Agent Sales and Services Pty Ltd v Foster
[2021] WADC 39
•30 APRIL 2021
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: AGENT SALES & SERVICES PTY LTD -v- FOSTER [2021] WADC 39
CORAM: DEPUTY REGISTRAR HEWITT
HEARD: 21 APRIL 2021
DELIVERED : 30 APRIL 2021
FILE NO/S: CIV 4213 of 2020
BETWEEN: AGENT SALES & SERVICES PTY LTD
Plaintiff
AND
WILLIAM FOSTER
First Defendant
VALERIE ANN FOSTER
Second Defendant
Catchwords:
Practice and procedure - Defendants' application for summary dismissal - Turns on its own facts
Legislation:
Australian Consumer Law
Result:
Action dismissed in part
Representation:
Counsel:
| Plaintiff | : | Mr I W Priddis |
| First Defendant | : | Mr J P Cook |
| Second Defendant | : | Mr J P Cook |
Solicitors:
| Plaintiff | : | Vogt Graham Lawyers |
| First Defendant | : | Mendelawitz Morton Commercial Lawyers |
| Second Defendant | : | Mendelawitz Morton Commercial Lawyers |
Case(s) referred to in decision(s):
Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168
DEPUTY REGISTRAR HEWITT:
In approximately the year 2000 the defendants to this action conducted a business known as Poolmart Leeming as partners. Subsequently they carried on their business using a company structure known as Bilveray Holdings Pty Ltd which was a trustee and beneficiary of the Foster Family Trust. The company operated its business through a number of outlets and its directors were the former partners of the business which was taken over by the company.
In March 2020 the company went into administration and thereafter in May the company was wound up leaving a considerable debt owing by it to the plaintiff with little, or quite probably no, prospect of recovery. The plaintiff has therefore commenced the present action against the defendants and they have brought an application by a chamber summons filed 18 February 2021 seeking judgment dismissing the claim or alternatively striking out various identified portions of the statement of claim as inadequate and orders that the claim be struck out in its entirety.
In order to deal with the application it is necessary to identify the various causes of action that are pursued by the plaintiff and deal with each individually.
The first of the claims against the defendants stems from a document executed by them in a form produced by the plaintiff entitled 'Application for Credit'. It is contended by the plaintiff that document which comprises three separate sheets constitutes the defendants as guarantors of the debt of the plaintiff and it is on that basis that the first of the claims against the defendants is founded.
The second claim is based on allegations founded on s 236 and s 237 of the Australian Consumer Law for false and misleading conduct.
The final head of claim is for the rectification of the credit agreement to which I have referred, in the event it is found not to constitute a guarantee, to rectify that document by adding a guarantee clause which it is contended forms part of the mutual intention of the parties.
I shall commence by considering the terms of the document which in the statement of claim is called a 'Second Credit Agreement' in which it is contended by the plaintiff created an obligation as guarantor exercisable by the plaintiff against each of the defendants in that capacity. The evidence makes it clear that the second agreement was executed by the defendants on 17 September 2019 after a meeting with the first defendant in which the plaintiff through its director, Mr Gentiluomo expressed his concern at the level of indebtedness which had been run up by Bilveray Holdings Pty Ltd.
The Second Credit Agreement was, as earlier noted, a proforma document prepared by the plaintiff and in the words of the director of the plaintiff the purpose of which (at least from the plaintiff's point of view) was as set out in par 21 of his affidavit dated 18 February 2021 which stated:
The purpose of the 'Second Credit Agreement' referred to in the Statement of Claim, was that it was to ensure that the Plaintiff had enforceable personal guarantees from Bill and Valerie in respect of money owed by Bilveray to the Plaintiff.
That is why I gave the Second Credit Agreement to Bill at the Meeting, for him and Valerie to sign.
The reference to Bill and Valerie is a reference to the first and second defendant to this action. The first point to deal with then is whether or not the credit agreement is capable of being characterised as a guarantee.
I commence by noting that the application for credit appears to be in the name of Bilveray Holdings Pty Ltd and that in the section provided for the names and addresses of partners/principle directors the names of the defendants have been inserted. Also notably the defendants have signed the document in a number of places and they are described in that signature clause as 'applicants'. It is obvious that the form presented by the plaintiff to the defendants for their signature was intended to cover a variety of situations from sole trader to partnership to company and the wording adopted by the person who drafted the credit agreement has made provision for that to be recognised when the form is completed. In that respect on the second page of the agreement there is a first sentence as follows:
In the event that this Application for Credit is approved I/We hereby agree with AGent Sales and Services Pty Ltd (hereinafter referred to as the Supplier) to abide by all the following terms and conditions.
