ADX Building Systems P/L v Macleod - [2014] SADC 212

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
ADX BUILDING SYSTEMS P/L v MACLEOD & ORS
[2014] SADC 212
Judgment of His Honour Judge Chivell
19 December 2014
GUARANTEE AND INDEMNITY - THE CONTRACT OF GUARANTEE - PARTIES AND CAPACITY
Claim by plaintiff for moneys owed by third defendant for supply of building materials - first and second defendants signed an application to the plaintiff for credit - deed of guarantee within the application partly filled out but not executed - third defendant in liquidation so action stayed against the company - whether first and second defendants gave guarantees of third defendant's debt notwithstanding non-execution of deed.
Held: No valid guarantee given by first and second defendants. Judgment for first and second defendants.
Law of Property Act 1936 (SA) s 41, referred to.
Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd & Ors (1985) 9 ACLR 909; Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160; Ariadne Steamship Co Ltd v James McKelvie & Co [1922] 1 KB 518; Rawcliffe v Bianco Hiring Service Pty Ltd [2002] SASC 430; Burrell & Family Pty Ltd v Harris [2010] SASC 184; Ankar Pty Ltd v National Westminster Finance (Aust) Ltd (1987) 162 CLR 549; Erect Safe Scaffolding (Aust) Pty Ltd v Sutton (2008) 72 NSWLR 1; Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; Andrew Knox Holdings Pty Ltd v ANZ Banking Group Ltd (1996) 188 LSJS 385; Savoy Investments (Qld) Pty Ltd v Global Nominees Pty Ltd [2008] QCA 282; Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424, considered.

ADX BUILDING SYSTEMS P/L v MACLEOD & ORS
[2014] SADC 212
Introduction

The plaintiff is a company which supplies building materials, including materials for the installation of ceilings, to the building trade. I will refer to it as ‘ADX’. The claim is made against Mr and Mrs Macleod (‘the Macleods’) and against the company of which they were the directors and shareholders, Macleod Ceilings Pty Ltd (‘Macleod Ceilings’). Claims against a fourth defendant (Badge Constructions (SA) Pty Ltd) and a fifth defendant (Fabcot Pty Ltd) were discontinued (FDN 17).
Macleod Ceilings is now in liquidation. The claim against the company is therefore stayed (Corporations Act 2001 (Cth), s 440D).
The claim is for the sum of $383,532.31 for the supply of building materials to the defendants, which sum ADX says is due and payable and remains unpaid. The plaintiff says that the building materials were supplied to Macleod Ceilings on credit.
As the Statement of Claim was originally cast, the plaintiff asserted that Mr and Mrs Macleod were liable as principals to pay for these materials. Paragraph 8.1 of the Statement of Claim alleges:
8.    In accordance with the terms of the Credit Account ADX:
8.1supplied building materials to the Macleods and/or Macleod Ceilings (the Supply);
Paragraphs 13 and 14 allege:
13.   The Macleods and/or Macleod Ceilings are indebted to ADX in the sum of $383,532.31 which debt is not in dispute.
Particulars
13.1On 14 February 2012 the Macleods and/or Macleod Ceilings acknowledged liability to ADX at a meeting between Rob Macleod for Macleods and/or Macleod Ceilings and Colin Wright for ADX.
13.2On 26 April 2012 the Macleods and/or Macleod Ceilings acknowledged liability to ADX in a telephone call between Rob Macleod for Macleods and/or Macleod Ceilings and Colin Wright for ADX.
14.ADX seek the following remedies as against the Macleods and/or Macleod Ceilings;
14.1   payment of the sum of $383,532.31; or
14.2   in the alternative damages in the sum of $383,532.31;
14.3   interest on the above sum at the rate of 8.0% pa from the date that payment of each invoice is due until payment is made;
14.4   costs; and
14.5   interest.
