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  4. Groves v BMW Australia Finance Pty Ltd - [2000] QDC 22

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Groves v BMW Australia Finance Pty Ltd[2000] QDC 22

Groves v BMW Australia Finance Pty Ltd[2000] QDC 22

DISTRICT COURT OF QUEENSLAND

 

CITATION:

Groves and Anor. v. BMW Australia Finance Pty. Ltd. and Anor.

PARTIES:

EDMUND STUART GROVES and LE NEVE ANN GROVES

(Plaintiffs)

v

BMW AUSTRALIA FINANCE PTY LTD

(First Defendant)

RIVERSIDE INVESTMENTS PTY LTD

(Second Defendant)

FILE NO/S:

1789/94

DIVISION:

 

PROCEEDING:

 

ORIGINATING COURT:

District Court

DELIVERED ON:

31st March, 2000

DELIVERED AT:

Brisbane

HEARING DATE:

13th, 14th, 15th and 16th March, 2000

JUDGE:

Forde, D.C.J.

ORDER:

  1. The application for declaratory relief in the Further Amended Statement of Claim is refused and the claim for damages against both defendants are dismissed with costs.
  2. The application by the plaintiff's for further discovery dated 16th March, 2000, is refused.
  3. The counter-claim by the first defendant is dismissed.
  4. It is ordered that the first defendant do pay the plaintiffs' costs of and incidental to the counter-claim to be assessed.
  5. It is ordered that the Notice claiming indemnity by the plaintiff's against the second defendants be dismissed with costs.
  6. Liberty to apply.

CATCHWORDS:

CONTRACT – breach of performance of leasing agreement – uncertainty; misleading or deceptive conduct – holding out or ostensible authority – reliance – failure to inform or silence – rectification.

See ss 52, 68 and 87 of the Trade Practices Act 1974 (Cth); Wardley Australia Limited v Western Australia (1992) 175 CLR 514; Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd. (1964) 2 QB 480; Royal Globe Life Assurance Co Limited v. Covacevic (1979) 22 SASR 78; Northside Developments Pty. Ltd. v. Registrar General (1989-1990) 170 CLR 146; Petera Pty. Ltd. v. E.A.J. Pty. Ltd. (1985) ATPR 40-605; Derham and Anor. v. AMEV Life Assurance Company Ltd. (1981) 56 FLR 34; Parkdale Custom Built Furniture Pty. Ltd. v Puxu Pty. Ltd. (1982) 149 CLR 191; Commonwealth Bank of Australia v. Mehta and Anor. (1991) ATPR 41-103; Gould v. Vaggelas (1985) 157 CLR 215; Argy v. Blunts and Lane Cove Real Estate Pty. Ltd. (1990) 26 FCR 112; Halton Pty. Ltd. v. Stewart Bros Drilling (1992) ATPR 41-158; Demagogue Pty. Ltd. v. Ramensky (1992) 39 FCR 31; Rhone-Poulenc v. UIM Chem Services (1986) 12 FCR 477; Elders Trustee and Executor Co. Ltd. v. E.G. Reeves Pty. Ltd. (1987) 78 ALR 193; Esanda Finance Corporation Limited v. Peat Marwick Hungerfords (1997) 188 CLR 241; Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd. (1967-1968) 118 CLR 429; Trawl Industries v. Effem Foods Pty Ltd. (1992) 27 NSWLR 326; Kendle v. Melsom (1998) 72 ALJR 560; Ferraro v. Smith BC9101945; Biotechnology Australia Pty Ltd (1988) 15 NSWLR 130; D.F. Covacich and Another v F. Maguire BC 9202447 21st may, 1992 Appeal No. 99 of 1991; Re Perpetual Trustee Co and Riverfield Tiki (1997) 35 ATR 365; Meehan v. Jones (1982) 149 CLR 571; Thorby v. Goldberg (1964) 112 CLR 597; Placer Development Ltd. v. The Commonwealth (1969) 121 CLR 353; Heitman v. Guardian Assurance Co. Ltd. & Anor. (1992) 7 ANZ Insurance Cases 61-107; Maralinga Pty. Limited v. Major Enterprises Pty. Limited. (1973) 128 CLR 336; Pukallus v. Cameron (1982) 180 CLR 447; Slee v. Warke (1949) 86 CLR 271; Majestic Homes Pty Ltd. v. Wise (1978) Qd. R. 225; Craddock Bros. v. Hunt (1923) 2 Ch 136; Thomas Bates & Son Ltd. v. Wyndham's (Lingerie) Ltd. (1981) 1 WLR 505; Taylor v. Johnson (1982-1983) 151 CLR 422; Custom Credit Corp Ltd v. Gray [1991] 1 VR 540; Winks v. WH Heck & Sons Pty. Ltd. [1986] 1 Qd R 226.

COUNSEL:

Mr TC Somers (for the plaintiffs)

Mr PW Hackett (for the first defendant)

Ms KE Downes (for the second defendant)

SOLICITORS:

Wyman & Co (for the plaintiffs)

Bairr Gasteen (for the first defendant)

Clarke & Kann (for the second defendant)

Introduction

  1. [1]
    The plaintiffs, Edmund Stuart Groves and Le Neve Ann Groves, signed a lease agreement with the first defendant, BMW Australia Finance Pty Ltd. (“the financier”) on or about 26th day of March, 1992. It was accepted by the financier on or about 31st day of March, 1992. The said agreement related to two BMW vehicles under separate contracts numbered 100038 and 100039 respectively. The said contracts are documents 3 and 4 which form part of Exhibit 1. Contract 100038 and 100039 relate to a 525i and a 325i model respectively. Mr. Groves was offered a BMW Auto Plan lease in each instance. This was a new product for financing vehicles purchased from the second defendant, Riverside Investments Pty. Ltd. trading as Brisbane BMW (“Brisbane BMW”).
  1. [2]
    The attraction of this type of lease agreement in so far as Mr. Groves was concerned was that there was no residual value payable at the expiration of the lease. It required him to estimate the number of kilometres which each of the vehicles was expected to travel. There was an excess usage fee of 8 cents per kilometre after 50,000 kilometres was travelled in each instance.
  1. [3]
    The main question for determination in the case is whether the plaintiffs were aware or ought to have been made aware that that if the number of kilometres exceeded 50000 by more than 5000 kilometres, it was considered a default of the said agreement and the financier was entitled to take possession of the goods and recover monies pursuant to clause 12 of the said lease agreement (Exhibit 4 document 5). The plaintiffs contend that there were assurances or representations made that the only penalty incurred if the kilometres exceeded 50,000 kilometres was that 8 cents per kilometre was payable and that there was no limit placed upon the number of kilometres.
  1. [4]
    The plaintiffs sue for damages for negligence and or breach of s. 52 of the Trade Practices Act 1974 (“the Act”) in their Further Amended Statement of Claim. In the course of the case, a ruling was given that the plaintiffs were entitled to commence an action notwithstanding that the financier had made only a demand for monies owing but had not issued proceedings: Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 526, 532. The financier denies that it is bound by any representations by the servants or agents of Brisbane BMW. It further asserts that it was entitled to take possession of the said vehicles pursuant to Clause 12 of the said lease agreement. It has counter-claimed for $108,490.96 together with interest on the sum of $48,073.96 at the rate of 17.9% and on the sum of $60,417.00 at 17.75% on and from 13th March, 2000. The quantum of this claim is not challenged. The plaintiffs in their reply and answer seek to avoid the consequences of any default alleged by reliance on ss. 52, 68 and s. 87 of the said Act. In relation to the latter on the basis that the said lease agreements are void. Further, that clause 12.5 of the said lease agreements are void for uncertainty as no Estimated Final Value was stated in either of the Leasing Orders. Brisbane BMW denies that there were any misleading or deceptive statements by its servants or agents.

