Barro Group Pty Ltd v Vecron Constructions Pty Ltd
[2010] VCC 1224
•15 September 2010
| IN THE COUNTY COURT OF VICTORIA | Not Restricted |
| AT MELBOURNE CIVIL DIVISION COMMERCIAL EXPEDITED DIVISION |
Case No. CI-09-02698
| BARRO GROUP PTY LTD | Plaintiff |
| (ACN 005 105 724) | |
| v | |
| VECRON CONSTRUCTIONS PTY LTD | First Defendant |
| (ACN 128 255 676) | |
| and | |
| ANDREW VECRIS | Second Defendant |
| and | |
| MICHAEL FOLINO | Third Party |
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| JUDGE: | HIS HONOUR JUDGE GINNANE |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 22- 23 March, 29 and 30 April 2010; Written submissions 5 May 2010 |
| DATE OF JUDGMENT: | 15 September 2010 |
| CASE MAY BE CITED AS: | Barro Group Pty Ltd v Vecron Constructions Pty Ltd & Ors |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 1224 |
REASONS FOR JUDGMENT
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Catchwords: CONTRACT – goods sold and delivered – whether delivery of goods proved.
GUARANTEE – whether enforceable – whether subject to condition precedent – whether condition precedent waived – whether unenforceable because of undue influence or unconscionable conduct – Garcia v National Australia Bank Ltd (1998) 194 CLR 395 defence.
CONTRIBUTION – third party claims – whether claim for damages includes claim for debt under contract – unjust enrichment – Wrongs Act 1958 ss.23A and 23B.
ESTOPPEL – promise by third party to pay for materials ordered on defendant’s account – unjust enrichment.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C F Morgan | Michael Sandor & Associates |
| For the First Defendant | Mr R D Cohrssen | Michael J Kane |
| For the Second Defendant | Mr B Carew | Vincent J Ryan |
| For the Third Party | Mr R Siva | Belleli King & Associates |
| HIS HONOUR: |
1 The plaintiff, Barro Group Pty Ltd (“Barro”), supplies pre-mixed concrete and related materials. Vecron Constructions Pty Ltd (“Vecron”) is a concreting business which provides paving and general concreting services, including laying house slabs and driveways.
2 Barro sues Vecron and a guarantor, Mr Andrew Vecris, for the sum of $135,993.78, being the unpaid price of concrete and steel products ordered and delivered to sites in Melbourne.
3 Mr Andrew Vecris, the second defendant, is the father of Mr Demitrus Vecris, who is not a party to the proceeding.
4 Mr D Vecris is the sole director of Vecron.
5 In May 2008, Vecron executed an application for commercial credit to establish a trading account with Barro. The application was signed by Mr Demetrius Vecris as director of Vecron. Included in the application was a Deed of Guarantee and Indemnity (“the Guarantee”). This was signed in May 2008 by Mr Andrew Vecris, and witnessed by his wife, Mrs Filia Vecris, the mother of Mr Demetrius Vecris.
6 The Guarantee was a continuing, all moneys guarantee providing for the payment of “any or all accounts and indebtedness now due or to become due by the Applicant to Barro whatsoever and howsoever arising”.
7 The application for credit was approved by Ms Sandra Ippolito, credit manager of Barro, on 30 June 2008. A trading relationship was established with 30-day terms and supply of concrete was maintained between July of 2008 and February of 2009. Barro contends that goods and services were ordered to the value of $483,956.78 on the Vecron account.
8 On 26 February 2009, the account was stopped at the request of Mr Andrew Vecris and no further materials were supplied. Barro contends that Vecron made further payments of $347,963, leaving the balance owing by it to Barro.
9 Vecron maintains that it had an arrangement with Mr Michael Folino whereby he was permitted to order concrete from Barro using the Vecron account so long as he continued to reimburse Vecron for any concrete used. Accordingly, Vecron argues that the $135,993.43 debt, if proved by Barro, relates to concrete ordered by Mr Folino, and had no connection with Vecron projects. In May 2008, Mr Folino was a friend of Mr D Vecris. Mr Folino’s father has worked for Mr D Vecris. In essence Mr Folino represented to Mr D Vecris that he would only use the account for a temporary time as he was applying for credit, and that anything that he ordered he would pay for.
10 Barro argues that it had no knowledge of Mr Folino prior to 26 February 2009 when the Vecron account was suspended.
11 Vecron and Mr Andrew Vecris allege that Mr Folino had authority to use Vecron’s account with Barro and did so to order the materials in respect of which Barro now sues. They have brought third party proceedings against him, ultimately relying on separate third party notices. They allege that Mr Folino agreed with Mr D Vecris to pay for the materials he ordered, but that he has failed to do so. The relief that they seek includes a declaration that they are entitled to contribution and/or indemnity and damages from Mr Folino against any judgment, including costs, that Barro may obtain in the proceeding against them.
12 The third party, Mr M Folino, filed a Defence, arguing that if any payments are outstanding in respect of concrete ordered on Vecron’s account with Barro, the responsibility lies with Five Star Concrete Construction Pty Ltd rather than Mr Folino personally, as he was simply an employee or agent of that company. The defence refers to various payments made by that company. Mr Folino was represented during the early stages of the trial, but his counsel then withdrew and his solicitors were given leave to cease to act. His defence was therefore not argued.
The Issues
13 The issues for determination are:
(a) Did Barro deliver the concrete and other products, which are the subject of its claim, as a result of orders, including orders placed by Mr Michael Folino, on the account of Vecron? (b) If yes to (a), is Vecron liable for the price of the products that Mr Folino ordered? (c) Was the document Mr A Vecris signed in May 2008, an enforceable guarantee of the debts Vecron owed to Barro (leaving the Garcia defence for determination under issue (d))? (d) If yes to (c), was the Guarantee given by Mr Andrew Vecris unenforceable because of the application of the principles stated in Garcia v National Australia Bank Ltd?[1] (e) Is Mr Folino liable to indemnify or to pay to Vecron and Mr A Vecris any amount that they are ordered to pay to Barro? [1] (1998) 194 CLR 395
ISSUE 1: Did Barro deliver the concrete and other products, which are the subject of its claim as a result of orders placed by Mr Folino on the account of Vecron?