The first Statement of Claim was filed on 20 September 2012. Pursuant to an order made by Master Blumberg on 13 May 2014, a further claim was made that the Macleods were liable pursuant to a guarantee. The relevant claim is encapsulated in paragraphs 26A to 26C of the Second Statement of Claim. These paragraphs are as follows:
26A.On or about 7 August 2006 the Macleods completed a Customer Account Application Form and returned it to ADX (“the Application Form”)
26B.Section 6 of the Application form contained a Deed of Guarantee (“the Guarantee”) which nominated Robert Macleod and Cymatha Mcleod [sic] as joint and several Guarantors (“the Guarantors”).
26C.The Guarantee provided, inter alia, that:
26C.1.the Guarantors agreed to guarantee payment to ADX of all moneys from time to time owing by Macleod Ceilings to ADX; and
26C.2.the Guarantors shall pay interest at the rate of 18% p.a. to ADX on the moneys due to ADX;
The words ‘Deed of’ in [26B] of the Second Statement of Claim were deleted, without objection, at the trial.
These claims were all denied by the Macleods in their Second Defence. They pleaded:
27.Deny paragraphs 26A to 26I of the Statement of Claim inclusive and say further that the First and Second Defendants:
27.1 at no time provided a personal guarantee, either written or orally, to the Plaintiff for the payment of debts owed by the Third Defendant Macleod Ceilings Pty Ltd to the Plaintiff;
27.2 at no time discussed their personal assets or undertook from their personal assets to repay any monies owed to the Plaintiff by the Third Defendant
On the application of the Macleods, the Defence was further amended on the first day of trial, without objection from the plaintiff, to add a further pleading in relation to conversations between Mr Macleod and Mr Wright of the plaintiff as follows:
27.1.1At the time the Third Defendant dealt with the Plaintiff in connection with the making of the credit supply account application:
(i)the First Defendant conveyed to Mr Colin Wright of the Plaintiff that the First and Second Defendants would not provide a guarantee;
(ii)Mr Wright on behalf of the Plaintiff conveyed he would accept the document without a guarantee; and
(iii)the First Defendant then signed the document on behalf of the Third Defendant in the presence of Mr Wright.
The Authorities Referred To
In Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd & Ors,[1] an agency agreement between an insurance company and a company operated by the defendants was executed. The agreement also contained a personal indemnity from the directors of the agent company. This indemnity was executed by the affixing of the company seal and attesting of the directors in the same way as the principal agreement. The New South Wales Court of Appeal (Mahoney and McHugh JJA, Kirby P dissenting) held that the personal indemnity of the directors was valid, because the intention of the directors to give an indemnity could be inferred from their actions and the surrounding circumstances.
[1] (1985) 9 ACLR 909
Mahoney JA said:
As I have said, no particular form of execution of the document was required on the part of Mr and Mrs Austin. In my opinion, it would in this regard have been sufficient if, by some form of writing (there may arguably be other ways), Mr and Mrs Austin had signified that they were bringing the document into operation according to its term, ie, they were agreeing to indemnify the plaintiff as therein set forth. The ordinary way in which a party may do this, is, of course, by the affixing of his signature to the document at the appropriate place. But that, in my opinion, is not the only way in which he may bring the document into operation. He may, for example, bring it into operation by the affixing of his initials to it or by the making of his mark on it. And, in my opinion, he may produce that result by the writing on it of an alias or even of the name of another person. This, it has been held, in my opinion correctly, that a writing being a false name may be a signature for that purpose even within the statute of fraud: see Byers v Brown [1859] Legge 1136. And, I think, it would be sufficient if, though he does not sign his name, the party writes on the document words such as “I hereby bring this document into operation as my document”. The essential in each such case is that, by what he does, he signifies his purpose of bringing the document into operation according to its terms. There may, of course, be reasons, in estoppel or otherwise, why some particular act will or will not cause the document to be so operative. But in the present case no such considerations arise.
I agree with the submission of Mr Dal Cin, counsel for the defendants, that the present case is very different. Here, there is no signature at all on the deed of guarantee.
It was not accepted in Scottish Amicable, nor has it been argued here, that the guarantee became binding on the defendants as a result of an estoppel, or because the defendants had taken the benefit of the guarantee. In this case, the evidence is that the company had been extended credit by ADX for over a year prior to the events in question, without any form of security being demanded.
In Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd[2], the defendants O’Sullivan and Mould had signed a factoring agreement on behalf of the defendant Kiyose Holdings Pty Ltd and, on the plaintiff’s case, personal guarantees. The agreement and the guarantees were expressed within a single document, executed as a deed. The deed contained covenants made by Kiyose, and clauses 12, 13 and 14 specifically contained personal guarantees from the directors, and an agreement to execute an equitable mortgage over their assets as security for their guarantees. The deed provided only for execution by Messrs O’Sullivan and Mould ‘for and on behalf of Kiyose Holdings Pty Ltd’.
[2] (1989) 21 NSWLR 160
Giles J referred to conflicting Australian and English authorities. After examining the judgment of Atkin LJ in Ariadne Steamship Co Ltd v James McKelvie & Co,[3] he observed, at 167-8:
The difference in approach which has been perceived is between asking whether from the words qualifying the execution alone and without reference to the entirety of the document a personal undertaking by the signatory is negatived, and asking whether on the construction of the document as a whole it should be concluded that the signatory was intended to incur no personal liability. The observations of Atkin LJ have been regarded as taking the former approach.
[3] [1922] 1 KB 518
After referring to the judgment of Wood J in NEC Informations Systems Australia Pty Ltd v Linton (unreported) and Scottish Amicable, Giles J concluded, at 174:
In the result, I conclude that the proper approach is to inquire whether there is to be found an intention that the signatory be personally bound to the contract evidenced in the document, meaning thereby not a subjective intention but an intention to be found objectively, notwithstanding a qualification attached to the signature. That intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible. The inquiry is not limited to consideration of the signature and its qualification in order to determine whether or not the signature indicates an assent to be personally bound.
Giles J found that the surrounding circumstances did not justify a conclusion that Messrs O’Sullivan and Mould executed the deed ‘so as to bind them as guarantors’. His Honour said (at 176):
Clark wanted signature by Mr O'Sullivan and Mr Mould, as distinct from and in addition to execution by Kiyose. It did not get it. Nonetheless it traded with Kiyose. The transaction was not fully implemented, and the failure to fully implement it can not be now rectified by calling upon signature by Messrs O'Sullivan and Mould as the act of Kiyose to do double duty as signature on their own behalves.
In Rawcliffe v Bianco Hiring Service Pty Ltd,[4] Ms Rawcliffe and Mr Monz, the purported guarantors, signed a number of documents including, as here, an application for credit, a notice of disclosure, and a ‘guarantee’ which was in the form of a deed. The deed was executed by them, in the presence of witnesses, but the common seal of the company was, for some reason, placed between the two signatures. A schedule to the guarantee did not include their names. At [126] Lander J, with whom Doyle CJ and Bleby J agreed, adopted the formulation by Giles J in Clark Equipment, quoted above. His Honour held that the intention of the defendants to give a guarantee was manifest from the actions of the parties and the surrounding circumstances.
[4] [2002] SASC 430
In Burrell & Family Pty Ltd v Harris,[5] a loan agreement executed by the defendant on behalf of a company, contained a personal indemnity clause:
The director of the borrowing entity also acknowledges personal liability for all debt remaining after the loan repayment date inclusive of all interest and recovery costs.
White J said, at [30-31]:
In determining whether a person signing a contract intended to be personally bound by it, the Court must consider the contract as a whole and not just the manner of its execution. This was the conclusion of Giles J in Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd.
[His Honour then quoted the passage in Clark quoted above.]
Giles J rejected the approach suggested by Atkin LJ in Ariadne Steamship Company Ltd v James McKelvie & Co. The decision of Giles J in this respect was endorsed by the Full Court in this State in Rawcliffe v Bianco Hiring Service Pty Ltd.
(Citations omitted)
Like Scottish Amicable, there was only one execution clause to the contract, and the purported indemnity was contained within the document.