Nature of the Plaintiffs Case

  1. [5]
    In the first instance, Mr. Groves attended Brisbane BMW on or about 15th February, 1992. He sought an appraisal of a Ford Fairlane with a view to trading it on a new BMW. This appraisal is Exhibit 4 document 11. Subsequently, Mr. Groves approached Brisbane BMW with a view to trading a 320i model BMW which he had leased. He had leased it for some two (2) years and it had travelled some 62,980 kilometres. An appraisal was carried out by Brisbane BMW and is evidenced by Exhibit 4 document 12. This occurred on 5th March, 1992. When Mr. Groves had leased the 320i model, Brisbane BMW had reduced the interest rate from 18 per centum to 11 per centum. His repayments were some $1,100.00 per month.
  1. [6]
    Mr. Groves estimated that the number of kilometres which each of the vehicles would travel would be between 25,000 and 30,000 kilometres per annum. This is borne out by Exhibit 4 documents 11 and 12. In his dealings with Brisbane BMW in February, 1992, Mr. Groves dealt initially with one Vince Semaro. Mr. Semaro was a salesman. Mr. Groves had dealt with him previously as he traded his BMW vehicles every two years. Mr. Groves gave evidence that he told Mr. Semaro of his concern with paying a residual figure at the expiration of his leases. In response, Mr. Groves says that he was told by Mr. Semaro that there was a new product on the market which had the following features:
  1. (a)
    that the vehicles would be fully maintained during the term of the lease and
  1. (b)
    that the plaintiffs could keep the vehicles for the full four years as long as they paid the excess fee of 8 cents per kilometre for any distances travelled in excess of the kilometre allowance of 50,000 kilometres per vehicle.
  1. [7]
    On the occasion that the plaintiffs went to sign the lease documents, Mr. Groves said that at the request of his accountant he reaffirmed clause (b) above in the presence of Mr. Semaro and Mr. Patrick Fielding who was the acting Financial Manager of Brisbane BMW. Mr. Groves could not say that he reaffirmed clause (a) above. Mrs. Groves in her evidence confirmed that a person named “Patrick” did confirm clause (b) but was not able to recall if Mr. Fielding referred to a limit of 5,000 kilometres.
  1. [8]
    Mr. Groves contended in examination in chief that on the first occasion that he visited the premises of Brisbane BMW, he was accompanied by his General Manager, Mr. Tony Martin. Mr. Groves believed that the transaction was completed within a few days. On the second occasion Mr. Groves says that he attended with his wife, the female plaintiff. It is quite clear on the documentary evidence that the transaction commenced on or about 15th February, 1992 and was completed when the plaintiffs signed the lease documents which was on or about 26th March, 1992. That date was changed to 30th March on the Schedule (Exhibit 4 documents 3 and 4.) but the original date was 26th March, 1992 (Exhibit 4 document 5). Nothing turns on the change.
  1. [9]
    Mr. Tony Martin gave evidence that he attended Brisbane BMW on one occasion only. He and Mr. Groves spoke to Vince Semaro. Mr. Martin confirmed that Mr Groves was concerned about the residual value on leases. Mr. Semaro then told Mr. Groves that there was a new product which the financier had introduced called an “operational lease”. The lessee had to set a limit on the number of kilometres which the vehicle was expected to travel throughout the four years of the lease. Mr. Groves elected 100,000 kilometres but Mr. Semaro suggested that that number of kilometres would make the lease “too dear” and suggested 50,000. The costings were based on this figure. According to Mr. Martin, Mr. Semaro told them that if the kilometres exceeded 50,000, then a penalty of 8 cents per kilometre was charged. He then worked out that if the vehicle travelled 100,000 kilometres then the penalty would be $4000.00. No other penalty was referred to. Mr. Martin was unable to recall any other parts of the conversation. He continues to work for the plaintiffs.
  1. [10]
    Mr. Groves gave simile evidence as to how the figure of $4,000.00 was arrived at by way of a penalty. He stated in evidence that he was willing to pay the extra repayments per month as it would avoid the problem with the residual value and maintenance was included. After speaking to his accounts, Mr. Groves accompanied his wife to the premises of Brisbane BMW and spoke to Mr. Semaro and Mr. Fielding. He wanted an assurance that the 8 cents a kilometre was the only penalty to be incurred. Mr. Groves stated that he was referred to the box in Exhibit 4 documents 3 and 4. He said he was satisfied “with the danger and that was the 8 cents usage fee”. As mentioned, Mrs. Groves confirmed this conversation.
  1. [11]
    The vehicles were serviced by Brisbane BMW during the next two years. When the kilometres reached 50,000, the plaintiffs were told that they had to return the cars. Letters were sent which are Exhibit 4 documents 6 and 7. Mr. Groves contends that this was the first notice of the requirement that the vehicles should not be driven beyond the 5000 kilometres buffer. The immediate response by the plaintiffs was in the form of a letter dated 7th June, 1994 from their solicitors to the financier. The relevant part reads as follows:

“...at the time of purchase representations have been made to our clients by the sales representative in relation to BMW Auto Plan Plus and which are not included therein. Those representations include but are not limited to the following:—

  1. Our clients would only have to pay a penalty of 8 cents a kilometre at the end of the 48 month term.
  1. No other moneys would be payable and the final value would be equal to the payout.
  1. The vehicles would be fully maintained during the 48 month period notwithstanding the 50,000 kilometres had been reached.
  1. That one of the vehicles was a demonstrator with approximately 6,000 kilometres however in the calculation of any penalty the 50,000 kilometre would be in addition to that reading.

The salesman was well aware that our clients expected to exceed 50,000 kilometres during the four year term of the Lease and could reach up to 100,000 kilometres.

Furthermore it was never explained to our client that the vehicles would have to be returned when they reached 50,000 kilometres.”

  1. [12]
    The plaintiffs continued to use the vehicles, to pay the monthly lease payments and to maintain the vehicles. In fact, they were refused possession of the vehicles on one occasion unless payment of the maintenance bill was made. Formerly, the financier had paid Brisbane BMW upon presentation of the repair invoice and pursuant to the lease arrangement. By letter dated 25th October, 1994, the financier made demand upon the plaintiffs to deliver up the two vehicles.
  1. [13]
    By letter dated 23rd December, 1994, the solicitors for the plaintiffs purported to terminate the said lease agreement on the ground that the financier had failed to pay for the costs of maintenance during the term of the lease. Notice of a counter-claim was given in relation to the costs of maintenance paid by the plaintiffs.

Nature of the Defendants' Case

  1. [14]
    The financier did not call evidence. Exhibit 5 was tendered by consent. It contained the documents relied upon by the defendants. Brisbane BMW, the second defendant, called three witnesses.
  1. [15]
    Mr. Robert Gordon William Kendall: Mr. Kendall gave evidence that he was the General Manager of Brisbane BMW at the material time. He was introduced to Mr. Groves by the sales manager, Mr. Rick Kelly. This was prior to the execution of the lease documents. Mr. Kendall said that he explained the terms of the Auto Plan Plus to Mr. Groves. In particular, he emphasised the need to be accurate in nominating the number of kilometres because one was “only allowed to travel another 5000 kilometres over and above the nominated mileage and then the lease agreement was invalidated once you exceeded 5,000 kilometres”.(Transcript p. 174.1). Further, Mr. Kendall said that he explained that there was a penalty of 8 cents per kilometre for the 5,000 kilometres travelled. Mr. Kendall said that he also spoke to Mr. Groves about sales tax exemption on the vehicles “as the he was the owner of child care centres”.
  1. [16]
    When cross examined about the terms of the lease, it became obvious that Mr. Kendall had limited knowledge. For example, he had no knowledge of the significance of the figure for Estimated Final Value. This figure was not inserted in the Leasing Orders (Exhibit 4 - documents 3 and 4). This becomes relevant in relation to the question as to the uncertainty of the lease documents. Also, Mr. Kendall had no knowledge as to what the consequences of a default under the lease documents. Mr. Kendall does confirm that Mr. Groves contacted him when the problems arose for excessive kilometres. He attempted to resolve the matter.
  1. [17]
    It was put to Mr. Kendall that he had a conversation with the male plaintiff in relation to sales tax exemption but it was after 1993. A document which is Exhibit 14 was tendered by consent. This document establishes that exemptions for child care centres from sales tax for certain items including motor vehicles came into effect on 24th December, 1993. Mr. Kendall may have been mistaken when he spoke to Mr. Groves about the sales tax issue.
  1. [18]
    Patrick Derek Fielding: Mr. Fielding was employed as the Corporate Sales Manager with Brisbane BMW from 1990 to the end of 1993. When the Business Manager was absent, he would act in that position as he had wide experience in finance deals involving motor vehicles. He gave evidence of his familiarity with Auto Plan Plus. He described it as a “pure rental” arrangement. A party can rent the vehicle for a period and subject to compliance with the conditions of the lease, the vehicle can be returned without any risk due to change in the value of the vehicle due to market forces.
  1. [19]
    What Mr. Fielding does confirm in so far as Mr Grove's evidence is concerned is that Mr. Semaro was present when he had his dealings with Mr. Groves prior to the siting of the lease documents. Mr. Fielding also conceded that Mrs. Groves may have been present. This assumes more significance when one considers the different conversations with Mr. Semaro and Mr. Fielding and the duty owed by the Brisbane BMW. Mr. Fielding prefaced his evidence by saying that the events occurred some “eight or nine years ago”. At p. 193.20, he said:

“...The basic parameters of an Auto Plan lease is that it's the term and the kilometres and then the ramifications in terms of condition and the kilometres the car has travelled. You have the option to take the car over two, three or four years. The kilometre - there are kilometre ceilings, maximum ceilings that would apply for any of those terms. The kilometre limit is the basis on which the finance comply is setting their own internal residual. It's not stated to the person leasing the car what residual they have assumed but based on the kilometres that are agreed to by the purchaser leasing the car, the finance company sets the appropriate residual. There is a 5,000 kilometre buffer that is available should there be a need to exceed that agreed figure. The charge for going into that buffer is 8 cents per kilometre but once that buffer is exceeded, the contract is breached and the whole security that the Auto Plan lease is desired to provide of having no risk of residual is undone.”