There follows a succession of terms and conditions but relevantly term 7 is in the following terms:
… I/We will indemnify the Supplier against and agree to reimburse it for any expenses it may incur in recovering or attempting to recover payment from me of the amounts which may from time to time be overdue. These costs include legal court, solicitors, debt collections agency commissions and fees.
Later at cl 12 the agreement provides:
… notwithstanding any change in my trading structure I/We will remain personally liable for all goods and services requested by me or my agents and I/We charge any interest that I/We have on any land whatsoever with the repayments of any sums or monies outstanding to the supplier and will enter into any deed of Mortgage as may be required by the supplier to secure all monies owing.
There is an obvious and immediate difficulty and that is that the applicant was a company Bilveray Holdings Pty Ltd and that the only way in which it was possible for the company to agree to the terms of the agreement was by the signatures of its office bearers. Nonetheless it is contended by the plaintiff that the clauses to which I have referred cast a personal liability on the defendants as guarantors of any monies which were due and owing to the plaintiff. That appears to me to be a rather improbable proposition since there is nothing in the document which clearly identifies itself as a guarantee and in order to give effect to the company's agreement to the credit agreement it was necessary for its directors to sign.
In this regard the plaintiff places weight on the case Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168 (Alonso) which has some broad similarities to the present case. In Alonso a lease document in which the defendant company was named as lessee contained a guarantee clause with provision for signature. The director did not enter her signature in the position provided but did sign the lease execution clause and further her name was handwritten in the guarantee (but not signed) and that writing was formally witnessed by a third party. The documentation of the lease made it plain that it was the intention of the parties that performance of the lease was to be guaranteed.
It was held by Edelman J that the execution of the lease in the capacity of a director was sufficient to satisfy the requirements of the Statute of Frauds. Additionally there was a further memorandum signed by the guarantor which reinforced the conclusion that a sufficient memorandum signed by the party to the charge existed and the statutory requirements had been satisfied. His Honour said:
For these reasons I conclude that there was an objectively manifested intention to be legally bound by the second defendant.
Returning to the present case the affidavit filed by the plaintiff's director makes it clear that he held that intention. What is far from clear is whether the defendants shared that view, particularly the second defendant who was not even present when the plaintiff's director indicated he wanted 'rock solid guarantees' and presented the second credit agreement for signature.
Notwithstanding my considerable misgivings about the proposition which is advanced by the plaintiff I do not regard it as so untenable that a summary judgment seeking to overturn that part of the claim should succeed. The credit agreement is unhappily framed but it might in some eyes, although not mine, be construed as a guarantee by those who signed it. Accordingly, I am not satisfied to the necessary degree that the summary judgment application for this aspect of the claim should succeed.
I next turn to the proposition that if the document does not in fact constitute a guarantee then the court should intervene and rectify the agreement by inserting a clause that does constitute it to be a guarantee.
The first step in rectifying an agreement is to establish clearly what the parties agreed. It is propounded by the plaintiff that the defendants agreed to guarantee any monies due by the company of which they were directors in the event that the company itself was unable to pay and to charge their own property to secure that end. The plaintiff's assertion is based on a number of meetings between the parties. The relevant evidence of the plaintiff is contained again in Mr Gentiluomo's affidavit by referring to pars 14, 15 and 25 of the statement of claim and confirming the accuracy of what was alleged in those paragraphs. It is notable that at the meeting at which the credit agreement was presented, that being the agreement which is now sought to be rectified, the second defendant was not even present. To the extent that the second defendant is said to have been party to an agreement in the terms contended for by the plaintiff the only occasion on which the second defendant is said to have agreed to the terms of the contractual arrangement was in par 25(f) that being an occasion about one and a half years earlier in which both Mr Gentiluomo and the defendants were in a motor vehicle going out for lunch and the first defendant stated that they, being the first and second defendant, would if necessary sell property and repay the plantiff any money which the company owed. To the extent that the second defendant is said to have thereby agreed (approximately one and a half years before the second credit agreement was executed) is said to arise by the fact that she did not contradict the plaintiff on the earlier occasion.