[5] [2010] SASC 184
White J also observed, at [46]:
For the reasons given earlier, although the execution clause of the 2008 Agreement considered by itself suggests that the word “director” may be a qualification of Mr Harris’ signature, that is less obviously so when the agreement is considered as a whole, and particularly, when regard is had to cl 4(d). It is possible for a person to intend his or her signature to have a dual effect: so as to bind a principal and to accept personal responsibility. Finkelstein J made this point in Follacchio v Harvard Securities (Aust) Pty Ltd when he said:
...The appellant [argued] that it is not permissible for a person to affix one signature to a contract and have that signature operate in, say, two capacities: one as agent for a principal and another to assume personal responsibility. But I see no reason in principle why this could not occur. All that is necessary is that the capacity or capacities in which the person is placing his signature on a contract be clear. If it is clear that he intends to sign the contract in two or more capacities, there is no reason why that intention should not be given effect.
(Citations omitted)
Although Mr Ross-Smith did not clearly submit that the signatures in Section 5 of Exhibit P5 had a dual effect, in the way White J held that the signature did in Burrell, I would reject such a suggestion because:
·the signatures in Section 5 could not be said to be an execution of the deed in Section 6 – the attestation clauses are completely different;
·in this case, it is clear that the Macleods’ signatures in Section 5 are ‘for the company’ only.
Although it was not argued in this case, it was argued in Burrell (see [57]) that:
·A guarantor’s offer must be clear and definite … Vague or equivocal statements will not suffice: they must be promissory and show an intention to be legally bound. Nor will a mere overture to provide a guarantee constitute an offer capable of acceptance. The central question is whether or not it is sufficiently clear from the documentation and surrounding circumstances that there is an intention to enter a legally binding obligation.
(from O’Donovan & Philips ‘The Modern Contract of Guarantee’, 3^rd ed. (1996) LBC);
·At law, as in equity, the traditional view that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety … A doubt as to the status of a provision in the guarantee should therefore be resolved in favour of the surety …
(Ankar Pty Ltd v National Westminster Finance (Aust) Ltd.[6]See also Erect Safe Scaffolding (Aust) v Sutton Pty Ltd[7] and Bofinger v Kingsway Group Ltd.[8])
[6] (1987) 162 CLR 549 at 561
[7] (2008) 72 NSWLR 1 at [155]
[8] (2009) 239 CLR 269 at [53]
Even if it could be argued that there was some kind of implicit guarantee to be inferred from Mr Macleod’s actions in ‘proffering’ Exhibit P5 in that condition, it could only be described as vague and equivocal. In Section 1 of the document, the credit sought was limited to $20,000.00 per month, and yet ADX continued to extend credit beyond that figure to the amount claimed. It is unclear whether, even if there was a guarantee, it was limited or unlimited. If it was limited, the plaintiff’s claim is vastly in excess of the limit.
The Plaintiff’s Case
Mr Ross-Smith, counsel for the plaintiff, made it clear that the sole issue to be decided in this case was the validity of the alleged guarantee (T 56). He did not pursue the alleged liability of the Macleods as principals, nor did he pursue an allegation that the debt was affirmed by Mr Macleod in subsequent conversations (c.f. Andrew Knox Holdings Pty Ltd v ANZ Banking Group Ltd;[9] Savoy Investments (Qld) Pty Ltd v Global Nominees Pty Ltd[10]). Further, it is not suggested that the Macleods provided an indemnity to ADX to keep it harmless from losses occasioned by the company’s default (See Andar Transport Pty Ltd v Brambles Ltd[11]).
[9] (1996) 188 LSJS 385
[10] [2008] QCA 282
[11] (2004) 217 CLR 424 at [23]
The Credit Application
It is the plaintiff’s case that the Macleods guaranteed the repayment of any debt incurred by the company by proffering a document entitled ‘Customer Account Application Form’ dated 7 August 2006 (Exhibit P5).
The following are relevant features of the document:
·at the top of the document are three boxes which require endorsement, obviously by or on behalf of ADX:
APPROVED BY          DATE                  CREDIT LIMIT
All of these boxes are left blank.