  1. [20]
    Initially, when asked about the documents a day before he gave evidence, Mr. Fielding could not remember signing the documents. The first time that he was asked to recall the conversations was at the same time, that is, some eight years after the event. One had the distinct impression that Mr. Fielding was doing his best to reconstruct what he believed his practice was as distinct from what he actually told the plaintiffs. Mrs. Groves did not recall any discussion about the buffer kilometres but it was not denied by her that it may have been discussed. It seems to be common ground in the case that Mr. Fielding was acting as the Business Manager in the absence of Mr. Bouy who was on leave during the week that the lease documents were signed. There is little doubt that Mr. Fielding had some knowledge of the Auto Plus Plan, but none were familiar with the financial obligations in dollar terms which fell to the plaintiffs on default. In cross-examination, he was adamant that he told the plaintiffs about the 5000 kilometre buffer as “it's pivotal to the whole product”.
  1. [21]
    One aspect of Mr. Fielding's evidence which requires some comment is that he said that “if Mr. Groves had suggested to me he was going to be in excess of 100,000 kilometres, we wouldn't have been referring that product to Mr. Groves”. Mr. Semaro did not show to Mr. Fielding the appraisal relating to the plaintiffs two year old BMW. The kilometres were recorded at some 62,980. One can infer, further information or another alternative would have been provided by Mr. Fielding. The plaintiffs would have been more clearly forewarned about the nature of the product and the default provision. The absence of an Estimated Final Value in the Leasing Order was likely to have assumed more significance for Mr. Groves. The figures for each vehicle relating to the Estimated Final Value appear in Exhibit 5 pp 26 and 27. Mr. Fielding stated that he never saw those documents. It is the defendants' case that the plaintiffs were aware only of the monthly instalments referred to in those exhibits.
  1. [22]
    Mr. Fielding stated that it was the policy of Brisbane BMW that the finance person explained the finance contract. Mr. Fielding did so as the Corporate Sales Manager even though he was not part of the finance section unless Mr. Bouy was away. Mr. Fielding referred to problems which may occur if the salesperson talks of interest rates etc. Unfortunately, in the present case Mr. Semaro, attempting to carry out his role as a sales representative, was able to assure Mr. Groves that with this new product, that he need not worry about any residual value. I find, he then assisted Mr. Groves to arrive at the nominated kilometres figure of 50,000 which both of them realised was totally artificial. The eagerness of Mr. Semaro to achieve a sale clouded his duty to his client. In light of the findings of the conversation between Mr. Semaro and Mr. Groves, the former's absence does not detract from the plaintiffs' case. On the second occasion as described by Mr. Groves, the latter has failed to give evidence in accordance with his pleadings.
  1. [23]
    William Lewis Bouy: Mr. Bouy was described by Mr. Groves as a friend. Neither Mr. Bouy nor Mr. Fielding were employed by Brisbane BMW at the time of trial. Mr. Bouy gave evidence that he spoke to Mr. Groves in early 1992. The latter had no recollection of speaking to Mr. Bouy in relation to the subject lease until after the alleged default. According to Mr. Bouy, the conversations occurred in the month leading up to the signing of the lease documents. The involvement of Mr. Bouy began when Mr. Groves wanted a payout figure on the BMW that he was to trade on the subject vehicles. According to Mr. Bouy there was also some talk of whether the plaintiffs were required to pay sales tax given their business. Mr. Bouy says that he discussed the new product Auto Plan Plus with Mr. Groves. He told him that this product may alleviate the problems of losing money each time that he sold his vehicle because he was guaranteed a buy back and that it was tied to the kilometres travelled. He says that he told Mr. Groves that he would have to check the kilometres travelled each year carefully. He added:

“I would have also explained to him that there was a penalty issue involved; that there was a 5000 kilometre leeway on the maximum kilometre allowed and that the penalty involved I believe was 8 cents a kilometre, but it was important that the kilometres travelled were in keeping with the period of time that he had the vehicle”. (p 212.25).

And at p. 213.1:

“I would have said to him that, as I said, there was an 8 cents a kilometre penalty and that you only had 5,000 kilometres leeway and that, for instance, if you were to do more than the kilometres within the term of the agreement, then you would need to hand the vehicle back to the financier and let them make a decision on what they were going to do with it in terms of selling and whether the agreement would be terminated, or what fees you would have to pay.”

  1. [24]
    Although this advice touched upon some of the consequences, Mr. Bouy like the other witnesses called by Brisbane BMW had no idea of the financial consequences as a result of any default. In fact, the advice given by Mr. Bouy is somewhat equivocal. He was not in a position to spell out to Mr. Groves the extent of his liability subject to the sale of the vehicle. In fact, in cross-examination, Mr. Bouy conceded that the financier specifically told Brisbane BMW not to include the Estimate Final Value figure (P. 220.1-8) in the Leasing Orders.
  1. [25]
    Mr. Bouy was asked about his conversation with Mr. Groves concerning the sales tax issue. The significance of the timing of this conversation is relied upon heavily by the plaintiffs to establish that it occurred at the same time as the warnings were given by Mr. Kendall and Mr. Bouy in relation to the 5000 kilometre buffer. The plaintiffs contend that the sales tax exemption did not become law until 23rd December, 1993 and that the conversations about sales tax and thus the warnings occurred after March, 1992. Mr. Bouy said:

“I suggest to you that it was in the context of that dispute that you had - sorry that both you and your manager, Mr. Kendall had discussions with Mr. Groves and that it was approximately mid 1994? - I wouldn't believe that that would necessarily be correct, because I think, as I recollect, Mr. Groves, at the point when our discussions were being undertaken, was investigating the possibility of getting sales tax exemptions, and I was surprised because I wasn't aware that sales tax exemptions may or may not have been able to be claimed by a child care centre. I was aware that sales tax exceptions could be claimed by primary producers, and that's why it sticks in my mind.”

  1. [26]
    Mr. Kendall and Mr. Bouy may have been mistaken about whether they had the conversation about the sales tax before the lease was signed. However, what was more likely was that Mr. Groves would have been more concerned about sales tax exemption at the time that he entered into the transactions and not after he was having problems with the lease. In any event, this issue is not in my view determinative of the relative credibility of the witnesses on either side. For example, Mr. Groves may have canvassed the views of Mr. Kendall and Mr. Bouy prior to the Bulletin (Exhibit 14) being issued. The relevant legislation referred to in Exhibit 14 came into effect on the 24th day of December 1993. Such legislation is not made in a vacuum. It is often preceded by public debate. Even if the conversations concerning the sales tax occurred after the plaintiffs entered into the lease arrangements, it does not detract in any significant way from the thrust of the evidence of the defence witnesses.
  1. [27]
    Although Mr. Groves could not recall same, Mr. Bouy was very involved in the financial side of the lease arrangements. In cross examination (p 223.40(f)), it becomes quite clear that Mr. Bouy was able to summarise the main features of the application and the financial package which the financier was required to consider. This could only have occurred if Mr. Bouy and Mr. Groves had discussed same in some detail (Exhibit 5 pp. 28 and 29). The chronology (Exhibit “G”) was handed up in the course of submissions. It shows that there were extensive dealings between the plaintiffs, the financier and Brisbane BMW. Mr. Groves has no recall of many of these events. His evidence was limited to looking at the cars, the representations by Mr. Semaro and Mr. Fielding and signing the documents.

Credibility of the Plaintiff

  1. [28]
    The credibility of Mr. Groves has suffered for the following reasons:
  1. (a)
    his inability to recall a series of transactions including those with Mr. Bouy prior to the signing of the lease which do not assist his case. The documentary evidence is overwhelming in so far as the nature of the transactions and their extent.
  1. (b)
    the discrepancy between his evidence and the case pleaded particularly in relation to paragraph 12 (b) of the pleadings. This related to his alleged conversation with Mr. Fielding. In evidence he could not recall any conversation whereby the maintenance issue arose on his second visit. Given that this was one of the two alleged misrepresentations, the failure to prove same assumes more importance. A simile comment could be made with respect to paragraph 13 of the Further Amended Statement of Claim.
  1. (c)
    It was alleged against Mr. Groves that his conversations as stated by him with the witnesses called by Brisbane BMW were a fabrication. There was no attempt to rebut this suggestion. A letter written by the plaintiffs' solicitors (Exhibit 4 document 8) has been referred to. This letter was written shortly after the first defendant raised the 5000 kilometres buffer (Exhibit 4 document 7). However, document 8 refers only to the conversation with the sales representative who was Mr. Semaro. Therefore, a court can more readily draw the inference that the version given by Mr. Groves is not reliable in the absence of rebuttal evidence. This inference relates to the evidence concerning conversations with the witnesses called and not Mr. Semaro, as Mr. Groves' version is supported to some extent by Exhibit 4 document 12 in relation to the kilometres likely to be travelled.
  1. (d)
    It was suggested that Mr. Groves deceived the first defendant by nominating 50,000 kilometres when he knew that it was likely that it would be exceeded. It was done as the alternative of 100,000 would have made the repayments more expensive. Mr. Groves believed that he would be penalised 8 cents per kilometre if he went over the nominated figure. He was led into nominating that misleading figure by the servant or agent of the Brisbane BMW. This is a two edged sword for Brisbane BMW.
  1. [29]
    The weight of the evidence given by Mr. Kendall, Mr. Fielding and Mr. Bouy leads one to make the following findings:
  1. That prior to deciding to lease the vehicles, Mr. Groves was told by Mr. Semaro to nominate the lower figure of 50,000 kilometres. This was an inducement to him as it meant lower monthly instalments. It also meant that Brisbane BMW was more likely to make two sales. Mr. Semaro told Mr. Groves that the only penalty would be that he paid 8 cents for every kilometre that the each vehicle travelled. He could then return the vehicles at the end of the term and would not have to pay any residual. This arrangement appealed to Mr. Groves as he did not like paying out the residual. In fact he had spoken to Mr. Bouy on the very topic on this occasion.
  1. That each of the witnesses, Mr. Kendall, Mr. Fielding and Mr. Bouy had warned Mr. Groves that the 8 cents per kilometre applied only to the buffer figure of 5000 kilometres. All three had specifically warned Mr. Groves that if he exceeded the buffer then he would be in default of the lease or the lease would be ‘invalidated’ to use Mr. Kendall's description. I was particularly impressed by the evidence of Mr. Bouy who gave his evidence in a logical, methodical and forthright manner. He was prepared to make concessions when appropriate. He was candid in his explanation as to the absence of the Estimated Final Value figure in the Leasing Orders. He was acknowledged as a friend by Mr. Groves and no longer worked for Brisbane BMW.
  1. That none of the witnesses called by Brisbane BMW were able to explain to the plaintiffs the nature of the obligations in the event of default. The figure of the Estimated Final Value was left blank on the instructions of the financier. The plaintiffs were unaware of this figure when they signed the lease documents. They never saw the quotation details (Exhibit 5 documents 26 and 27).
  1. Mr. Groves was aware that the finance section of Brisbane BMW dealt with the leases. It is pleaded that he relied upon the statements of Mr. Semaro. The following passage is relied upon by the defence:

