Unison Finance Group Pty Ltd v Electric Life Pty Limited

1. [1]

   This is an appeal as of right pursuant to s 39 of the Local Court Act 2007 (NSW) from a judgment of the Local Court to the effect that the defendant (plaintiff below) was entitled to a refund of money paid by what was claimed to be a mistake following the expiry of a rental agreement. The plaintiff (defendant below) submits that the learned Magistrate erred in construing the rental agreement as having expired after its first (automatic) renewal, contending that it was in operation when the payments were made, so that the payments were made pursuant to a continuing liability to do so. It is submitted that other errors were also made but, having regard to my view about the proper construction of the rental agreement, it is not necessary to consider them.

Background

1. [2]

   On 10 November 1998 the parties entered into a “rental agreement” of electronic equipment comprising four computers, three scanners a digital camera with a battery charger and digital key system and accessories. The “initial term” was specified in a schedule as 48 months from the commencement date of 10 November 1998. Rent was payable quarterly and made by direct debit from the defendant’s bank account. After the initial term ended on 10 November 2002 the agreement automatically renewed for an additional period of 12 months as provided in the agreement. Whether the renewal clause provided only for a single renewal period after the initial term and thus the term expired on 10 November 2003, is the focus of the construction ground to which I have already referred.

2. [3]

   As it happened, after 10 November 2003, quarterly payments continued to be deducted from the plaintiff’s bank account until 20 November 2012, when the last instalment was paid. The authority to make the deductions was executed at the outset and remained on foot throughout. The defendant must be taken to have been aware, through its bookkeeper in charge of its accounts, that the payments were being made. The amount “overpaid” was almost $55,000.

3. [4]

   The evidence of Mr Cimino, a director of the defendant, was that he thought the arrangement was one of hire-purchase, in which the loan entered into to obtain the equipment was fully financed by a loan from the plaintiff, and was repayable by the rental payments in four years at which time the defendant would own the equipment. The written agreement in no way reflected such an arrangement and Mr Cimino’s evidence about this is irrelevant except that it perhaps explains why, at the end of four years, he took no steps to terminate it. Mrs Cimino was employed by the defendant who, whilst the book keeper was on holiday in August 2012, discovered that quarterly payments were still being made and arranged (with the plaintiff’s agreement) to stop them. The defendant wrote to the plaintiff on 13 December 2012 claiming that the defendant “should have terminated this agreement after the four year term”. The plaintiff responded, “[w]e confirm termination of the agreement as per your instructions” namely from that date. (It is not suggested that this amounted to an acceptance by the plaintiff that the agreement subsisted for only four years.)

4. [5]

   Mr Cimino said that, in about 2000, the camera was replaced and disposed of as it was not functioning properly at the time and was of no value. He said that, in 2001, the computers and scanner were replaced as they “needed updating”. The telephone system was replaced in 2003 but Mr Cimino could not recall what was done with it and despite a search, had been unable to locate it. Except for the telephone system, he said the equipment “was of no value and it was all disposed of in the recycle bin.” Mr Cimino was not required for cross examination and, accordingly, his view of the value of the items when he disposed of them must be accepted.

5. [6]

   On behalf of the plaintiff, Mr Watson, its Managing Director, denied that the plaintiff lent money to the defendant but, rather, purchased the equipment which it then rented to the defendant on the terms and conditions of the rental agreement.

6. [7]

   The action proceeded in the Local Court by way of Statement of Claim and Defence. On the first day of the hearing the plaintiff applied to amend its defence to raise the defence under the Limitation Act that the defendant was precluded from seeking restitution of at least some of the money it had paid. No Notice of Motion had been filed seeking such an amendment and the plaintiff’s solicitor sought leave to file the Amended Defence. The learned Magistrate rejected the application for leave, in effect, on the basis that the action had been on foot for some time and it was too late to raise a fresh defence on the hearing. I do not need to determine whether this decision was correct and decline to do so. There was no cross examination of the deponents.

The meaning of clause 8

1. [8]

   The defendant points to the opening phrase in this clause, namely “immediately upon the expiration of the Initial Term” and submitted that this permitted only one occasion of renewal because there could only be one “Initial Term”. It was then submitted that the repeated references to the “Initial Term” made it clear that this was the correct interpretation of the renewal clause. Thus, for example, there could only be one occasion which answered the description “180 days prior to the date on which the Initial Term expires”. The renewal envisaged by sub-cl (a) could not, therefore, include sub-cl (a) itself which is necessarily confined to what could occur following the expiration of the (first and only) “Initial Term”.

2. [9]

   On the other hand, the plaintiff submits that the concluding words of sub-cl 8 (b) – “upon the same terms and conditions which appear in this Agreement” – meant that all the terms of the original contract survived a renewal and were incorporated in the renewed contract, including clause 8(a). Accordingly, the agreement would automatically renew until terminated in accordance with the clause.

3. [10]

   It seems to me that the plaintiff’s submission must be accepted. Sub-clause 8(b) describes the character of the renewed agreement, specifying its period (the lesser of the “Initial Term” or twelve months) and its content (the same terms and conditions as appear in this agreement). The schedule defining the “Initial Term” remained a part of the contract, thus continuing its application in the new clause 8 in the same way as it did in the original agreement. It follows, therefore, that since the defendant did not give notice within par 8(a)(i) or return the equipment under par 8(a)(ii), the agreement was continuously renewed until 14 December 2012 when it was terminated by the agreement of the parties (the plaintiff not seeking a return of the equipment).

4. [11]

   Given my conclusion about the meaning of clause 8 of the agreement, it is not necessary to consider whether, if the agreement had expired, clause 12 of the agreement applied to require the defendant to continue to pay rent despite his failure or (because of the disposal of the items by Mr Cimino) destruction of the items. I note, however, that the contract makes specific provision in the event of any loss or damage to the equipment. Clearly if, at the time of loss or destruction, the equipment was worthless the owner suffered no loss and there is no basis for any payment to it except, it may be, in respect of outstanding rent. As it seems to me, the mere fact that, in the event of destruction, the goods could not be returned would not keep the agreement on foot if the renter had given a notice in writing within the meaning of clause 8(a)(i). However, it is not necessary to further consider this issue since no such notice was ever given.

5. [12]

   Although most right thinking people would think that the plaintiff has been unjustly enriched at the expense of the defendant and has taken unfair advantage of the defendant’s mistake, it is legally entitled to win this appeal. Perhaps, its legal rights having been vindicated, it could consider whether it should keep the money in its pocket.

Orders

1. [13]

   I make the following orders:

   1. (1)

      the appeal against the judgment of the Local Court of 17 April 2014 is allowed;

   2. (2)

      in lieu thereof judgment be entered in favour of the plaintiff; and

   3. (3)

      the defendant to pay the plaintiff’s costs of the proceedings in the Local Court and in this Court.