There is no evidence before me that the application by Macleod Ceilings for a Credit Trading Account was ever accepted by or on behalf of ADX, or on what terms, particularly as to the credit limit. The pleading in [7] of the Second Statement of Claim, that ‘The Application was approved by ADX and a credit account was thereby established’ has not been proved. The fact is, though, that ADX continued to extend credit to Macleod Ceilings;
·Section 1 contains a ‘request’ to ADX to open a 30-day Credit Trading Account in the name of Macleod Ceilings;
·Mr Macleod is nominated as a ‘Contact Name’ for the business;
·the amount of credit sought per month is stated as ‘$20,000.00’;
·the ‘Business establishment or incorporated date’ is stated as 6/05 (Section 2);
·the assets, liabilities and capital (‘Paid Up’ and ‘Nominal’) are unstated;
·a request to attach a Balance Sheet and Profit and Loss Statement or a contact for these documents is also left blank;
·the type of business (whether ‘Sole Trader’, ‘Partnership’, ‘Bus. Reg. No’ or ‘ABN’) is left blank;
·the ‘Company Type’ is stated as ‘Private’, the ‘ABN’ is stated, and the registered company name is stated as ‘Macleod Ceilings’;
·a request for information about whether the ‘Applicant or Directors’ act as a trustee or trustees for a trust was answered:
Name of Trustee:       Robert & Cymantha Macleod
Name of Trust:           Robert & Cymantha Macleod Trust
Type of Trust:             Family Trust
·the form indicated that the business address of the business – that is, PO Box 238, Kersbrook SA – was ‘Being Purchased’. Of course, that cannot be correct. Later in the document there is a reference to ‘Lot 14 Little Parra [sic] Rd Kersbrook’. I infer that was the property which was being purchased;
·the ‘Company Type’ was indicated as ‘Private’;
·a request to provide a ‘minimum 3’ trade/credit references was left blank (Section 3);
·the ‘Sole Trader, Partners or Directors Particulars’ were given as those pertaining to Robert Macleod and Cymantha Macleod, the first and second defendants (Section 4);
·the form requested information about ‘Land owned by Directors, Company or Partners’. It was indicated that ‘R & C Macleod’ owned property at Morgan, with a current value of $150,000; ‘C Macleod’ owned property at Eden Hills, with a current value of $230,000; and ‘R & C Macleod’ owned property at Kersbrook, with a current value of $440,000 with an encumbrance of $380,000;
·a ‘Declaration’, which was signed by both the Macleods, formed Section 5 of the document. The declaration reads as follows:
The applicant (‘you’) acknowledges as follows:-
Terms of Credit.
You have read and agreed with the terms and conditions of sale, that are part of this application and you agree that you will pay all invoices by the last working day of the month after the month of invoice.

Duty of Disclosure.
You are not aware of any information, notice or court proceedings that may lead to bankruptcy, appointment of an administrator, controller or managing controller, receiver or receiver manager or liquidator. You do not intend to enter into any scheme of arrangement with creditors either formally through a court or otherwise. None of the directors/s, partners or proprietors have been a director of a company placed in liquidation or have been declared bankrupt or have entered into an arrangement under the Bankruptcy Act 1966 (as amended).

Privacy Act.
You authorise ADX to obtain from a credit reporting agency details of your personal and commercial credit information if required by ADX for the purpose of assessing this application for credit. You authorise ADX to provide information of your credit position with ADX to persons who may seek that information from ADX.

Use of Information:
You acknowledge and agree that information about transactions under these terms of credit may be used by ADX for marketing purposes.

Signatures:
You are authorised to make this application. You are signing this application without undue pressure or unfair tactic.
·the signatures of the Macleods appear below the terms of the declaration and below the words:
‘Signed for the applicant’ (my underlining)
·a series of boxes, indicating the capacity in which the Macleods were signing the document, is also above their signatures. The box for ‘directors’ is ticked. The boxes for ‘partners’ and ‘proprietors’ are left blank;
·there is no company seal affixed to the document.

It is abundantly clear that Section 5 is a declaration by the company, Macleod Ceilings, made by its directors on its behalf. There is nothing in the declaration, or in the execution clause, from which it might be inferred that the directors, by their signatures, were assuming personal responsibility for the promises made by the company, whether by way of guarantee or otherwise.