 “If you wanted to find out whether or not one lease product is more appropriate than another you are not going to ask Vince the car salesman, you are going to ask the finance manager, the on-site finance manager; is that right? - I didn't have to ask which was appropriate - they told me and, yes, that's correct, I would ask the finance manager.” (p. 130.27)

  1. [30]
    However, at p. 131.10:

“So you wouldn't - it's not reasonable for you to rely on Vince to give you information about finance products, about which he probably knows nothing at all? -- Vince shouldn't portray himself that he does.

So you were relying on Vince's confidence? -- I am. He sells them every day. I buy them once every two years.

He never sat down with you and rang up finance companies for you? -- He does it all the time. He picked up the telephone and asked to get a quote.

You are saying that Vince has organised financing for you? -- when he sat down and calculated out on his calculator an was giving me a price, that's a pretty good start.

...

He didn't introduce you to the finance manager and ask the finance manager to take you through it? -- No.”

  1. [31]
    Given the previous relationship between Mr. Semaro and Mr. Groves and the nature of the present transaction, I an satisfied that it was reasonable for Mr. Groves to rely on the advice of Mr. Semaro to reduce the kilometres to 50,000 in lieu of 100,000 and that the only penalty for going over 50,000 kilometres was 8 cents per kilometre. The fact that Mr. Semaro presented a distorted picture of the position is another matter. What happened thereafter may assume greater significance once the legal principles which apply are discussed.

Legal Principles

  1. [32]
    Holding Out

“Where a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of such other person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no actual authority”: Bowstead on Agency 14th Ed. p. 235; Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd. (1964) 2 QB 480.

The following passage appears in Halsbury's Laws of Australia at 15-60:

“...The principal cannot set up a private limitation upon the agent's actual authority as to reduce the ostensible authority, for, so for as their persons are concerned, the ostensible authority is the sole test of his or her liability....The holding out must be to the particular individual, rather than merely to persons in general who may not have acted on that appearance.”

  1. [33]
    The representations by Mr. Semaro, I find, were to the outsider permitted by Brisbane BMW: that he could contact the financier, obtain a quote and make statements about the Auto Plan Plus. If Brisbane BMW wished to avoid being bound by statements made by sales representatives, then there ought have been guide lines laid down and enforced to avoid the opportunity for making such representations. Mr. Fielding was strictly in sales yet provided detailed financial advice to the professions. Both Mr. Semaro and Brisbane BMW shared the common goal of making sales of vehicles. Brisbane BMW could have asked the financier not to provide any quotations to sales representatives but only to the financial manager or his nominee. Without such a direction, one can infer that Brisbane BMW permitted its sales representatives to seek such information and pass it on to prospective purchasers.
  1. [34]
    The plaintiffs' case is that although the financier did not grant to Brisbane BMW the actual authority to act on its behalf, it may, by words or conduct, have represented to the plaintiffs that Brisbane BMW and moreover its employees had authority to act as its agent. Ostensible authority can arise from a specific representation by words or conduct: Royal Globe Life Assurance Co Limited v. Covacevic (1979) 22 SASR 78. The financier provided Brisbane BMW with the necessary paperwork and instructions about same. The employees of Brisbane BMW were told not to fill in the figure for the Estimated Final Value. However, the evidence of Mr. Groves was clear on this point:

“. ..You are aware that Brisbane BMW was acting on your behalf to arrange finance; is that correct? -- Correct.“

  1. [35]
    One must remember that the Leasing Order was not signed by anyone at Brisbane BMW. In fact it was sent interstate for signature. It was consistent with the evidence of Mr. Groves that at the stage that the documents were signed by the plaintiffs, he believed that Brisbane BMW were acting on his behalf and that the financier had to accept same in order to finalise matters. The cases referred to by the plaintiffs' counsel can be distinguished. For example, in the “Raffaella” case the undertaking signed by Mr. Booth was done in the presence of the plaintiffs and with the stamp of his principle affixed. There was no way in which the plaintiffs could have known for certain whether or not Mr. Booth was authorised. In contrast, Brisbane BMW, I find, was preparing a finance application on behalf of the plaintiffs for presentation to the financier and later acceptance by it. I am satisfied that there has been no holding out by the financier in relation to Brisbane BMW: Northside Developments Pty. Ltd. v. Registrar General (1989-1990) 170 CLR 146 at 171. The Trade Agreement (Exhibit 5 pp. 1-23) has been of no relevance on this issue as there is no evidence that the plaintiffs were aware of it during their negotiations.
  1. [36]
    In light of that evidence, it is not open to the court to find in the present transaction that Brisbane BMW was acting as the agent of the financier. Mr. Groves was at the material time and still is an experienced businessman and believed Brisbane BMW was acting for him. There is no doubt that if it were established that the employees of Brisbane BMW were acting as agents of the financier, and their representations were misleading or deceptive and relied upon by the plaintiffs, then the plaintiffs would be entitled to avoid the said lease agreements: Derham and Anor. v. AMEV Life Assurance Company Ltd. (1981) 56 FLR 34.
  1. [37]
    Disclaimer Clause

The financier in paragraphs 4(b) and (c) of its Amended Defence relies on clause 4(f)(iii) of the Lease Agreement (Exhibit 4 document 5) which contains a disclaimer clause whereby the financier asserts that it will not be responsible for any representations made by any person who may have introduced this transaction to the plaintiffs and that the financier shall not be liable in respect of any statements regarding the plaintiffs' rights or position in respect of any law. The plaintiffs' counsel contends that s. 68 of the said Act prevents the first defendant from relying on the disclaimer clause. See also Petera Pty. Ltd. v. E.A.J. Pty. Ltd. (1985) ATPR 40-605 at 46,887. I accept that submission but in light of the other findings, the argument is an academic one.

  1. [38]
    Misleading and Deceptive Conduct

In Parkdale Custom Built Furniture Pty. Ltd. v Puxu Pty. Ltd. (1982) 149 CLR 191 at 198-199 the following passage appears which is accepted as a correct statement of the relevant test.:

“...the court must decide objectively whether the conduce is misleading or deceptive or likely to mislead or deceive... Section 52 does not expressly state what persons or class of persons should be considered as the possible victims for the purpose of deciding whether conduct is misleading or deceptive or likely to mislead or deceive. It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct. Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must, in my opinion, be regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will or (sic) course depend on all the circumstances.”

  1. [39]
    Mr. Groves is an astute person and not gullible. He had extensive commercial investments as at the time he entered into the lease arrangements. However, this was a new product. Even the employees of Brisbane BMW had no idea of the extent of the financial obligations for which the plaintiffs would have been liable in the event of a default. Mr. Semaro gave some advice about what to nominate by way of kilometres and touched upon the penalty in default. At that point in time, Brisbane BMW was liable for such statements which, I find, were misleading and deceptive. Mr. Groves had a high regard for the reputation of Brisbane BMW. He could not be said to have acted unreasonably at that point in relying on such advice. The misleading conduct of Brisbane BMW can be quite unrelated to fault or dishonesty: Commonwealth Bank of Australia v. Mehta and Anor. (1991) ATPR 41-103 at 52,610.
  1. [40]
    Reliance

In Gould v. Vaggelas (1985) 157 CLR 215 at 236, Wilson J. sets out clearly the appropriate principles:

“1. Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case.