14 Barro called evidence from Ms Ippolito, the credit manager of Barro.
15 Ms Ippolito gave evidence of how Barro deals with orders from customers. They are usually generated by a telephone call. The order is sent to the central dispatch section of Barro, where it is allocated to a plant. The delivery load is then allocated to a truck driver, who obtains a delivery docket, stating the quantity, the mix and the delivery address of the job. The truck driver proceeds to the delivery address. He completes a delivery document describing the delivery address, a time out, a time of arrival, and the time for the start of and finish of the concrete pour. Within a few days Barro sends a Tax Invoice to the customer for the delivery.
16 Orders for products other than concrete were processed in a different manner.[2]
[2] Transcript (“T”) 78
17 Ms Ippolito’s evidence established that the amount claimed was according to Barro’s records outstanding on Vecron’s account.
18 Ms Ippolito gave evidence that she had suspended Vecron’s account in February 2009 at the request of Mr D Vecris. She referred to a communications log which summarised telephone calls and contained details of Mr D Vecris calling on 26 February 2009 wanting “the account to remain inactive until fully paid”. There was a dispute about Mr D Vecris had referred to a split with his “business partner” but nothing turns on that.
19 The delivery dockets and tax invoices were tendered by Barro to prove delivery. The defendants accepted that they were admissible as business records under s.69 of the Evidence Act 2008[3] and provided prima facie proof of delivery but put arguments as to their weight. This was particularly the case as Ms Ippolito played no part in the customer order section of Barro and did not know who had received the orders for the products. I informed the parties that I would proceed on the basis that the delivery documents were prima facie evidence of delivery in accordance with the information contained on them.[4]
[3] T 92-93, T 97-98.
[4] T 95
Defendants’ Submissions
20 The defendants put in issue the ordering and delivery of the goods which are the subject of Barro’s claim. Mr A Vecris did not admit that the orders placed in relation to the disputed invoices were made by Vecron. In particular, he submits that the customer signatures are not conclusive evidence that Vecron ordered the goods.
Decision of the First Issue
21 I find that the concrete and other materials, the price of which has not been paid, were ordered by and delivered at the direction of Mr Folino. He placed these orders on Vecron’s account.
22 I consider that the delivery documents are proof that the products were ordered on Vecron’s account. Not all of the delivery dockets contained the customer’s signature by way of acknowledgement of receipt. However, that feature was explained in the evidence as reflecting the unwillingness of some subcontractors or others receiving the products to sign for them.
23 There is also sufficient evidence to conclude that these products were ordered by Mr Folino. Counsel for Vecron provided a Table setting out details of the particular deliveries, which are the subject of Barro’s claim. The deliveries were made to ten sites in suburban Melbourne.
24 Some deliveries were to the address which Mr Folino gave as his address in Court documents filed in this proceeding. A number of the deliveries were to sites to which materials has been delivered had received previous deliveries from Barro, for which Mr Folino made payment. A site in Hallam featured prominently in this regard. Some other documents recorded Mr Folino’s mobile telephone number.[5]
[5] T 224
25 Mr D Vecris gave evidence of conversations with Mr Folino about these unpaid invoices in which he confirmed that these were the addresses of Mr Folino’s projects[6]. According to Mr D Vecris, Mr Folino did not dispute that Barro had delivered the product as he requested. Ms Ippolito stated that Mr Vecris had admitted liability to the debt owed at that time.[7]
[6] T217
[7] T 80
26 I find that Barro has proved the delivery of the products which are the basis of its claim. I also find that those products were ordered by Mr M Folino, the third party, on Vecron’s account. There was no dispute about the price Barro charged for the products and I find that the total of the relevant invoices amounting to $135, 993.78 remains owing to Barro.
ISSUE 2: If Yes to (a), is Vecron liable for the price of the products that Mr
Folino ordered?
Barro’s Submissions
27 Barro argued that Vecron is liable for the price of products ordered by Mr Folino on its account. There was a relationship of actual authority between Vecron and Mr Folino. Mr D Vecris, the director of Vecron, gave Mr Folino actual or apparent authority to use Vecron’s account with Barro. Barro did not run checks to ensure that only authorised persons were using the account, but rather took customer’s assertions at face value.
28 The defendants did not submit in any detail that Mr Folino had not been given authority to order products on Vecron’s account. However, I will set out my reasons for the conclusion that he had that authority.
Consideration of the second issue
29 An agent acting within the scope of his or her actual authority, or whose acts are validly ratified by the principal, binds their principal. [8]
[8] See e.g. Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 and Crabtree - Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd (1975) 133 CLR 72
30 The evidence that I set out below establishes that Mr D Vecris gave Mr Folino authority to order product on Vecron’s account with Barro. In answer to questions put in cross-examination, Mr D Vecris gave the following evidence.
“Q: You have a deal with Folino that he can use the account?--- A: Yes. Q: So you authorise him to use your account?--- A: Yes. Q: As far as Vecron knows, it's Vecron. That's right? As far as Barro
knows, it's Vecron?---A: Yes. Q: You haven't told them any different. That's right?--- A: Yes. Q: Then on that account the concrete's delivered and you pay for it.
That's right?---A: Yes.”[9] [9] T 233
31 Evidence that Mr Folino had authority to order product on Vecron’s account is also found in Mr D Vecris’ actions in asking Barro to suspend the account in February 2009. In addition he gave the following evidence of his conversation with Mr Folino about his non- payment of invoices:
“in the meantime, in December, I’d noticed that he’d used quite a substantial amount of supplies through Pronto, or through Barro, and I suggested that I would stop the account running until he had paid that, and he threatened me with if he found out that I had stopped the account on him he would not pay me anything that he owed in regards to - with everything that he owed he would not pay me. So I was basically forced to allow him to continue to work. He promised me that certain jobs had to be finished before he would get payment, and I was forced to allow him to continue using the account.