Section 6 of the document is entitled ‘Guarantee (this page MUST be completed)’. This section is described as a ‘Deed of Guarantee’. It is dated 7 August 2006. The names of the guarantors are written in the first schedule as being Robert Macleod and Cymantha Macleod. The ‘Customer’ is described in the terms of the ‘deed’ as the entity which is being supplied with goods, and that is expressed as Macleod Ceilings Pty Ltd.
The principal covenant in the guarantee is as follows:
NOW THIS DEED WITNESSETH AS FOLLOWS:-
In consideration of ADX agreeing at the request of the Guarantor(s) to extend to the Customer further credit facilities the Guarantor(s) hereby covenants and agrees with ADX to pay to ADX within fourteen (14) days from demand all moneys from time to time owing by the Customer to ADX whether alone or in conjunction or jointly with any other person and/or company including but not limited to all moneys owing by the Customer to ADX at the date hereof and to indemnify and keep indemnified ADX against all losses, damages, expenses and/or other moneys incurred by ADX by reason of ADX having extended credit facilities to the Customer and agreeing to extend further credit facilities to the customer.
The most significant feature of Section 6 of the document is that the deed is not executed. Neither Mr nor Mrs Macleod signed, sealed or delivered the instrument. It is therefore not a deed. Since the enactment of sub-ss 41(1)(a) and 41(3) of the Law of Property Act 1936 (SA) in1984, it is no longer necessary that a deed be ‘sealed or delivered’, although the attestation clause in this document does require that. Section 41(1) states:
41—Execution and attestation of deeds
(1) The following rules govern the execution of a deed:
(a) a natural person executes a deed by signing, or making a mark, on the deed;
…
Section 41(2) provides:
(2) The execution of a deed must be attested—
(a) where the deed is executed by a natural person—by at least one witness who is not a party to the deed;
...
Section 41(3) provides:
(3) Delivery and indenting are not necessary in any case.
Section 41(4) provides:
(4) Notwithstanding the defective execution of a deed by or on behalf of a party to the deed, the execution will be taken to be valid if it appears from evidence external to the deed that the party intended to be bound by it.
It was not argued that this section applies in this case. This is not a case of defective execution – this is a case of non-execution of the deed. Not only is the deed in this case not executed, it is not attested by a non-party witness either, as required by s 41(3).
For that reason, the Statement of Claim was amended by the plaintiff, without opposition from the defendants, to delete the words ‘Deed of’ from paragraph 26B of the Second Statement of Claim.
Mr Ross-Smith submitted that the deed of guarantee was not a separate document from the rest of Exhibit P5. He described it as ‘integral’ to the document, principally because of the statement at the top of page 3:
Section 6: Guarantee (this page MUST be completed)
I disagree. The deed is an entire document. It is dated in the first line, it has recitals and covenants which do not relate to any other part of the document. The execution clause has provision for the deed to be ‘Signed sealed and delivered’ by or on behalf of the guarantors, and provision for the name, address and signature of a witness.
This is to be contrasted with Section 5 of the document, the ‘Declaration’, which refers to the rest of the document, the ‘application’, and the signatories declare the truth of the statements of fact therein. There is a signature clause without provision for witnesses. As I have already mentioned, it is made clear that the signatures are ‘for the applicant’, by the ‘directors’. In my view, it could not be clearer that:
·the signatures in Section 5 are merely for Macleod Ceilings; and
·the non-execution of Section 6 means there is no deed of guarantee.
The implication of the admonition ‘this page MUST be completed’ is also clear – that ADX will not accept the application for credit unless the deed is executed. In my view, this is inconsistent with Mr Ross-Smith’s argument that personal guarantees can be implied from the ‘proffering’ of the non-executed, and therefore invalid, deed, and that such proffering was somehow acceptable to ADX, and that credit was extended to Macleod Ceilings for that reason. Such a submission lacks commercial reality.
Mr Ross-Smith also argued that Section 6 of Exhibit P5 is an ‘integral’ part of the document because Section 7, the ‘Terms and Conditions of Sale’, follows it. Again, I do not accept that this is so. Section 7 is the ‘small print’ part of the document. It is referred to in Sections 1 to 5, that is true, but, significantly, it is not referred to in Section 6, the Deed. It is an entire instrument, in the nature of an appendix. It has no execution clause. It does not even require initialling. I think it is entirely separate from Section 6.