  1. If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.
  1. The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true facts or not he did not rely on the representation.
  1. The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract.”
  1. [41]
    I find that the statements made by Mr. Semaro were misleading or deceptive within the meting of S. 52 of the said Act having regard to the statement of Gibbs CJ in Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd., op.cit. at 198-199. In any event, I am prepared to find that as this was a new concept as far as the male plaintiff was concerned, up until when he spoke to Mr. Semaro, he had not acted unreasonably in reliance on his representation. On his version, which I reject, he says he was informed subsequently by other employees of his limited liability of 8 cents per kilometre. However, before the plaintiffs entered into the lease arrangements, they were possessed of the true facts, namely, that if they exceeded the 5000 kilometres buffer, that they would be in default under the lease. Therefore, the causal link required for the recovery of damages under S. 82 of the said Act relating to any representations by Mr. Semaro was broken, as at the date the plaintiffs entered into the lease. I refer to the evidence of Messrs. Kendall, Fielding and Bouy all of whose evidence I accept subject to the previous discussion concerning the sales tax. There was no evidence from Mrs. Groves that she relied upon anyone other than her husband. In some cases, one can infer reliance from the fact that a party enters into the transaction after having been told certain things. This was not one of those cases. The following principle is more apposite in the present case:

“A case may perhaps be imagined where an applicant is so negligent in protecting his own interests that there will be a finding of fact that the representation complained of was not in the circumstances a real inducement to his entering into a contract. In such a case the element of causation between misrepresentation and damage will have been severed by the intervention of the negligence of the applicant”: Argy v. Blunts and Lane Cove Real Estate Pty. Ltd. (1990) 26 FCR 112 at 138.

The male plaintiff said that he did not bother to read all of the terms of agreements that he entered into just the essential terms. He was only interested in the monthly instalments, the kilometres he could travel, the 8 cents per kilometre penalty and the fact that there was no residual value. He was not interested in reading the conditions of the lease. Clause 12.1 provided the financier was entitled to retake possession of the paid vehicles if they were driven in excess of 5,000 kilometres more than the kilometre allowance specified in the Schedule.

  1. [42]
    Failure to inform or silence

The plaintiffs rely not only on representations of the servants or agents of Brisbane BMW, but also the failure to inform or silence as follows:

“13B. The said Fielding never informed the Plaintiffs, in circumstances where he ought to have done so because it would have been misleading not to do so, that the lease agreement referred to in paragraph 14(c) hereof contained terms and conditions:

  1. (a)
    that the First Defendant shall be entitled to repossession of the said motor vehicles if they were driven in excess of 5,000 kilometres more than the kilometre allowance specified in the Schedule, namely the 50,000 kms allowance referred to in paragraph 10(d) hereof;
  1. (a)
    that maintenance charges would no longer be free to the Plaintiffs after 50,000 kilometres;
  1. (b)
    that there would be excess charges over and above the 8 cents per kilometre incurred in circumstances whereby the said vehicles travelled beyond 50,000 kilometres;
  1. (c)
    that those excess charges comprise an entitlement on the part of the First Defendant to charge to the Plaintiffs a recoverable amount by reference to, inter alia, the sum of:
  1. (i)
    the entire rent less any maintenance rebate;
  1. (ii)
    the First Defendant's estimated final value.”

Paragraph (a) has been dealt with previously by direct evidence. The other paragraphs fall into the generic term “excess charges”. Once Mr. Groves had been told about the 8 cents applying only to the 5,000 kilometres, did it fall to him to make further inquiry or to rely solely on what he was told? That is, did the employees of Brisbane BMW owe a duty to inform him or was it misleading or deceptive conduct on their part?

  1. [43]
    Even though Mr. Groves was only 25 years of age at the time that the plaintiffs entered into the lease arrangements, he was experienced in financial matters. A perusal of the financial documents which accompanied the application for finance in the present case shows the extent of his dealings. Mr. Groves conceded that he was aware of the existence or likelihood of existence of other default provisions in other contracts but never asked for an explanation. In other words, he was prepared to enter into such transactions oblivious of the detail of such default provisions. The only question he asked of Mr. Fielding appears at p. 140.55-60 and 141.1:

“You went in and asked a specific question: “The penalty for my exceeding the ceiling is 8 cents per kilometre?” And that's it?-- That's it”.

Even on his own version his specific question was answered: Halton Pty. Ltd. v. Stewart Bros Drilling (1992) ATPR 41-158 at 40-153. It could be said that in the absence of a duty or obligation to give a full explanation, an honest answer to a specific query discharges that obligation. In fact the answer given by Mr. Fielding, I find, was more expansive and related the 8 cents to the 5,000 kilometres only. The allegation of fraud has not been pursued.

  1. [44]
    In Commonwealth Bank of Australia v. Mehta and Anor., op.cit. p. 52,612 the following principles summarised by Waddell AJA, which I respectfully adopt, are set out:

“Firstly, it is said that conduct, whether express or by silence, cannot speaking generally, be categorised as misleading or deceptive unless it conveys or contains, in all the circumstances, a misrepresentation....

Secondly, it is submitted that whether or not conduct amounts to a misrepresentation is to be decided by considering what is said and done against the background of all surrounding circumstances...

Thirdly, it is said that silence in certain circumstances, may contain or convey a misrepresentation. These circumstances will normally include an obligation of disclosure although that obligation need not be one imposed by the common law...”.

  1. [45]
    In the circumstances of the present case, it could not be said that any statement by the employees of Brisbane BMW would have left Mr. Groves with the impression that they had told him all that he needed to know. He gave no evidence to the effect that he believed he had been given a complete statement. He did not tell them that he had no intention of reading the lease documents. He did not ask them further specific questions which were left unanswered. Mr. Groves, I find, had the requisite knowledge of commercial dealings to know that if he defaulted there would have been other consequences. I find that once one accepts the version of events given by the employees of Brisbane BMW, then a reasonable person in the position of the male plaintiff would have made further inquiry: see Argy v. Blunts & Lane Cove Real Estate (1990) 26 FCR 112 at 137.
  1. [46]
    It cannot be concluded that the failure of the employees to provide further information as pleaded amounted to any breach of duty or was misleading or deceptive within the meaning of the said Act: Commonwealth Bank of Australia v. Mehta and Anor., op.cit. at 52, 614; Demagogue Pty. Ltd. v. Ramensky (1992) 39 FCR 31 at 38-39.
  1. [47]
    There may be particular relationships which raise a duty of disclosure. The types of relationships which arise at common law were discussed in Rhone-Poulenc v. UIM Chem Services (1986) 12 FCR 477 at 490 do not exist in the present case. Even if one assumes that there was such an obligation under s. 52 of the said Act, the conduct dealt with by that section is that which leads or is likely to lead a person or persons into error ibid. Mr. Bouy was told not to include the figure for Estimated Final Value in the Leasing Order. Mr. Groves was not interested in any such figure once he understood the nature of the present arrangement. On his version it would have been irrelevant. Therefore, it cannot be said that the failure to include same amounted to conduct which lead him into error. Similarly, if it was not envisaged by the parties that the employees of Brisbane BMW were required to provide a complete run down of all terms, then one could not readily find a breach of any duty either at common law or in equity.
  1. [48]
    Mr. Groves gave evidence that he does not read the standard terms of contracts: transcript p. 96. His failure to take reasonable care in the present case is obvious. This is another factor in determining whether any conduct on the part of the employees of Brisbane BMW is culpable that is whether it contributed in any way: Elders Trustee and Executor Co. Ltd. v. E.G. Reeves Pty. Ltd. (1987) 78 ALR 193 at 241:

“It is, of course, fundamental that s. 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests and also that it would be wrong to select particular words or acts which, although misleading in isolation, do not have that character when viewed in context.” Gummow J. referring to Parkdale Custom Furniture op. cit. p. 199.

  1. [49]
    It has been convenient to deal with the substance of the allegations, namely breach of s. 52 of the said Act and breach of duty of care. It is implicit in the declaratory relief sought by the plaintiffs that they have to show some such breach. Counsel for the financier has taken the point that declaratory relief is not appropriate. Without deciding the correctness of that submission, it has been more convenient to deal with the plaintiffs' allegations as part of the defence to the counter-claim. The practical consequences are similar. Apart from the allegations concerning the said Act, no breach of any relevant duty has been proved. For example, the plaintiffs have failed to establish that they were relying upon Brisbane BMW to provide the full detail of the transactions they were about to enter with the first defendant: Esanda Finance Corporation Limited v. Peat Marwick Hungerfords (1997) 188 CLR 241 at 252. There was no valid termination of the said leases by the plaintiffs once it is established that the plaintiffs were not entitled to claim maintenance services. Therefore, the declaratory relief sought in that respect also fails.
  1. [50]
    The defence pleaded pursuant to ss. 52 and 87 of the said Act fails.
  1. [51]
    Notice Claiming Indemnity

Notices dated 5th March, 1999 and 13th March, 2000, were given by the plaintiffs to Brisbane BMW. These were only relevant if the plaintiffs failed in their declaratory relief against Brisbane BMW and if the financier succeeded against it on its claim and there was a finding of deceptive or misleading conduct against Brisbane BMW and in respect of which the plaintiffs sought indemnity or contribution in relation to the financier's action. In light of the above findings, it is unnecessary to deal further with such notices save to dismiss same. In any event, it was argued that both of them were statute barred by, at the latest, in October, 1997. However, this was not pleaded and it is unnecessary to deal with the point.