Q: But when he made the threat, why didn't you just cancel the
account or cancel, you know - - -?A:
Well, it was a lot of money. I was in a position where either he wouldn't pay me anything or I could [give] him the benefit of the doubt and let him continue using the account and when he had finished the work he would pay me.” [10]
[10] T 210
32 Ms Ippolito gave the following evidence-in-chief:
“Q:
The order is normally generated by a call from the customer. It could be the director, could be an employee of his, could be one of his subcontractors, being a concreter, right?[11]
Did you have conversations with Mr Vecris about his liability to pay
those amounts?---A:
Demetrius Vecris rung me up to say that he's had a second thought with his partner - which is the first I've heard of it, then as far as I could see was supplying Vecron and him, there was nobody else involved; and that he wants the account suspended, and I said to him in so many words, ‘Do you realise the liability's still on you, for the simple reason the concrete's been ordered in your account? You have not said to us the concrete's not to be ordered by any other party except for yourself; so therefore anybody rung up for concrete on your account, that was acceptable.’ He said to me that ‘yes’, he realises the liability lies on him and that the account will be paid, but to have the account suspended in the mean time.”[12]
[11] T 52
[12] T 65
Decision of the second issue
33 I find that a relationship of actual authority existed between Vecron and Mr Folino. As director of Vecron, Mr D Vecris established an express arrangement with Mr Folino permitting him to use Vecron’s credit account with Barro to purchase cement and other products. Vecron therefore permitted Mr Folino to hold himself out to Barro as ‘Vecron Constructions’, effectively establishing a principal/agent relationship.
34 I do not consider that Mr Folino acted outside the scope of his authority by continuing to use the Vecron account after he had ceased to pay for the materials that he ordered from Barro. Mr D Vecris allowed Mr Folino to continue using Vecron’s account, because there was a relationship of trust between them and he believed that the best way to recoup monies owed was to allow Mr Folino to continue to trade. Although Mr D Vecris felt that he had no choice other than to allow Mr Folino to continue to place orders and thereby trade, he did make a decision to give Mr Folino that permission. He did have the option to put a stop on the account as soon he became aware of Mr Folino’s late payments. If he had done so and alerted Barro, any further orders made by Mr Folino would have been outside the scope of his authority. But he did not act in that manner and, accordingly, Vecron was liable for the product delivered to Mr Folino.
35 Vecron also ratified the acts of Mr Folino by continuing to allow him to order concrete on the Barro account for some time after he ceased to pay Mr D Vecris for them. He had been paying Mr D Vecris rather than Barro directly.
36 Until in February 2009, Mr D Vecris phoned Barro to suspend Vecron’s account, it had no knowledge of any improper or undesired use of the account and Barro was entitled to accept the orders from Mr Folino placed on Vecron’s account. After that telephone call, Barro suspended the account as requested.
37 Vecron is liable for the unpaid debts to Barro incurred by Mr Folino by placing orders on its account.
ISSUE 3: Was the document Mr Andrew Vecris signed in May 2008 an enforceable guarantee of the debts Vecron owed to Barro (leaving the Garcia defence for determination under issue 4)?
Application for Commercial Credit Form
38 The form of the application is one where the applicant ‘fills in the blanks’ with personal details to prove their creditworthiness. On the top of the first page it states “[t]o complete this application -” and then sets out a number of clauses or instructions. The third page is headed “Terms and Conditions of Application for Commercial Credit” and thereafter sets out a separate set of clauses. The last two pages contain a guarantee and indemnity form which requires a separate signature.
39 Clause 5 of the first page states:
“[I]f the Applicant is a Company, the Deed of Guarantee and Indemnity form on the last page must be completed by all directors of the Company. Guarantors should not witness each other’s signature and witnesses should be aged 18 years or older (we prefer that a Barro Group authorised representative witnesses the signatories).”
40 Clause 8 of the first page states:
“[T]he granting of your Application is in the absolute discretion of Barro Group and will not be of any effect unless confirmed in writing by Barro Group.”
41 In the second set of terms on the third page, Clause 10 states:
“[T]he Applicant acknowledges that Barro in its absolute discretion may at any time and without any liability whatsoever to the Applicant or any party claiming through the Applicant, vary cancel or withdraw without notice all credit facilities granted to the Applicant.”
42 The Guarantee and Indemnity form was signed only by Mr A Vecris, and was witnessed by his wife, Mrs F Vecris.
43 By letter dated 30 June 2008,[13] Barro wrote to Vecron to confirm that the application was approved for a three month trial.
[13] Stapled on the first page of Exhibit A
Evidence of Ms S Ippolito
44 Ms Ippolito stated that it was not a requirement of Barro that a director provide a guarantee, but a preference.[14]
[14] T 41
45 In cross-examination, Ms Ippolito acknowledged that she knew that the guarantor was not a director of Vecron.[15] She said it was customary for Barro to enter into guarantee agreements with a third party, who was often a relative.[16] She said that if a third party guarantee was provided, rather than a director guarantee, it would not be fatal to the application. She would still assess it on its merits.[17] When asked about the requirement in Clause 5 that directors themselves “must” provide the guarantee, she replied:
“If I didn’t put that in [the director guarantee requirement], nobody would sign the guarantee. So we put that in and then if it doesn’t happen we assess the application accordingly and might not give a larger credit limit or might decline the account. We are flexible in our credit policy but if we don’t put that as a requirement we would not get any guarantees signed because it would not say anywhere in our account application that we require directors to sign guarantees. Just a safeguard for us and hopefully with that we do get them most of the time.” [18]
[15] T 143
[16] T 143-144
[17] T 148
[18] T147
Mr Andrew Vecris’ submissions
46 Mr A Vecris contends that his signature on the guarantee section of the credit application form did not constitute a binding guarantee. He maintains that the contract of guarantee was not properly concluded, because a condition precedent was not satisfied, namely, that the Guarantee and Indemnity had not been completed by all directors of Vecron. Mr A Vecris also argued that it was a term of the Guarantee that there would be a co-surety and that in the absence of a co-surety, the Guarantee was unenforceable against him.
47 Mr A Vecris was not a director of Vecron. In giving the Guarantee, he acted as a volunteer. Barro was aware that he was not a director. Moreover, Mr D Vecris, as the director of Vecron, and therefore required by the terms of Clause 5 to sign the guarantee, did not do so.