Mr Wright’s Evidence
Mr Colin Wright is the owner and managing director of ADX. The company was incorporated in 2005. It has approximately 2,200 customers.
Mr Wright said he met Mr Macleod in the early 2000s. He later said that he regarded Mr Macleod as a good customer. He had traded with Mr Macleod’s previous business, and with Macleod Ceilings since incorporation.
Mr Wright said he had no memory of how Exhibit P5 was provided to ADX. He had no memory of receiving it. It does not carry any of his handwriting (T 41).He had no memory or Mr Macleod attending ADX, or discussing the form, or Mr Macleod signing it in front of him (T 61-2). He did not believe he did so. He did not accept the document without a guarantee (T 42).
What Mr Wright did not explain was how the document made its way into the records of ADX with the deed of guarantee unexecuted, why ADX had been extending credit since 2005 without a credit application having been made and why ADX continued to extend credit to the extent of over $300,000.00 without the application having been approved, and without the guarantee having been executed.
Whatever happened in August 2006, the document Exhibit P5 was received by ADX. It was in the company’s business records when Mr Wright retrieved it before this litigation was commenced. He said this was the first time he saw the document (T 62). I infer this was sometime in 2012.
There was no evidence from Mr Wright, or anyone else representing ADX, that credit was extended to Macleod Ceilings because they considered the proffering of Exhibit P5, with the deed of guarantee unexecuted, as the giving of a personal guarantee of Macleod Ceiling’s debts to ADX by the Macleods.
The Defendants’ Case
Mr Macleod’s Evidence
Mr Macleod gave evidence that the document Exhibit P5 was filled out by his wife, Cymantha (T 85). All of the handwriting on the form is hers, apart from his signature. He noticed two errors – the name of the family trust was wrong and she had filled in the ‘guarantee page’. As a result of advice from his accountant, his attitude was ‘never to sign a personal guarantee’ (T 87).
Mr Macleod said that, as a result of these errors, he decided to take the document back to ADX and ask for a ‘new one’ (T 88). When he was next at ADX, he took the form in and spoke to Mr Colin Wright. The following conversation took place:
A. I handed the application form to Mr Wright, I said 'We need a new form. My wife has made some mistakes on the form', and Colin opened the form, had a look at the form. He said 'What mistakes?', I said the family trust is incorrect, I said the - he said to me 'You haven't signed the guarantee either', and I said 'I have been advised by my accountant not to sign guarantees'.
Q. Did he say anything about that.
A. He said 'Oh, all right, well sign the other', and I signed the other, he said 'Okay' and he accepted it.
(T 88)
He said that his wife had already signed the document. He signed it in Mr Wright’s presence (T 89).
Mr Macleod said that ADX had been trading with, and extending credit to, Macleod Ceilings since it was incorporated (T 89).
In his final address, Mr Ross-Smith criticised Mr Macleod’s evidence that he did not give a guarantee. He submitted that if Mr Macleod did not intend to do so:
·he would not have taken the incorrect form to ADX, nor would he have given it to Mr Wright;
·he would have struck out Section 6 of the form rather than completing it to that extent;
·he made no attempt to correct what he said was the erroneous family trust information in Section 2 of the form before he went to ADX;
·the signatures of the Macleods in Section 5 of the form are made with the same pen;
·the Macleods would not have provided the information about their personal assets, as distinct from the company’s assets, in Section 4 of the form;
·Mr Macleod’s evidence that he signed Section 5 of the form in the presence of Mr Wright was not mentioned in an affidavit sworn in October 2012;
·Mrs Macleod was not called to give evidence and so I should infer that her evidence would not have assisted the defendants’ case.
For those reasons, Mr Ross-Smith submitted that I should find that the conversation alleged by Mr Macleod did not occur, that the document was proffered to ADX without any disavowal of the guarantee, and that the proffering of the form in that condition therefore constituted a guarantee.
