Metal Manufactures Ltd v Metalcorp Recyclers Pty Ltd [2004] HCATrans 222 (18 June 2004)

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Metal Manufactures Ltd v Metalcorp Recyclers Pty Ltd [2004] HCATrans 222 (18 June 2004)

Last Updated: 29 June 2004

[2004] HCATrans 222

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S476 of 2003

B e t w e e n -

METAL MANUFACTURES LIMITED

Applicant

and

METALCORP RECYCLERS PTY LIMITED

Respondent

Application for special leave to appeal

GUMMOW J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 18 JUNE 2004, AT 11.36 AM

Copyright in the High Court of Australia

MR D.E. GRIEVE, QC: May it please your Honours, I appear with MR R.D. MARSHALL for the applicant. (instructed by Sacks Australian International Lawyers)

MR M. WALTON, SC: May it please the Court, I appear with MR G.A. SIRTES for the respondent. (instructed by Bartier Perry)

GUMMOW J: Yes, Mr Grieve.

MR GRIEVE: This is one of the comparatively few cases which have been successfully maintained under section 52 on the footing of misrepresentation by silence. We accept that liability in such cases rests on a duty not to mislead or deceive and not upon any duty to speak, however, the question which arises in this application is, in our submission - - -

GUMMOW J: Justice Handley focused on it, did he not? Paragraph 16 of his reasons, page 34?

MR GRIEVE: Yes, he did. We submit the question which arises in this application is: in what circumstances and upon what principle does the duty not to mislead or deceive, being a duty imposed by statute, negate a contractual duty borne by the party to whom the alleged misrepresentation is made?

GUMMOW J: This was a very fact-specific case. Much turned upon the finding as to what his Honour said was “a substantial degree of mutual trust”.

MR GRIEVE: In our respectful submission, that matter was of - - -

GUMMOW J: Flowing out of a particular business relationship.

MR GRIEVE: In our submission, that matter was of incidental, if any, significance. The facts of this matter reflect a commonplace commercial transaction or series of transactions. There is nothing particularly unusual about them. There was no real dispute as to what took place. It is not a matter involving any findings of credibility or a matter depending upon the drawing of inferences.

In our respectful submission, the Court of Appeal simply declared the law to a commonplace set of facts with a rather remarkable consequence. The consequence of the Court of Appeal’s application of section 52 is that that section has an overarching effect. First, says the Court of Appeal, by its conduct in contravention of the section, the applicant forfeited its contractual rights against the respondent; and, secondly, by such conduct the applicant became liable to indemnify the respondent for any loss which the latter allegedly suffered in consequence of a breach of contract by its supplier. Now, that, with respect, is a remarkable outcome.

GUMMOW J: Well, it might be, but the facts are remarkable too.

MR GRIEVE: No, they were not, with respect - - -

GUMMOW J: Paragraphs 37, 38 and 39, particularly paragraph 39, I think.

MR GRIEVE: Even if one interprets the critical conversation as Mr Justice Handley described it, as an acceptance by the applicant of delivery of the stolen goods, that would not, of itself, negate the applicant’s rights to recover the price, had it paid the price to the respondent. What the Court of Appeal has done is to hold the applicant, for something which its officer did not say, liable to indemnify the respondent in respect of a course of conduct which it, the respondent, took without any obligation in that regard. Our friends have contended in paragraph 19 of their summary that the alleged deception:

left the respondent ignorant of the risk –

the risk being the payment to its supplier –

and without justification for withholding payment –

In our submission, that contention is untenable. The supplier, CJ Trade, simply had no title to the goods, and therefore no right to payment whatever.

It is that analysis of the parties’ contractual exposure, or lack of it, which, in our submission, points up the fundamental error of principle on the part of the Court of Appeal. What the Court of Appeal has held is that the allegedly misleading and deceptive conduct has negated the seller’s warranty of title. It has held that it has negated the buyer’s right to set up the seller’s lack of title under section 54 of the Sale of Goods Act, and it has effectively held, in our submission, where a buyer omits to warn a seller of the possibility that the seller is in breach of contract, the buyer automatically forfeits all contractual rights.

GUMMOW J: What do you say in response to what is put against you on page 66, paragraph 14?

MR GRIEVE: We submit that, as we said at the outset, the critical question is, did the applicant’s failure to speak mislead the respondent – as the Court of Appeal held – into understanding that notwithstanding that there may have been no title in the goods, the applicant would, come what may, pay the price? Now, that cannot be so. One cannot rationally attribute to the applicant’s representative an implied promise to pay come what may. That supposedly is what is said to have been the deception, that the respondent, as a consequence of the sales, went ahead and paid their supplier in the certain belief that whether they had any right to payment or not, the applicant would pay them. That just does not withstand scrutiny, in our submission.

There is a further and no less significant question to be resolved, namely, in the light of the decisions in Henville and I & L Securities, what, if any, significance is to be attributed to the respondent’s conduct in acting as it did in the circumstances of the matter? The applicant was entitled to assume that a similar credit arrangement obtained as between the respondent and its supplier as did obtain between the applicant and the respondent. The applicant was scarcely entitled to expect that the respondent would act as it did in making an immediate payment to its supplier, on that very day, without verifying the identity of the supposed representative of the supplier who called for payment, the bona fides of that person, and, more importantly, without satisfying itself that its supplier had in fact had title to the goods.

CALLINAN J: Mr Grieve, I must say one of the specific facts that stands out and impresses me in this case is the fact that we are not talking about any ordinary defect in title, we are talking about stolen goods.

MR GRIEVE: That is right.

CALLINAN J: No title at all.

MR GRIEVE: That is right.

CALLINAN J: I do not see that as being in your favour, I must say, rather the contrary. There is almost an obligation upon anybody to disclose knowledge, particularly if it is relevant to a transaction, of a preceding criminal act.

MR GRIEVE: But in this particular instance our client had no knowledge at all.

CALLINAN J: No. A suspicion, though.

MR GRIEVE: All it had was a suspicion or belief.

CALLINAN J: A very strong suspicion.

MR GRIEVE: Talk in the trade, so to speak. The respondent, on the other hand, had been told by its supplier that there was some shortage of delivery due to some theft as against its supplier. That did not seemingly have any bearing upon its preparedness to make immediate payment to a positive stranger, without making any inquiry. The case against our client elevates its silence in a way which, we submit, leads to an entirely capricious result.

The effect of the decisions in Henville and I & L of denying to a representor any entitlement to offset a representee’s contributory negligence puts into focus the issue of causation, as any section 52 case must do. As an example, the consumer of goods – for example, a power saw – could sue the supplier of such machinery, alleging a failure to warn and a consequent liability under the general law of negligence, concurrently with misleading and deceptive conduct constituting a failure to warn. In that circumstance, the supplier would be entitled to defend the matter on the basis of the plaintiff’s contributory negligence so far as his negligence count was concerned, assuming that the plaintiff in question had employed the power saw in an entirely foolish way. But unless the plaintiff’s folly broke the chain of causation, no such defence would be available to the statutory count.

We submit that that example illustrates the necessity in a case such as this to examine closely whether or not it was the alleged misleading or deceptive conduct which was essentially causative of the plaintiff’s loss. In that sense, we submit that no such finding could safely be made in this case. May it please your Honours.

GUMMOW J: This case turned very much upon its particular facts and circumstances. We are not satisfied that there are sufficient prospects of success in disturbing the conclusions reached by the New South Wales Court of Appeal to warrant a grant of special leave. Special leave, therefore, is refused with costs.

AT 11.49 AM THE MATTER WAS CONCLUDED