48 Counsel for Mr A Vecris submitted that the Guarantee was a deed purporting to be executed under seal that is drawn in a form by Barro, who intended that directors were to be bound by it. Then, because of the special rules applying to deeds, the intending surety will be bound at law, but is entitled to equity relieving him of any obligation. Reference was made to the use of the word “guarantors” in the document.
49 Counsel for Mr A Vecris relied on the decisions in Stramit Industries Limited v Reinhardt[19] and Marston v Charles H Griffith & Co Pty Ltd.[20] In Marston’s Case, Powell J set out the following principles:
[19] [1985] 1 Qd R 562
[20] (1982) 3 NSWLR 294 cf Re Prime Foods Ltd [1999] QSC 174
“1.
if it is a term, whether express or implied, of the arrangements pursuant to which a parol contract of guarantee is executed, that there will be another co-surety or other co-sureties, or that the principal debt, or the guarantee, will be secured in an identified way, then, unless the intended surety who has executed the guarantee consents to the other co-surety or co-sureties not thereafter executing the guarantee … or to he contemplated security not being provided … then the intended surety never becomes liable under the guarantee despite his execution of it — the failure of the other co-surety or co-sureties to execute the guarantee, or the failure to provide the intended security, thus affords the intending surety who executed the guarantee a defence at law to an action on the guarantee;
2.
if a parol contract of guarantee which is executed by an intending surety is drawn in a form showing another or others as intended joint and several sureties, it will be presumed, in the absence of acceptable evidence to the contrary, that the execution of that other, or those others, was a condition precedent to the surety who signed the guarantee becoming liable under it, and his, or their, failure to execute the guarantee will afford to the intending surety who executed the guarantee a defence at law to an action on the guarantee;
3.
where an intending surety has executed a guarantee under seal which is drawn in a form showing another or others as intended joint and several sureties, and has thereafter delivered the guarantee to the principal otherwise than as an escrow, then, because of the special rules as to deeds, the intending surety will be bound at law even though that other, or those others, does not, or do not, thereafter execute the guarantee; however, the fact that that other, or those others, does not, or do not, thereafter execute the guarantee gives rise to an equity in the intending surety to be relieved against the guarantee, which equity could be enforced by a suit in equity seeking a declaration of discharge in equity and an order for delivery up … ;
4.
where, upon its proper construction, a guarantee under seal reveals an intention that an intending surety who executed it is not to be liable under it unless another, or others, execute it as joint co-sureties, or unless the principal debt, or the guarantee, is secured in a particular way the surety who executed it is not liable under the guarantee unless that other, or those others, execute it, or unless the security is provided; the failure of that other, or those others, to execute the guarantee, or the failure to provide the security, affords the intended surety who executed the guarantee a defence at law to an action on the guarantee .. .”[21]
[21] Ibid at 300-301
50 Counsel for Mr A Vecris submitted that the Guarantee could not be construed as a counter-offer as Barro contended. Counsel pointed to the fact that it was a unilateral deed that contained four panels for signature. Because anyone could sign it, the fact that Mr A Vecris signed it could not, as a matter of construction, make it a counter-offer.
51 In response to Barro’s argument that it had waived the condition precedent in Clause 5, counsel submitted that that clause was intended to benefit both Barro and Mr A Vecris, who had given the Guarantee. Waiver did not apply when there is benefit to both parties. Clause 5 imposed the requirement that a guarantee from the director or directors of the company be provided at the least. Barro may customarily accept third-party guarantors if it wished, but Clause 5 required it also to obtain a guarantee from a director. If a third-party guarantor read Clause 5, they would expect that directors would also be signing the guarantee. The third-party guarantor would therefore be entitled to assume that it would be a shared liability.
52 Counsel for Vecron submitted that the first page of the document, and particularly Clause 5, formed part of the guarantee. Counsel submitted that regardless of Mr A Vecris guaranteeing the application, Clause 5 specifies that it is mandatory that there be director guarantees.
Barro’s submissions
53 Counsel for Barro submitted that the terms of the document determined the issue. The terms contained on the first page of the document were not clauses but instructions for completing the application.
54 Counsel pointed to Clause 7 of the first page, which states “[y]our application will be assessed and our Credit Manager will advise you of the result of your application”, and Clause 8, which states “[t]he granting of your Application is in the absolute discretion of Barro Group and will not be of any effect unless confirmed in writing by Barro Group”. Counsel submitted that these clauses indicated that the first page should be construed as an invitation to treat.
55 In regard to the mandatory language used in Clause 5, counsel submitted that as it was an invitation to treat, or an offer capable of being accepted, a counter-offer was made by Vecron of a third party guarantor, which was accepted by Barro. Counsel pointed to Ms Ippolito’s evidence that this was standard practice of Barro.
56 Counsel for Barro sought to distinguish the authorities relied on by Vecron on two bases. First, in both authorities the sureties were named on the document and there was an expectation of each co-surety that the other would execute the document. There was no evidence of such an expectation in this case. Second, there is not even one director offering to guarantee the debts, but rather a third-party.
Particular issues arising in respect of the third issue
57 The issues for determination in respect of issue 3 are the following:
• Is Clause 5 a condition precedent to the execution of the Guarantee or an invitation to treat?; • Have Barro waived their demand for a director guarantee in favour of a third party guarantee?; • Has the first defendant provided a counter-offer to the request for a director guarantee that was accepted by Barro? 58 As the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [22] stated the “the meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean”.
[22] (2004) 219 CLR 165 at 179 [40]
59 In my opinion, the guarantee given by Mr A Vecris does bind him despite the fact that the guarantee of the director was not given. When Mr A Vecris gave his third-party guarantee, a counter-offer was made on behalf of the debtor, Mr D Vecris, which was subsequently accepted by Barro.
60 Assistance is gained from the decision of the New South Wales Court of Appeal in Prosilis v Double Bay Newspapers Pty Ltd.[23] In that case a creditor sued upon a guarantee which, in a standard form, prescribed that personal guarantees of each director were to be provided where proprietary limited companies made the application. The guarantor was one of two directors, the other director being his wife. The guarantor argued that he should be released from the action on the guarantee as it was incomplete. The guarantor was held liable.