To some extent, Mr Ross-Smith’s submissions about Mr Macleod’s evidence were circular. If I find that Mr Macleod’s evidence cannot be dismissed on the balance of probabilities, then he has provided a complete explanation which answers most of Mr Ross-Smith’s criticisms – his wife filled out the form as far as she could, including Section 6, following the instruction that it must be completed, but Mr Macleod was insistent that they should not give guarantees, and that is the reason why the deed in Section 6 was not signed.
I found no reason to dismiss Mr Macleod’s evidence. There was nothing inherently implausible in it, nothing which was contradicted by objective evidence and nothing arising from his demeanour or any other factor which made me suspect he was not telling the truth. Further, there was nothing in Mr Macleod’s subsequent actions, in taking the form to ADX and discussing it with Mr Wright, which is inconsistent with his evidence. What is consistent with his evidence is that ADX continued to extend credit without an executed deed of guarantee.
I see no merit in Mr Ross-Smith’s submission about the pens. It is not clear what the significance of the point is, anyway. There is no expert evidence that the signature was written with the same pen. Even if there was such evidence, it is feasible that Mr Macleod took the same pen, or a pen of the same type, with him to ADX.
As to the defendants not calling Mrs Macleod, it must be remembered that it is the plaintiff who bears the onus of proving that the defendants gave a guarantee. I do not consider that the failure to call Mrs Macleod detracts from the credibility of Mr Macleod’s evidence. Clearly, the whole basis of the defendants’ case is Mr Macleod’s professed antagonism to giving a guarantee.
It is clear that the Macleods’ signatures in Section 5 were ‘for the applicant’, and that the applicant was Macleod Ceilings. There seem to be only two explanations for what has occurred:
(1)Mr Macleod is telling the truth and Mr Wright accepted the document without a guarantee and continued to extend credit to the company without one;
(2)Mr Macleod is not telling the truth, but through some inadvertence or incompetence on the part of Mr Wright or some other employee of the plaintiff, the form was received without a written guarantee and placed in its business records, and either:
·ADX continued to extend credit to Macleod Ceilings because it was assumed that the deed had been signed; or
·Mr Wright or some other employee of the plaintiff thought that the proffering, to use Mr Ross-Smith’s word, of the unexecuted deed along with the application form, constituted valid directors’ guarantees by the Macleods, despite the admonition that the deed ‘MUST’ be completed, and therefore continued to extend credit.
As I observed earlier, the second of these alternatives lacks commercial reality. There is no evidence upon which to base the first alternative.
Mr Ross-Smith’s submission was that it was the proffering of the document Exhibit P5, the handing of it to his client, which constitutes the proffering of personal guarantees. He asserted: ‘That’s my client’s evidence’ (T 141). But that is not his client’s evidence – on his evidence, Mr Wright denies that the document was proffered to him. Mr Wright’s position is that he has no memory of any discussion with Mr Macleod about Exhibit P5, and that he would not have accepted the form knowing the deed of guarantee was not signed. He did not give evidence that he interpreted Mr Macleod’s proffering of the form as the provision of guarantees. He made it clear that he would not have accepted it in that form.
Conclusion
I conclude that, for the following reasons, the plaintiff’s claim that the Macleods gave personal guarantees of Macleod Ceiling’s obligations to ADX should fail:
·the only reference in Exhibit P5 to guarantees is in Section 6, which is expressed as a deed, and which has not been executed;
·the plaintiff had been extending credit to Macleod Ceilings since 2005 without guarantees and without credit references, and continued to do so even though the deed was not executed;
·the signatures of the Macleods in Section 5 are expressly ‘for the applicant’ and do not contemplate the assumption of personal liability;
·it is illogical and implausible that the Macleods would present the document to ADX with the deed not executed if they intended to provide guarantees;
·in the absence of an executed deed, the terms and conditions of any implied guarantee, for example whether it was limited to the credit limit, and if so what that limit was, would be so vague and equivocal as to be unenforceable.
For all these reasons, the plaintiff’s claim must fail. There will be judgment for the first and second defendants. I will hear the parties as to any consequential orders.