question was whether the misleading conduct was a material inducement to Mr Spong, causing Associated to purport to buy the equipment from Slap and enter into the loan transaction with the CBA for that purpose.
- No challenge was made to the learned trial judge’s identification of relevant principles to be applied. In that respect his Honour had set out a passage from Hobson & Anor v Taylor & Anor:
“ Undoubtedly, it was necessary for the respondents to prove that the making of the agreement was induced by one [or] more of these representations. It was sufficient for them to prove that at least one of the representations was a substantial inducement. It was not the respondents’ case that it was only by a combination of each and every representation which they had pleaded that they were induced to have Wandani enter into the agreement.
 The inducement could have been proved by direct evidence, which of course could have come only from Mr Taylor, by a process of inference from other facts or by a combination of the two. In Hanave Pty Ltd v LFOT Pty Ltd, Kiefel J (with whom Wilcox J agreed) said:
‘The question of causation can sometimes be resolved not by direct evidence as to what part a misrepresentation played in the process of entry into contract, but by a court determining what effect must be taken to have resulted. Indeed this course may sometimes be preferable to one which rested solely on evidence later given on the point. In Gould v Vaggelas at CLR 236, Wilson J held that if a material representation is calculated (which is to say, objectively likely: Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd (1993) 41 FCR 229; 113 ALR 30; Henderson v Amadio Pty Ltd (No 1) (1995) 62 FCR 1 at 166; 140 ALR 391) to induce the representee to enter into a contract and the person in fact enters into a contract, a fair inference arises that the representation operated as an inducement, adding that it need not be the only cause.
A conclusion of inducement may then be reached where a combination of factors, including the quality of the representation itself, goes unanswered. In relation to the representation itself it would need to be of a kind likely to provide that inducement and such that: “;… common sense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract” (per Wilson J at CLR 238), a statement regarded by the full court in Ricochet as providing a practical guide to the drawing of inferences in such cases.’”
- Counsel for Mr Gallagher contended that the learned trial judge erred by:
- (a)finding that there was direct evidence that Mr Spong relied on the tax invoice as evidence that Slap acquired title to the equipment, and relied on it to borrow money from the CBA;
- (b)finding that the objective circumstances supported an inference that Mr Spong relied on the tax invoice; and
- (c)alternatively, by finding that such reliance was reasonable in the circumstances.
- In essence, the contention was that Mr Spong’s evidence showed that by 11 March when the Evolution tax invoice was received, Associated had already made a determination that it would purchase the equipment and that confirmation of ownership in order to prove title flow was simply to meet a requirement of the funder. Further, efforts to prove the “title flow” related to a period of time after the tax invoice had been received, and were directed towards meeting the requirements of CBA, rather than satisfying himself that title had passed. There was no material inducement, it was contended, because the tax invoice could not reasonably have given anyone, let alone Mr Spong, any comfort that title had passed. Associated had already decided to buy the equipment, Mr Spong had already caused Associated to make an application for finance, and Mr Spong made no efforts towards confirming the payment of the money set out in the tax invoice, or the passing of alternate consideration.
- There are a number of reasons why, in my respectful view, these contentions should be rejected.
- Firstly, the arrangements to enable the acquisition of Argon evolved over time until it was structured in a way that required title in equipment to pass from Slap to Associated in order for it to borrow from the CBA, and thus pay for the equipment it acquired from Slap. Since the security being offered to the lender was the equipment itself, title was a critical feature, and title had to pass to Associated. The email exchanges referred to above on 5 and 6 March 2015 showed unequivocal statements that Slap owned the equipment. Slap was passing title under the contractual arrangement to Associated, but Mr Spong required proof of the passage of title. It does not matter for that purpose that it may have been a requirement of the financier, as long as Mr Spong also required it in order to make the transaction efficacious. Thus, the subject matter of the tax invoice itself, the passage of title from Evolution to Slap, was a matter of concern to Mr Spong.
- Secondly, Mr Spong asked expressly for proof of the title passing from Evolution to Slap, in his email on 11 March. That request was made in the context that Mr Spong had told Associated and the financier that the assets could be charged. That could not occur unless Associated was the title holder. Thus, Mr Spong’s direct action prior to receiving the tax invoice was to seek it expressly for the purpose of showing title passing from Evolution to Slap, so that Slap could pass title to Associated under the arrangements. Mr Gallagher knew it was being sought for that purpose.
- Thirdly, Mr Spong confirmed in his oral evidence that it was intended to put forward the equipment as security for the lending, and that the tax invoice was part of his seeking proof of purchase in order to “prove title flow”, because it was a requirement of the funder. That Mr Spong had already made an application for finance by that time, and decided to commit Associated to buying the equipment and borrowing the money, does not negate reliance and causation. The compelling inference from Mr Spong’s evidence was that the lender would not lend unless it could take security over the equipment. Ultimately, that would occur when the finance transaction settled, the money was paid and the security taken. Plainly any commitment by Associated and Mr Spong was conditional upon Associated actually acquiring title. If it did not, it had nothing to offer the lender and the transaction would fail.
- Fourthly, the significance of the tax invoice to that process was expressed by Mr Spong in cross-examination. He said that he usually has to show title flow for the equipment in order to get the finance, and traditionally a tax invoice was used for that process. It was used as a confirmation from the vendor. Further, it was his experience that a lender such as CBA relied upon the tax invoice to prove title flow, apart from checking themselves.
- Fifthly, the evidence supported the finding that the tax invoice was proffered to the lender by Mr Spong in order to prove the title flow to the equipment. Thus, the tax invoice was actually used for the purpose for which it was requested in the first place. It was thus a material part of the information put forward by Associated to its lender in order to secure the lending under the arrangements with Slap and Evolution. It was plainly put forward in support of the application, and as therefore representing a truthful position rather than a false one.
- Sixthly, the representation that Slap owned the equipment and could therefore pass title to Associated was one which, in the terms used in Gould v Vaggelas, was calculated to induce the representee to act upon it. The representee did act upon it. Common sense, if nothing else, demands the conclusion that it played at least some part in inducing Associated to commit itself to the finance, which caused the loss.
- In my respectful view, both the direct evidence and the objective circumstances compel the conclusion which the learned trial judge reached, namely that the misleading or deceptive conduct was a substantial cause of Associated’s loss. No error has been demonstrated on the part of the learned trial judge in the relevant analysis of this issue. This proposed ground lacks merit.
- As both of the proposed grounds of appeal lack merit, leave to appeal should be refused. I propose the following orders:
- Leave to appeal is refused.
- The applicant pay the respondent’s costs of and incidental to the application.
- RYAN J: I agree.
- WILSON J: I agree with the reasons of Morrison JA.
Associated Equipment Pty Ltd v Evolution Piling Pty Ltd (in liq) & Ors  QDC 249.
Pickering v McArthur  QCA 294; Smith v Ash  2 Qd R 175;  QCA 112 at ; Arnold Electrical & Data Installations Pty Ltd v Logan Area Group Apprenticeship/Traineeship Scheme Ltd  QCA 100 at .
Exhibit 2.2, tab 29, AB 220.
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Called a Huette drill rig.
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AB 231, 232.
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See Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199.
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In these terms “can you please confirm this equipment is OK?”
 QCA 265 at -.
AB 334 lines 4-12.
- Published Case Name:
Gallagher v Associated Equipment Pty Ltd
- Shortened Case Name:
Gallagher v Associated Equipment Pty Ltd
 QCA 183
Morrison JA, Ryan J, Wilson J
01 Sep 2020