[23] [2000] NSWCA 30
61 The relevant term was:
“The personal guarantee of each director is required in the case of a registered company, the paid up capital of which is a nominal amount only. Two guarantees are printed on the back of this form. Additional copies may be obtained from our Credit Department, if required.”
62 Mason P, with whom Priestley and Beazley JJA agreed, decided that the critical question was whether the clause, which purported to be an express term of the credit arrangement between the parties, became an express or implied term of the guarantee which the guarantor executed and the creditor accepted. He first referred to Powell J’s statement in Marston:[24]
“If a parol contract of guarantee which is executed by an intending surety is drawn in the form showing another or others as intended joint and several sureties, it will be presumed, in the absence of acceptable evidence to the contrary, that the execution of that other, or three others, was a condition precedent to the surety who signed the guarantee becoming liable under it, and their failure to execute the guarantee will afford the intenting surety who executed the guarantee a defence at law to an action on the guarantee”[25]
[24] Marston v Charles H Griffith & Co Pty Ltd (1982) 3 NSWLR 294.
[25] Marston v Charles H Griffith & Co Pty Ltd (ibid) 300-301.
63 Mason P referred to the evidence showing that “the single guarantee was executed by the appellant and proffered by him on the basis that it was offered for acceptance as the sole collateral support for the credit terms sought by the principal debtor”.[26]
[26] Prosilis v Double Bay Newspapers Pty Ltd [2000] NSWCA 30, [42].
64 Mason P then addressed the guarantor’s argument that the proffered guarantee would have no effect unless and until identical guarantees were received from the other director:
“[T]his strikes me as unrealistic and uncommercial. It ignores the fact that the single guarantee and the application were each dated and sent on 14 September 1994. It treats the printed Credit Terms as a procrustean straightjacket, whereas each of the three terms is capable of being read as a reservation of right by the company to which there was an ‘application for credit account’”.[27]
[27] Prosilis v Double Bay Newspapers Pty Ltd (ibid) [46]
65 Mason P concluded that the clause was no more than a reservation of a right to decline to treat with the debtor unless the minimum number of guarantees were proffered:
“The circumstances in which all parties dealt with each other prior to acceptance of the credit application disclose those associated with the principal debtor, Australian Catalogue Corporation Pty Ltd proceeding on the basis that only one guarantee was offered, effectively on a ‘take it or leave it basis.’ None of this reasoning involves reference to purely subjective intentions. Nor does it contradict the written terms of the guarantee, assuming for the purpose of argument that the third of the Credit Terms is part of the guarantee. That is because the guarantee contract that was formed upon acceptance of the principal debtor’s credit application did not (when construed in light of its manner of formulation) itself stipulate that such guarantee was conditional upon execution of an identical guarantee by the appellant’s fellow director”[28]
[28] Prosilis v Double Bay Newspapers Pty Ltd (ibid) [46]
66 Mason P concluded that even if the clause was construed to be a condition precedent, it never became part of the contract:
“… That term never became part of that contract because the creditor accepted the proffered counter-offer from the principal debtor. That counter-offer was represented by the company’s Application which was accompanied by a single guarantee in circumstances inviting acceptance on that basis. In Bleyer, the pre-contractual communications stressed adherence to clause 3 of the Credit Terms. In the present case, they demonstrated departure.”[29]
[29] Prosilis v Double Bay Newspapers Pty Ltd (ibid) [47]
67 I also consider that Barro waived the requirement for directors’ guarantees. To establish a waiver it must be proved that notice of the waiver was given and that Clause 5 was included ‘primarily’ or ‘solely’ for the benefit of Barro.[30] Actual notice of the waiver can be found in the letter sent by Barro to Vecron dated 30 June 2008.[31] No express acknowledgment of the failure to provide directors’ guarantees was provided, however, in the table that sets out the account details of Vecron it is acknowledged that Mr A Vecris is to be a guarantor. In my opinion, this constitutes Barro giving actual notice of waiver.
[30] J O’Donovan and J Phillips, The Modern Contract of Guarantee (3rd ed, 1996), p 493, citing Morten v Marshall (1863) 2 H & C 305; 159 ER 127 as authority.
[31] Stapled on the first page of Exhibit A.
68 Clause 5 is of primary benefit to Barro, as its purpose is to bring personal responsibility as a director of a company debtor.
Decision of the third issue
69 I consider that, save for the determination of the Garcia defence which is next considered, the document that Mr Andrew Vecris signed in May 2008 was an enforceable guarantee of Vecron’s debts to Barro.
ISSUE 4: Was the guarantee given by Mr Andrew Vecris unenforceable because of the application of the principles stated in Garcia v National Australia Bank Ltd?
70 Mr Andrew Vecris relies on the defences of unconscionability and undue influence considered by the High Court in Garcia v National Australia Bank Limited.[32] He counterclaimed, seeking orders relieving him from his obligations under the Guarantee. The evidence of Mr A Vecris’ capabilities and how he came to sign the Guarantee are critical to the determination of this issue.
[32] (ibid)
Evidence of Mr Andrew Vecris
71 Mr A Vecris was born in Cairo, Egypt and is sixty-nine years old. English is his second language which was learnt on the go after he arrived in Australia in 1964 and began working in a factory. Mr Vecris is capable of reading English. He was originally trained as a fitter and turner in Egypt and was employed in Melbourne from 1964 to 1982 in that trade. In 1982, he completed a sewing machine mechanic certificate at the Royal Melbourne Institute of Technology, and worked in that role until 1984, when he left to begin a gardening business. He departed from gardening after three months to begin his own sewing machine repair business. He conducted this business from the garage of the family home.
72 In 1980, Mr and Mrs Vecris obtained a mortgage to purchase their home. In operating his business, Mr Vecris maintains an overdraft account to a limit of $5,000. Currently he is an appointing officer of VicSoccer and is in charge of an ordinary savings account provided by the Commonwealth Bank to pay referees their match fees when they become payable because mistakes have been made in their allocation to games.