  1. [52]
    Uncertainty

The plaintiffs' contention as pleaded in paragraphs 5 to 7 of the Reply and Answer is that as the calculation of the “Recoverable Amount” is dependent on the “Discounted Balance” figure which is in turn dependent on the “Estimated Final Value” then the lease agreement is uncertain as the figure for the latter is not included in the Leasing Order in relation to each vehicle. One should add reference to the evidence of Mr. Bouy who specifically stated that he was instructed by the financier to leave out the “Estimated Final Value”.

  1. [53]
    The approach of the courts is to try to uphold the commercial agreements entered into in circumstances of this nature: Upper Hunter County District Council v. Australian Chilling and Freezing Co. Ltd. (1967-1968) 118 CLR 429 at 437; Trawl Industries v. Effem Foods Pty Ltd. (1992) 27 NSWLR 326 at 333 and 343; Kendle v. Melsom (1998) 72 ALJR 560 at 572.
  1. [54]
    It is convenient to look at various cases in order to determine this question of uncertainty. In the Upper Hunter case referred to there was an agreement for the supply of bulk electricity by a supplier. By a clause of the agreement the supplier could vary its charges for electricity if their costs varied during the term of the agreement. It was held the clause was not void for uncertainty however wide might be the area of possible disagreement as to its denotation in a particular case. Clarke JA in the Trawl Industries whilst discussing the Upper Hunter case said:

“It was argued that the uncertainty did not relate to the meaning of the expression but only to the manner in which the cost should be determined and reliance was placed on Upper Hunter (op. cit.) However, my view is that where the court is concerned to inquire into the meaning of a clause pursuant to which a price is to be fixed in a manner in which the parties should be taken to have intended the determination of one element, namely cost, is relevantly a question of meaning. After all what the court is concerned to do is to determine how, according to the presumed intention of the parties, the price was to be fixed”.

  1. [55]
    In the present case the Standard Conditions of the lease (Exhibit 4 p. 5) defined “Estimated Final Value” as meaning the first defendant's “estimate of the value of the Goods at the date of termination of the Lease”. Therefore, notwithstanding that the plaintiffs may not have read this term prior to signing the lease, it was the clear intention of the parties by signing same to give effect to the definition. What meaning it had in practical terms is another question.
  1. [56]
    In Ferraro v. Smith BC9101945, Young J was concerned with a contract for the sale of land where there were various blanks left in the contract. His Honour quoted from the decision of Hope JA in Biotechnology Australia Pty Ltd (1988) 15 NSWLR 130 at 143:

“All these decisions show how far Courts are prepared to go in order to find that there is an enforceable contractual promise whether that is what the parties have intended. There are of course limitations. I have already referred to the case where the promisor has a discretion, not only as to what he shall do but also as to whether he shall do anything. Such a promise is illusory. Furthermore, it appears that the promise would not be enforceable if the manner of performance, including the amount of money to be paid or, if relevant the number of shares to be offered, is a matter entirely in the discretion of the promisor and no criteria by which the performance required of the promisor can be measured, or the minimum of that performance be measured, is expressed or can be found to be implied.”

In Covacich's case, a third party determined the area or value or the expenses could be determined objectively. In the present case, none of those approaches apply. In Ferraro, the parties had failed to complete a blank or strike out an inapplicable alternative in relation to vacant possession. There was a dispute about the point prior to the parties entering into the agreement. It was held that the contract was void for uncertainty. Mr. Groves did not want a lease which referred to a residual value or its equivalent.

  1. [57]
    It might be said by the financier that the quotations which were available prior to the signing of the lease documents contained the figures now relied upon to establish the “Estimated Final Value”. The plaintiffs never saw those figures. The Court of Appeal in Queensland has distinguished between the terms themselves and the evidence which was led to support them. Difficulty of interpretation is different from absence of meaning: D.F. Covacich and Another v F. Maguire BC 9202447 21st may, 1992 Appeal No. 99 of 1991. The interpretation in the present case relies upon a value being determined by one of the parties to the lease. Although the financier is not the promisor to pay, the effect of the “Estimated Final Value” is that it does determine what the plaintiffs are obligated to pay. The financier relies upon three cases to argue that the lease agreements are not uncertain even if the opinion of the lessor is determinative.
  1. [58]
    The first case is Re Perpetual Trustee Co and Riverfield Tiki (1997) 35 ATR 365. Under the terms of the lease, the lessee was liable to pay a “fair proportion” of certain outgoings relating to a property. There were no set guidelines or principles to be followed in determining what was a fair apportionment of land tax and that there was no universally correct basis for such an apportionment. In assessing the apportionment, the valuation proceeded by determining the ratio between the total area of the land and the area of the demised premises. Another approach was to compare the improved floor areas of a high rise building with those of the demised premises. In applying the former approach of an earlier assessment, the arbitrator was held to be in error as he failed to consider whether there were any changed circumstances such as would necessitate finding that some other percentage represented a fair apportionment. Williams J. commented at p. 374:

“Even if the appellant tribunal held that there was some error of reasoning in rejecting the contention that would not necessarily mean that the determination made as to what constituted a fair proportion was wrong. Indeed, the lessee may have been prepared to accept that determination for the year in question and was only interested in having the question as to the rejected basis left open for argument in future years.”

There seemed to exist in that case some objective criteria for a determination to be made. No evidence was called to establish how the “Estimated Final Value” was or how it could be determined in the present case.

  1. [59]
    The financier also relied upon a decision of Meehan v. Jones (1982) 149 CLR 571 for the proposition that the only caveat on the validity of an opinion when formed is that it be honestly formed. The High Court was concerned with a “subject to finance” clause which had been relied upon by the purchaser to avoid a contract. The clause read “the purchaser or his nominee receiving approval for finance on satisfactory terms and conditions ...”. The Court held that the clause was not void for uncertainty as long as the purchaser honestly regarded the terms and conditions on which finance was available as unsatisfactory, notwithstanding that the court may take a different view: Gibbs C.J. at 580; Wilson J. at 597. Two cases referred to and considered in Meehan v. Jones were Thorby v. Goldberg (1964) 112 CLR 597 and Placer Development Ltd. v. The Commonwealth (1969) 121 CLR 353. Thorby's case will be discussed later. In relation to Placer Development, Gibbs C.J. cited the passage in the judgment of Kitto J. p. 356:

“...wherever words which by themselves constitute a promise are accompanied by words showing that the promiser is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which action can be brought at all.”

  1. [60]
    Mason J. in Meehan v. Jones at 590 referred to pp. 359-361 of Placer Development op.cit. The latter page contains the statement of principle to be found in the joint judgment of Taylor and Owen JJ:

“Obviously, there is a complete absence from the clause, and from the Agreement as a whole, of any identifiable criteria by which it can be said the parties intended the amounts or rates to be determined; this is left solely to the discretion of the Commonwealth. This being so the clause amounts to no more than a promise to pay what, in all the circumstances, the Commonwealth in its discretion thinks fit and, as such, is wholly unenforceable.”

In Placer Development the relevant clause read as follows:

“If customs duty is paid upon the importation into Australia of the plywood, veneers, logs and other products of the Timber company, and is not remitted, the Commonwealth will pay to the Timber Company a subsidy upon the exportation of these products from the Territory for entry into Australia of an amount or at a rate determined by the Commonwealth from time to time, but the amount of subsidy paid shall not exceed the amount of customs duty paid and not remitted.”

  1. [61]
    The relevant clause in the present case apart from the meaning of the Estimated Final Value is clause 12.5:

“If BMW Finance having retaken possession of the goods pursuant to clause 12 disposes of the goods as soon as reasonably practicable at the best price BMW Finance can reasonably obtain at the time of disposal and the net proceeds of such disposal (after allowing for all costs and expenses incidental to return repossession and disposal including care storage and selling expenses) exceed the Estimated Final Value stated in the Schedule the amount of the excess shall be set off by BMW Finance against the Recoverable Amount provided always that the net proceeds so set off shall not exceed the Recoverable amount.”

It was in the discretion of the financier to determine the Estimated Final Value. That figure did not appear in the Schedule (Leasing Order). There seemed to be no identifiable criteria for determining that amount or value. It was specifically excluded prior to signing by the plaintiffs. It was never discussed by the parties. Just as the Commonwealth prohibited the amount of the subsidy from exceeding the amount of customs, so too did the financier prohibit the net proceeds from exceeding the Recoverable Amount. The quantum of the Estimated Final Value was a necessary part of the assessment of the Recoverable Amount payable by the plaintiffs.

