Stories from the Law Desk: Chapter 7 – Lose a lot by trying to save a little

Posted: 2 February 2023

We recently had one of our clients come to the firm regarding the purchase of a boat which had not gone in the way he had originally envisaged.  This is the story.

The Background

Our client was made aware 2 years ago of a luxury boat that was, “going cheap” and was in far north WA. It is a popular make, built-in 1978. The boat was moored but not seaworthy.

It was agreed in a handshake contract between the buyer (our client) and seller that the buyer would put down a cash deposit and pay the remainder of the purchase price of $200,000 over the next 6 months.  The sale was conditional upon the seller bringing the boat to a seaworthy condition by the time of the final settlement of the purchase price.

A cash deposit of $10,000 was paid by our client at the time of entering into the verbal agreement. Over the next 6 months, further payments were made totalling approximately $100,000. We say approximately because in subsequent correspondence from our client to the seller three different amounts were mentioned as the total of the payments made. No records exist of the payments being made to the seller and the seller had not confirmed in writing receipt of the funds.

The buyer made no attempt to either check who was the legal owner of the boat, or whether there were any security interests registered on the craft. (via the personal property security register PPSR).

The seller made no real progress in restoring the craft to a seaworthy condition.  It was slipped and the barnacles scraped off, but it remains on the slip and no further work has been carried out. After over 18 months, our client became frustrated at the lack of progress and after several unheeded demands for further work to be undertaken, he now wants his money back.  Our firm is tasked with trying to recover the $100,000 paid in cash.

Our Involvement

The first step was to check who owned the boat. From the registration details, the purported seller was not the owner. The registration evidences the owner as being a corporate entity that was deregistered by ASIC several years ago (Company A). 

The original invoice is in the name of a company that is also deregistered by ASIC (Company B).  Company A and Company B are unrelated.  

The invoice refers to a third company (Company C), which was represented on the invoice as the entity which would carry out the work to make the vessel seaworthy. We checked Company C. It was still registered by ASIC, but the sole shareholder was a corporation (Company D) which was also deregistered.

A PPSR search yielded that there was not a registered security interest on the craft.  

In summary:

  1. No written contract;
  2. Cash payments were made with no confirmation received from the seller as to him receiving the cash;
  3. It is unclear exactly how much was paid by the purchaser;
  4. The boat was not owned by the seller and the legally registered owner was a deregistered company;
  5. The purported seller was also a deregistered company;
  6. There was no contract between the purchaser and the repair facility, despite it being mentioned on the seller’s invoice;
  7. Even if it could be established that the repair facility was going to perform the necessary works, the repair facility entity was effectively defunct as it had no shareholder; and
  8. The person representing himself as the seller was not related to the corporate entity mentioned on the invoice (i.e., not a director nor a shareholder);

The issue of who owns the craft can be initially determined by referring to section 601AD (2) of the Corporations Act which basically says that the assets of a deregistered company vest in ASIC (the Commonwealth). Prima facie the boat is therefore owned by the government.

If it could have been established that there had been a sale transaction from Company A to Company B, then there may have been an argument that the boat was owned by Company B even though a change of owner on the boat’s registration wasn’t affected. That argument however gets us nowhere, as Company B is also deregistered, so again the asset would vest in ASIC.

We have written to the person who is representing himself as the seller and demanded a return of the $100,000. What do you think are the chances of our client getting his money back?

When asked why our client didn’t engage a lawyer to draft the necessary purchase contract his answer was, “I was trying to save money”.

(The facts of this matter have been modified where necessary to protect the identity of our client).

If you are about to purchase or sell an expensive piece of plant and equipment, engage a lawyer. Sure, it will cost an amount for professional advice but it safeguards your investment. 

Book a complimentary 30-minute consultation with a member of Apres Legal’s team.

Or call one of our friendly lawyers on 03 8567 7541

This article is not legal advice and should not be relied upon as legal advice. All articles from Apres Legal are intended to provide informative information. Legislation and case law may have been simplified and/or paraphrased. If you would like legal advice based on your current circumstances, you should contact Apres Legal.