73 Mr Vecris’ gave evidence that his wife was responsible for all financial duties of the home and his business. When asked in evidence-in-chief to explain a financial document from Westpac, he stated:
“If I tell you most of the time all this is done by my wife and this is going to be a bit difficult for me to tell you where that goes and where that comes from.”[33]
[33] T 270
74 Mrs Vecris completes the Business Activity Statements for her husband’s business. Mr and Mrs Vecris also receive help from their younger son to prepare BAS documentation that goes to his accountant at the end of each financial year.
The circumstances in which Mr Andrew Vecris signed the Guarantee in May
200875 Mr Andrew Vecris was working in the garage when he was called into the family kitchen by his wife, who was with their son, Demetrius. He was presented with the application form and accompanying guarantee deed, which was turned up to the signature page for the Guarantee. He stated that he did not read any other pages. He signed the page requiring the signature, but did not read the contents of that page either. He could not say whether he read the words “signature of guarantor” which were placed above the space reserved for signature, but he could have.[34] He was present in the kitchen for a minute or a minute-and-a-half before returning back to the garage.
[34] T 286
76 Mr Andrew Vecris stated that Demetrius said “sign here, Dad” with a smile on his face. His wife said: “Yes, we’re going to help him, yes.” Mr Andrew Vecris stated: “So I sign. She signs as well as me. I said ‘Thank you’ and I went back again to the garage.”[35]
[35] T266
77 Mr Andrew Vecris stated that when he signed the document he understood that he was helping his son to start a business. When asked why he signed the page, Mr Vecris responded that he signed the document in order to get concreting supplies for his son, which is what his son communicated to him when he was explaining the purpose of the document. When cross-examined by counsel for Barro, Mr Andrew Vecris stated:
“Q: You were happy [to sign] because you’re his father; just provide
the guarantee? –A: No. I was happy to sign the paper because he asked me for – he wanted to get supplies and he couldn’t get supplies for his business. Q: Without a guarantee? – A: For that, somebody who has for a name or – so I said, ‘yes, no
problem’.”[36][36] T 284
78 Mr Andrew Vecris denied that he had knowledge of the effect of the Guarantee and gave the following evidence:
“HIS HONOUR:
Q:
…The question to you was, did you know at the time you signed that document in front of you [Exhibit A: the guarantee and application form] that you were guaranteeing the debts of your son’s company… ?
A: I didn’t. No. I wasn’t guaranteeing the debts of the company.” Q: So your answer is no? A. As far as I know, no.” COUNSEL:
Q: Well, what were you signing? A: I was signing to get his supplies easier. He had difficulties getting
supplies.[37]Q: And how did your signature help? . . .Because the company that he was dealing with, they wanted a signature from the dad or the mum or something , so I ad to put the signature to give him a helping hand.” … Q: “You didn’t think to say, ‘well, what are we signing son?--- A: Like I said, they asked me to sign to help the son. My wife was there, I was there and the question was, I will help him and I thought I’ll help him and I signed the paper but I did not know – nobody say and explained to me, ‘listen, young man, what are you doing?’ or something. No, just was between son, mother and me. So I signed it.”[38]
[37] T285
[38] T 285-286
79 Mr Andrew Vecris gave evidence that his understanding of a guarantee was related to guaranteeing the quality of work that he performed when repairing sewing machines.
Evidence of Mr Demetrius Vecris
80 Mr D Vecris gave evidence that his understanding of the Guarantee and Indemnity part of the credit application was that it was some sort of character reference to show that he was of good character “or who could vouch for who he was”.[39] However, he agreed that he had read that section of the document that stated “Signed sealed and delivered and then signature of Guarantor.”[40] He stated that he went to his parents’ home for dinner and just before dinner that he met his father in the kitchen. He asked his father to sign the document, informing him that it was “just for an application so I can get an account open get some concrete and he signed it for me.”[41] He stated that he had the document turned to the guarantee page and asked his father to sign it. When his father queried what the signature was for, Demetrius told him it was “so he could open up an account.”[42] Andrew Vecris then signed the document without reading its contents or the rest of it. He did not advise his father to seek independent legal advice.
[39] T205
[40] T247
[41] T205
[42] T 228
81 Mr D Vecris later rang the Barro salesman, who collected the document.
82 Mrs Vecris, who witnessed her husband’s signature, was not called to give evidence.
Evidence of Ms S Ippolito
83 In cross-examination by the second defendant, Ms Ippolito confirmed that she had processed Vecron’s application for credit, and that she was the person who filled out the ‘Office Use Only’ box on the first page of the application. She confirmed that she conducted a title search of the guarantor and found that it was Andrew Vecris. She then confirmed that at the time of the search, she recognised that Andrew Vecris was not a company director, and that his only involvement in the transaction was one of surety. Ms Ippolito confirmed that no one on behalf of Barro explained the purport and effect of the guarantee to Andrew Vecris. She stated that it was commonplace for relatives to give guarantees to newly established companies like Vecron.
Additional Features of the Credit Application and Guarantee
84 The Application for Commercial Credit featured on its first page a box which contained the following words in capital letters:
“THIS APPLICATION FOR COMMERCIAL CREDIT AND THE ATTACHED GENERAL TERMS AND CONDITIONS OF SALE ARE CRITICAL DOCUMENTS. DO NOT COMPLETE THIS APPLICATION IF YOU HAVE ANY QUERIES ABOUT WHAT YOU ARE SIGNING, IN PARTICULAR THE GUARANTEE AND INDEMNITY. BARRO GROUP SUGGESTS YOU SEEK INDEPENDENT COMMERCIAL, FINANCIAL and/or LEGAL ASSISTANCE”.
85 The Application contained a section for the provision of the details of trade referees. The second last page of the document was headed “CONFIDENTIAL” “DEED of GUARANTEE& INDEMNITY”. It provided a place for the signatures of guarantors, which is where Mr A Vecris signed the Deed.
Submissions of Mr A Vecris
86 Counsel for Mr A Vecris argued that he had no understanding of what a guarantee was. He was a volunteer. His defence pleaded that Mr D Vecris exercised a special relationship of influence and reliance over him by reason of their relationship as son and father, such that Mr A Vecris would do what Mr D Vecris asked him to do.