  1. [62]
    The final case relied upon by the first defendant is Heitman v. Guardian Assurance Co. Ltd. & Anor. (1992) 7 ANZ Insurance Cases 61-107 at 77,487. Under a policy, the insurer had to form an opinion as to whether the insured was “totally and permanently disabled”. The court dealt with the requirements to prove the clause where the insurer failed to form the necessary opinion. The onus was on the insured to provide to the insurer the evidence necessary for the opinion to be formed. That case is distinguishable from the present case.
  1. [63]
    In the present case, there has been no challenge to the quantum of the claim by the financier on the grounds that it is capricious or excessive. There has been no argument addressed to the court about the relevance or otherwise of the cases relied upon by counsel for the financier. It seems that on the cases, the fact that one party to an agreement is required to form an opinion does not mean that the agreement is uncertain. There has been no attack on the honesty of the financier in nominating the figures for “Estimated Final Value” in relation to each vehicle.
  1. [64]
    The one case which requires some discussion is Biotechnology Australia op.cit. p 143. The statement “...it appears that the promise would not be enforceable if the manner of performance, including the amount of money to be paid...is a matter entirely in the discretion of the promisor, and no criteria by which the performance required of the promisor can be measured...”. The “Estimated Final Value” was a matter entirely in the discretion of the financier as lessor. The only difference in the present case is that it is the plaintiffs who promise to pay monies owing under the lease, not the financier who determines the amount payable. There was no criteria by which the value estimated could be measured. The financier was required to estimate the value of the vehicles at the date of termination of the lease, that is, four years from the date of the agreement. There is no formula or procedure nominated to allow one to measure the “honesty” or otherwise of the valuation. In fact the Estimated Final Value as estimated in the quotations (Exhibit 5 documents 26 and 27) are similar to the figures which appear as part of the claim in the action (Para. 14 and 15 of the defence and counter claim of the first defendant). Those figures are $41,503.50 and $51,912.00. When one looks at the sale price of the vehicles, the figures are $39,750.00 and $47,000.00 respectively. These figures are not disproportionate. In other words, the Estimated Final Value in each instance is slightly larger than the sale price which reflects the market value. However, the Estimated Final Value would be similar whether the lessee defaulted after one month or in the present case two years. It potentially could have been after say three years and eleven months. Therefore, it is difficult to infer that the Estimated Final Value reflects the market value whenever that may be.
  1. [65]
    In the case of Thorby v. Goldberg (1964) 112 CLR 597 at 605 Kitto J. states the following principle which has been accepted in other cases such as the Biotechnology case op. cit.:

“But an agreement is not void for uncertainty because it leaves one party or group of parties a latitude of choice as to the manner in which agreed stipulations shall be carried into effect, nor does it for that reason fall short of being a concluded contract.”

This is not a case where if a default occurs, the lessor is to have a discretion or option as to whether he will carry out that which purports to be the promise. In the present case, a figure was calculated at or about the time that the lease documents were entered into. The dates were 5th March, 1992 and 10th March, 1992. The plaintiffs were not told those figures but the monthly instalment was calculated with those figures in mind as part of the quotation (Exhibit 4 document 8B p. 2 para. 3) The figure was left out of the Leasing Orders at the direction of the financier according to Mr. Bouy. There is no evidence upon which one could rely to determine how the figure is measured or whether it varies if the lease proceeds past say two years. In fact, the sale price of the vehicle is set off against the discounted outstanding instalments plus other charges plus the Estimated Final Value. The latter adds to the liability of the plaintiffs. Therefore, the larger that amount the greater the liability of the plaintiffs.

  1. [66]
    The financier has an unfettered choice as to what figure to insert by way of an Estimated Final Value. There are no parameters in the present case. The manner in which it is determined seems to be at the discretion of the financier. No evidence was called by the financier to explain how the figure was arrived at. It clearly was not something which the parties evinced a common intention to include a specific amount or for it to be determined in an objective way. It was to be an estimate by the financier of the value of the vehicles at the date of termination of the Lease. In accordance with the authorities and the facts of this case, I find that the Leasing Agreements are illusory or uncertain.
  1. [67]
    The consequences of omitting the Estimated Final Value figure from the Leasing Orders could have been avoided if the plaintiffs had been notified of same by counter-offer and the lease payments followed: Custom Credit Corp Ltd v. Gray [1991] 1 VR 540. In that case, an offer made by a borrower to a credit provider lacked an essential element, namely, the schedule of payments, and its purported acceptance did not amount to a contract. However, the credit provider then made a counter-offer by forwarding the payment books which included the schedule. The borrower accepted by making the payments and taking delivery of the loan.
  1. [68]
    Maintenance Obligations

Pursuant to clause 5.1 of the Lease Agreement, the financier had an obligation to bear the cost of maintenance services during the leasing term. On or about 29th November, 1994 and 5th December, 1994, Brisbane BMW carried out routine service of the said motor vehicles. The plaintiffs allege that the financier is in breach of its obligations under the lease agreements as it failed to pay the maintenance costs amounting to $2,205.54. Apart from the uncertainty point, given the findings that the financier was entitled to terminate the said lease agreements, it follows that it is not liable to pay for any maintenance services after the date of termination. The relevant letter terminating the said agreements was dated 26th October, 1994 (Exhibit 4 document 8H). The loss falls where it lies. The plaintiffs got the benefit of the use of the vehicles.

  1. [69]
    Rectification

The financier seeks rectification of the lease agreements in the event they are held to be uncertain. Counsel for the financier submits that the court ought to be satisfied that the common intention of the parties to the lease agreements was that the Estimated Final Value was to be determined by the financier alone. That is, I find, in accord with clause 1,1 of the lease agreements. However, the value was not omitted by mistake. Rectification will be reused where it has not been shown that the parties intended the written contract to give effect to the whole of the antecedent agreement: Maralinga Pty. Limited v. Major Enterprises Pty. Limited. (1973) 128 CLR 336 at 349-350. In the latter case, Mason J. said that a court cannot be satisfied that the instrument does not reflect the true agreement of the parties unless the writing was intended to record the earlier agreement and by the mistake of the parties it fails to do so. The evidence of Mr. Bouy was that he had been instructed by the financier to leave out the figure for Estimated Final Value in the Leasing Orders. “Schedule” as defined in the lease agreement means an order for the leasing of goods signed by an authorised servant or agent of the lessee in the form or to the effect of Schedule A. There is no schedule to the lease but there are the Leasing Orders previously referred to (Exhibit 4 documents 3 and 4. Therefore, it cannot be said that the figure was omitted by mistake. In Pukallus v. Cameron (1982) 180 CLR 447 at 456, Brennan J. put it in these terms:

“Although the remedy of rectification is no longer held to depend upon proof of an antecedent concluded contract, it is necessary to show a concurrent intention of the parties, existing at the time when the written contract is executed, as to a term which would have been embodied in the contract if the parties had not made a mistake in expressing their intention.”

  1. [70]
    The rectification sought requires the insertion in Exhibit 4 documents 3 and 4 respectively the figures $41,503.50 and $51,912.00. The alternative relief sought namely the deletion of the words “stated in the Schedule” in clause 12.5 of the Lease Agreement is not relied upon by the financier as part of its counter-claim. However, to grant such relief would be similar to rectification as required in the first instance. The lease agreements are either certain or rectification to insert figures is warranted. In any event, the deletion of the words “stated in the Schedule” is inconsistent with the approach taken in the letter of the financier to the plaintiffs' solicitors and dated 17th June, 1994 (Exhibit 4 document 8B p. 2 para. 3).
  1. [71]
    Mr. Groves gave evidence that there was no residual value. He was not asked about the concept of Estimated Final Value. If one party only is mistaken about the lack of correspondence between his intention and the words in a document, he is, without more, not entitled to relief: Slee v. Warke (1949) 86 CLR 271. Where one party “lies low” but has realised the mistake in the agreement, then that party would be precluded from resisting rectification: Majestic Homes Pty Ltd. v. Wise (1978) Qd. R. 225 at 231. Stable S.P.J. who wrote the leading judgment in that case refereed to the decision of Craddock Bros. v. Hunt (1923) 2 Ch 136 at 151 where Lord Sterndale expressed the view that rectification can be granted of a written agreement on parol evidence of mutual mistake, although that agreement is complete in itself and has been carried out by a more formal document based on it.
  1. [72]
    If rectification were necessary in this case, I would refuse such relief based upon the conduct of the financier who specifically told Mr. Bouy to leave the figure out of the Leasing Orders which are in fact defined as part of the schedule to the Lease Agreements: Thomas Bates & Son Ltd. v. Wyndham's (Lingerie) Ltd. (1981) 1 WLR 505 at 514-516 cited in Taylor v. Johnson (1982-1983) 151 CLR 422 at 431. Where there is a question whether an inference should be drawn against a party from evidence already before the Court, the failure of the party to call a witness whose evidence could be relevant to the issue may be taken into account in deciding whether the inference should be drawn: Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226, per Kneipp J at 233.
  1. [73]
    Costs

It was submitted by the plaintiffs' counsel that the bulk of the first day of hearing was devoted to applications by the defendants and so any costs of that day should be paid by the defendants whatever the outcome of the case. The applications by the defendants were part of the ordinary skirmish before a trial. In fact it revealed weaknesses in the plaintiffs' pleadings which were required to be re-pleaded. Alternatively, the plaintiffs seek a costs on a full indemnity basis pursuant to Rule 794(1) and Rule 5(4). For the reasons given and which is obvious from the transcript, the time taken by all parties allowed the issues to be defined and the pleading put in order for what turned out to be a complex case. The application by the plaintiffs is refused.