That is hardly evidence that the contract which was eventually signed was intended to set out terms to which she had agreed. Additionally, the removal in time from these events to the eventual signing of the contract which is sought to be rectified is so great as to rob any probative value which may be drawn from these events. Even if the silence of the plaintiff might have been considered to be an agreement to provide a guarantee as is contended, I cannot accept that one and a half years later because the second defendant may have overheard her husband's remarks while driving in a car to lunch could possibly be regarded as consent in the manner which is necessary in order for her to have made an agreement which formed the basis of the documentation prepared by the plaintiff and which is capable of being rectified to reflect the agreement. For that reason I am of the view that the application for rectification cannot possibly succeed and it should be dismissed.
The next claim is that concerning misleading and deceptive conduct. That essentially sets out the history of conversations between the first defendant and the plaintiff in which various representations are said to have been made by way of promises to ensure that the plaintiff company was paid its dues in the event that the company of which the defendants were directors was unable to do so. Once again there are profound problems with the claim brought under the Australian Consumer Law. One of the obvious problems is that the second defendant made no representations. It is said by the plaintiff that the first defendant was her agent in making such representations, a fact denied by each defendant. Nothing is advanced by the plaintiff which could displace that contention. It is true that the first defendant was the party who was preoccupied with the operation of the company business and no doubt he would have had some measure of ostensible authority in carrying out those tasks. Giving a personal guarantee and charging one's personal property is not an incident of running the business. There is no basis contended for that I can see that could possibly support the proposition which the plaintiff advances that the first defendant was the agent of the second defendant in making the representations. What we are left with is that on one occasion approximately one and a half years prior to the signing of the agreement the wife was present when it is alleged that the husband made the necessary representations. That to me does not make her liable for those representations if indeed she has heard them because she did nothing to induce in the mind of the plaintiff, other than her silence, to suggest that she also was joining in such representation.
A further substantial obstacle in the way of the plaintiff is the fact that the evidence of the plaintiff is that in his affidavit in opposition sworn 18 February 2021 lodged 16 March 2021, Mr Gentiluomo stated:
The purpose of the 'Second Credit Agreement' referred to in the Statement of Claim, was that it was to ensure that the Plaintiff had enforceable personal guarantees from Bill and Valerie in respect of money owed by Bilveray Pty Ltd to the Plaintiff.
That is why I gave the Second Credit Agreement to Bill at the Meeting, for him and Valerie to sign.
In the statement of claim at par 15d it is alleged Mr Gentiluomo said:
… words to the effect that the Plaintiff would continue to supply Bilveray only if: (a) there was an updated credit agreement with signed personal guarantees by each of the Defendants; (b) the Plaintiff could caveat the Defendants' properties; and (c) payments became more regular and more substantial.
To my mind that establishes that the plaintiff was no longer prepared to rely on the statements of the first defendant but required a written document which, in his opinion, conferred security rights on the plaintiff, and that is the basis upon which he continued to trade with the company. In any event it is difficult to see what loss the plaintiff has suffered by reason of the misleading and deceptive conduct alleged. At the time that the credit agreement was entered into the company owed rather more than it did when put into liquidation. By allowing the company to continue to trade the plaintiff firstly had some level of reduction in the amount which was owing and furthermore would presumably have made a profit margin on the goods supplied. Leading it to a somewhat better position than it would have been by sending the company to the wall at the earliest stage. It may be, of course, that the liquidation of the company at an earlier stage would have led to a better outcome for the plaintiff. Additionally it seems that almost all of the outstanding credit made available to the company was for transactions entered after the Second Credit Agreement was executed.
In summary therefore I consider that the claim which is based on misleading and deceptive conduct and for rectification of the credit agreement to include a clause by way of guarantee should be dismissed but that the remainder of the claim should be permitted to continue. As a consequence of that ruling the various paragraphs which deal with the propositions outlined should be deleted from the statement of claim and although not strictly necessary it would probably be helpful if a substituted statement of claim excluding the paragraphs which set out or refer to the dismissed portions of the claim should be presented.
As to the remaining paragraphs of the statement of claim under attack, they are of marginal relevance to the cause, but do no harm and cause no problems that are obvious to me and may remain.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
NF
Registrars Associate
30 APRIL 2021
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