87 Counsel for Mr A Vecris argued that Barro would have understood that the father placed trust and confidence in the son. The Court could infer as a matter of constructive knowledge that the transaction may not have been fully and accurately explained to the father. This was said not to be a high evidentiary onus.
88 The defence pleaded that Mr A Vecris’ signature on the Guarantee was obtained by the undue influence of the son over his father by reason of the lack of knowledge of the father of the business conducted by his son, the contents of the guarantee, the love and affection between the father and the son and the desire of the father to please the son.
89 Barro knew, or ought to have known of the features of the relationship between the father and son and the influence of the son and reliance by the father were the natural and probable features of that relationship.
Submissions of Barro
90 Counsel for Barro submitted that the Garcia principles were not applicable to the relationship between Mr A Vecris and his son and that Mr A Vecris would have to rely on the principles of undue influence in cases such as Blomley v Ryan.[43] Counsel noted that both father and son claimed to not understand the purport and effect of the transaction and the defence discussed in Garcia’s Case could not apply in such circumstances. Mr A Vecris’ case was really one of unilateral mistake. Mr A Vecris was an able and capable businessman.
[43] (1956) 99 CLR 362
Principles enunciated in Garcia
91 The majority of the High Court (Gaudron, McHugh, Gummow and Hayne JJ) in Garcia v National Australia Bank Limited adopted Dixon J’s explanation in Yerkey v Jones[44] of the two kinds of situations that entitle a wife to relief in equity in circumstances where a guarantee has been procured in unconscionable circumstances. Those two situations are:
[44] (1939) 63 CLR 649
[45] Yerkey v Jones (ibid) 684
[46] Yerkey v Jones (ibid) 684
• Where a wife, “alive to the nature and effect of the obligation she is undertaking, is procured to become her husband’s surety by the exertion by him upon her of undue influence, affirmatively established”;[45] and • Where a wife “does not understand the effect of the document or the nature of the transaction of suretyship.”[46] 92 It is the second situation which is pleaded by Mr A Vecris.[47]
[47] See Amended Defence and Counterclaim of the Secondnamed Defendant, paragraphs 6 – 8E.
93 In reference to the second situation, the High Court stated:
“It holds further, in the second kind of case, that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger. And what makes it unconscionable to enforce it in the second kind of case is the combination of circumstances that:
(a)
in fact the surety did not understand the purport and effect of the transaction;
(b)
the transaction was voluntary (in the sense that the surety obtained no gain from the contract the performance of which was guaranteed);
(c)
the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet
(d)
the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her.
…. It will be seen that the analysis of the second kind of case identified in Yerkey v Jones is not one which depends upon any presumption of undue influence by the husband over the wife. As we have said, undue influence is dealt with separately and differently. Nor does the analysis depend upon identifying the husband as acting as agent for the creditor in procuring the wife’s agreement to the transaction. Rather, it depends upon the surety being a volunteer and mistaken about the purport and effect of the transaction, and the creditor being taken to have appreciated that because of the trust and confidence between surety and debtor the surety may well receive from the debtor no sufficient explanation of the transaction’s purport and effect. To enforce the transaction against a mistaken volunteer when the creditor, the party that seeks to take the benefit of the transaction, has not itself explained the transaction, and does not know that a third party has done so, would be unconscionable.”[48]
[48] Garcia v National Australia Bank Ltd (ibid) 395, 408-410
94 These principles were applied by the Court of Appeal in Kranz v National Australia Bank Ltd[49] in which Mr Kranz, agreed to secure a loan procured by Mr Lefkovic. The purpose of the loan was to finance the purchase of shares by Mr Lefkovic. Mr Kranz was married to the sister of Mr Lefkovic’s wife. Mr Lefkovic was an accountant and had often been Mr Kranz’s business adviser during a period of twelve years. Mr Kranz could read but not write English, but was an experienced businessman. Charles JA (with whom Winneke P and Eames JA agreed) held that the principles in Garcia are not limited “to the most intimate of family relationships”.[50] Of this issue, Charles JA held:
“But the formulation in the judgment of the majority of the High Court in Garcia is not so confined. The principle stated by the High Court in Garcia would make it unconscionable for a bank to enforce a guarantee given by a volunteer if it has not explained the situation to the guarantor, and does not know that an independent person has done so, if the bank knows that there was a relationship of trust and confidence between the guarantor and the debtor whose debt has been guaranteed.[51] In Australia it remains therefore for the debtor to establish that the bank was aware of a relationship that put the bank on inquiry, such as that of a husband and wife or solicitor and client, or that there was a relationship of confidence between the debtor and the third party.”[52]
[49] (2003) 8 VR 310
[50] Kranz v National Australia Bank Ltd (2003) 8 VR 310, 320
[51] Citing Garcia v National Australia Bank Ltd (ibid) 409 at [33]
[52] Kranz v National Australia Bank Ltd (ibid) 322
95 Given the limited knowledge available to the Bank, Charles JA concluded that it could not have known, actively or constructively, that there was a relationship of trust between Kranz and Lefkovic so as to invoke the principles in Garcia.
Decision of the fourth issue
96 Applying the Court of Appeal’s judgment in Kranz, I conclude that the principle in Garcia is not confined to the most intimate of family relationships, and could potentially extend to a parent-mature age child relationship. There are authorities that support that conclusion.[53]
[53] State Bank of New South Wales Ltd v Layou [2001] ANZ ConvR 487; [2001] NSW ConvR 55- 984 cited in Kranz and see also ANZ Banking Group Ltd v Alirezai [2004] QCA 006 at [39]
97 Ms Ippolito testified that when she assessed the application, she assumed that a “relative” of Demetrius Vecris was guaranteeing his application. That was usually the case.[54] The evidence supports the conclusion that Ms Ippolito was aware or ought to have been aware that Mr A Vecris was a volunteer. The evidence also supports the conclusion that Ms Ippolito ought to have been aware that Mr Andrew Vecris may well have been the father of Mr D Vecris.[55]
[54] T 144
[55] T 143 -144
98 It remains to determine whether Andrew Vecris ought to be relieved of the obligations of the Guarantee under the second situation identified in Garcia, because Barro understood, or ought to have understood, that Mr Demetrius Vecris may not have fully and accurately explained the purport and effect of the transaction to his father.