  1. [74]
    Application for Further Discover

In what could only be described as an unusual application, counsel for the plaintiffs made application in the course of the addresses for further discovery pursuant to Rule 223(4)(b) of the Uniform Rules in the event that the plaintiffs lost the action. The basis of this application was that there had been non-disclosure of “many documents, comprising correspondence and brochures etc. that have passed between the First and Second Defendants, relative to the product Auto Plan Plus (transcript p. 177.52; p. 199.5; p 216.7; p 196.1)”.

  1. [75]
    It was not suggested to the plaintiffs that they received these Brochures prior to signing the documents. Rather it appears that the documents would be relevant to the plaintiffs' case to show what information was provided to Brisbane BMW and moreover its servant or agents. It was conceded by those witnesses that they knew little about the default procedures or the consequences for the plaintiffs. Mr. Groves was not interested in the default aspects as he believed that if one paid the necessary instalments then there would be no problems. Alternatively, he realised that if he failed to make mortgage payments, for example, they “take the house”.
  1. [76]
    The application sought discovery “of all correspondence and promotional material that passed between the First Defendant and the Second Defendant on or prior to March 1992.” There were brochures produced in the course of trial (Exhibit 4 document 2 and Exhibit 13). The witnesses called for the defence conceded that they did not refer to the 5000 kilometre buffer or the consequences of going over that buffer. It is difficult to know what other information could assist the plaintiffs. It became a question of credit as to whether the employees of Brisbane BMW gave the plaintiffs accurate information. I have held that they did. I refuse the application for further discovery.

Orders

  1. The application for declaratory relief in the Further Amended Statement of Claim is refused and the claim for damages against both defendants are dismissed with costs to be assessed.
  1. The application by the plaintiffs for further discovery dated 16th March, 2000, is refused.
  1. The counter-claim by the first defendant is dismissed.
  1. It is ordered that the first defendant do pay the plaintiffs' costs of and incidental to the counter-claim to be assessed.
  1. It is ordered that the Notice claiming indemnity by the plaintiffs against the second defendants be dismissed with costs to be assessed.
  1. Liberty to apply.
Close

Editorial Notes

  • Published Case Name:

    Groves and Anor. v BMW Australia Finance Pty. Ltd. and Anor.

  • Shortened Case Name:

    Groves v BMW Australia Finance Pty Ltd

  • MNC:

    [2000] QDC 22

  • Court:

    QDC

  • Judge(s):

    Forde DCJ

  • Date:

    31 Mar 2000

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112
3 citations
Jump To
Cite 1 - (1990) 26 FCR 112
Cite 2 - (1990) 26 FCR 112
Cite 3 - (1990) 26 FCR 112
Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130
3 citations
Jump To
Cite 1 - (1988) 15 NSWLR 130
Cite 2 - (1988) 15 NSWLR 130
Cite 3 - (1988) 15 NSWLR 130
Commonwealth Bank of Australia v Mehta and Anor. (1991) ATPR 4 1-103
4 citations
Jump To
Cite 1 - (1991) ATPR 4 1-103
Cite 2 - (1991) ATPR 4 1-103
Cite 3 - (1991) ATPR 4 1-103
Cite 4 - (1991) ATPR 4 1-103
Craddock Bros v Hunt (1923) 2 Ch 136
2 citations
Jump To
Cite 1 - (1923) 2 Ch 136
Cite 2 - (1923) 2 Ch 136
Custom Credit Corp Ltd v Gray [1991] 1 VR 540
2 citations
Jump To
Cite 1 - [1991] 1 VR 540
Cite 2 - [1991] 1 VR 540
D.F. Covacich and Another v F. Maguire (1997) 35 ATR 365
2 citations
Jump To
Cite 1 - (1997) 35 ATR 365
Cite 2 - (1997) 35 ATR 365
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
2 citations
Jump To
Cite 1 - (1992) 39 FCR 31
Cite 2 - (1992) 39 FCR 31
Derham v AMEV Life Assurance Company Ltd. (1981) 56 FLR 34
2 citations
Jump To
Cite 1 - (1981) 56 FLR 34
Cite 2 - (1981) 56 FLR 34
Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193
2 citations
Jump To
Cite 1 - (1987) 78 ALR 193
Cite 2 - (1987) 78 ALR 193
Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241
2 citations
Jump To
Cite 1 - (1997) 188 CLR 241
Cite 2 - (1997) 188 CLR 241
Freeman & Lockyer v Buckhurst Park Properties (1964) 2 QB 480
2 citations
Jump To
Cite 1 - (1964) 2 QB 480
Cite 2 - (1964) 2 QB 480
Gould v Vaggelas (1985) 157 CLR 215
2 citations
Jump To
Cite 1 - (1985) 157 CLR 215
Cite 2 - (1985) 157 CLR 215
Halton Pty. Ltd. v Stewart Bros Drilling (1992) ATPR 4 1-158
2 citations
Jump To
Cite 1 - (1992) ATPR 4 1-158
Cite 2 - (1992) ATPR 4 1-158
Heitman v Guardian Assurance Co Ltd (1992) 7 ANZ Insurance Cases 61 — 107
2 citations
Jump To
Cite 1 - (1992) 7 ANZ Insurance Cases 61 — 107
Cite 2 - (1992) 7 ANZ Insurance Cases 61 — 107
Kendle v Melsom (1998) 72 ALJR 560
2 citations
Jump To
Cite 1 - (1998) 72 ALJR 560
Cite 2 - (1998) 72 ALJR 560
Majestic Homes Pty Ltd v Wise [1978] Qd R 225
2 citations
Jump To
Cite 1 - [1978] Qd R 225
Cite 2 - [1978] Qd R 225
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336
2 citations
Jump To
Cite 1 - (1973) 128 CLR 336
Cite 2 - (1973) 128 CLR 336
Meehan v Jones (1982) 149 CLR 571
3 citations
Jump To
Cite 1 - (1982) 149 CLR 571
Cite 2 - (1982) 149 CLR 571
Cite 3 - (1982) 149 CLR 571
Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146
1 citation
Jump To
Cite 1 - (1990) 170 CLR 146
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
4 citations
Jump To
Cite 1 - (1982) 149 CLR 191
Cite 2 - (1982) 149 CLR 191
Cite 3 - (1982) 149 CLR 191
Cite 4 - (1982) 149 CLR 191
Petera Pty Ltd v EAJ Pty Ltd (1985) ATPR 40-605
2 citations
Jump To
Cite 1 - (1985) ATPR 40-605
Cite 2 - (1985) ATPR 40-605
Placer Developments Ltd v The Commonwealth (1969) 121 CLR 353
2 citations
Jump To
Cite 1 - (1969) 121 CLR 353
Cite 2 - (1969) 121 CLR 353
Pukallus v Cameron (1982) 180 CLR 447
2 citations
Jump To
Cite 1 - (1982) 180 CLR 447
Cite 2 - (1982) 180 CLR 447
Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477
2 citations
Jump To
Cite 1 - (1986) 12 FCR 477
Cite 2 - (1986) 12 FCR 477
Royal Globe Life Assurance Co Limited v Covacevic (1979) 22 SASR 78
2 citations
Jump To
Cite 1 - (1979) 22 SASR 78
Cite 2 - (1979) 22 SASR 78
Slee v Warke (1949) 86 CLR 271
2 citations
Jump To
Cite 1 - (1949) 86 CLR 271
Cite 2 - (1949) 86 CLR 271
Taylor v Johnson (1983) 151 CLR 422
2 citations
Jump To
Cite 1 - (1983) 151 CLR 422
Cite 2 - (1983) 151 CLR 422
Thomas Bates & Son Ltd v Wyndhams's (Lingerie) Ltd [1981] 1 WLR 505
2 citations
Jump To
Cite 1 - [1981] 1 WLR 505
Cite 2 - [1981] 1 WLR 505
Thorby v Goldberg (1964) 112 CLR 597
3 citations
Jump To
Cite 1 - (1964) 112 CLR 597
Cite 2 - (1964) 112 CLR 597
Cite 3 - (1964) 112 CLR 597
Trawl Industries of Australia Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326
2 citations
Jump To
Cite 1 - (1992) 27 NSWLR 326
Cite 2 - (1992) 27 NSWLR 326
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429
2 citations
Jump To
Cite 1 - (1968) 118 CLR 429
Cite 2 - (1968) 118 CLR 429
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
2 citations
Jump To
Cite 1 - (1992) 175 CLR 514
Cite 2 - (1992) 175 CLR 514
Winks v W.H. Heck & Sons Pty Ltd[1986] 1 Qd R 226; [1985] QSCFC 119
2 citations
Jump To
Cite 1 - [1986] 1 Qd R 226
Cite 2 - [1986] 1 Qd R 226

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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