Findings
99 I accept Mr Andrew Vecris’ evidence of how he came to sign the Guarantee. I consider that his evidence contained the truth of how he came to sign the Guarantee and of what he understood that it entailed. I find that he did not understand that he was guaranteeing all of Vecron’s debt. His evidence supports the conclusion that he believed that he was helping his son - a parent supporting his son’s application to open a trade account. Certainly there is nothing to suggest that he was aware that he might be liable for debts incurred on the account of Vecron by anyone that his son might authorise to use it. He had no knowledge that Mr Michael Folino could run up debts on the account. I saw nothing implausible or contradictory in his account. I accept that he was a man of some small scale business experience, but the only major financial document that he has ever signed was a family mortgage many years ago.
100 I have considered carefully the following matters. First the failure of Mr Andrew Vecris to call his wife to give evidence, for which no explanation was provided. This entitles the conclusion that her evidence would not have assisted his case.[56] Second I find Mr Demetrius Vecris’ evidence that he was unaware that he was asking his father to sign a guarantee implausible. He had filled out the form, including the trade referees section and had ample time to read the warning on the front page and the section headed “Deed of Guarantee & Indemnity”. By handing the document to his father turned to the page requiring signature he hampered his father considering the whole of the document.
[56] Jones v Dunkel (1959) 101 CLR 298
101 Despite these observations about the failure to call Mrs Vecris and the evidence of Mr D Vecris, I found Mr A Vecris’ evidence convincing about how he came to sign the Guarantee and what he understood that it entailed. It is not unknown for members of a family to provide a parent with inaccurate information about a document that they are asked to sign.
102 I therefore find that in signing the guarantee Mr Andrew Vecris was a mistaken volunteer.
103 I find that Barro through Ms Ippolito knew that Mr Andrew Vecris, the guarantor, was a volunteer and ought to have known that he may well have been the father of Mr Demetrius Vecris.
104 I also find that Barro took no steps to ensure that Mr Andrew Vecris understood the nature and effect of the guarantee, not least that he would be liable for debts incurred by anyone whom Vecron, through Mr Demetrius Vecris, authorised to use the account. This is despite Barro’s Credit Application Form stating in Clause 5 on page 1 in respect of the Deed of Guarantee and Indemnity “(we prefer that a Barro Group authorised representative witnesses the signatories)”.
105 I consider that Mr Andrew Vecris has established that Barro knew or ought to have known that relationship of trust and confidence would be likely to exist between father and an adult son seeking to establish a small business. It requires no great evidence to conclude that Barro ought to have known many parents will rely on and trust their sons and daughters to advise them about business transactions. The Guarantee was detailed and densely worded. It carried in it the potential liability for debts incurred on the Vecron account that Barro seeks to enforce in this case. A prospective guarantor required a careful explanation of it in order to understand its ramifications.
Decision of issue four
106 I consider that the four circumstances specified in Garcia’s Case and set out above have been established by Mr Andrew Vecris.[57] It would be unconscionable in the relevant sense for Barro to be able to enforce the Guarantee against him. Mr Andrew Vecris is entitled to a declaration that he never became liable to Barro pursuant to the guarantee.
[57] Cf Bank of New South Wales Ltd v Chia (2000) 50 NSWLR 587
107 Mr A Vecris’ defence contained a plea that from about October 2008, Barro and Vecron agreed to extend the credit available, including to provide it to persons other than Vecron. That plea was not supported by evidence and was not developed in submission.
ISSUE 5: Is Mr Folino liable to indemnify or to pay to Vecron and Mr A Vecris any amount that they are ordered to pay to Vecron?
108 In its third-party proceeding, Vecron alleged that Mr Folino requested it to permit him to order materials using its account with Barro on the basis of representations that he would be responsible for payment of the material.
109 Vecron alleges that it relied on Mr Folino’s representations and acted to its detriment by allowing him to order materials on its account. It alleges that Mr Folino is estopped by his conduct from denying an obligation to pay the amount Vecron owes to Barro. Vecron argues its case in reliance on promissory estoppel, as it considers that its arrangement with Mr Folino was not supported by consideration and therefore was not an enforceable contract.
110 Vecron relied on the decision of the High Court decision in Walton Stores (Interstate) Ltd v Maher,[58] including the following principles contained in the judgment of Brennan J:
“ In my opinion to establish an equitable estoppel, it is necessary for the plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the plaintiff knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.”
[58] (1988) 164 CLR 387 at 428-429
111 I consider that Vecron has made out a case of promissory estoppel based on its reliance on Mr Folino’s representations. It assumed that a legal relationship existed between them as a result of Mr Folino’s representations and that he would pay for the materials that he ordered. It acted to its detriment in reliance on the representations, as Mr Folino knew, by allowing him to order materials on its account with Barro. Mr Folino has failed to fulfil the assumption or expectation of Vecron.
112 One method of granting relief on the basis of the promissory estoppel is to require that Mr Folino pay to Vecron the amount that he represented that he would pay, but he did not.[59]
[59] See Young, Croft and Smith ‘On Equity’, pps 1114 -1118
113 Vecron also claims in its third-party proceeding that Mr Folino has been unjustly enriched at its expense.
114 The evidence establishes that Mr Folino obtained the benefit of the materials that he ordered from Barro on Vecron’s account. He has been unjustly enriched at the expense of Vecron. This provides a second reason for awarding equitable compensation in favour of Vecron against Mr Folino. [60]
[60] ibid p1207
115 A claim that Vecron acted as agent for Mr Folino in the purchase of the materials was not pressed.
Decision of issue five
116 Vecron is entitled to succeed in its third party claim against Mr Folino.
Third party proceedings by Mr Andrew Vecris against Mr M Folino
117 I will proceed to consider Mr Andrew Vecris’ third party proceeding in case I am wrong in my conclusion that the Guarantee is not enforceable against him.
118 The third party proceeding brought by Mr A Vecris against Mr Folino in its amended form proceeds on the basis that, for the exclusive purposes of the third-party proceeding, it “was liable in respect of damages” within the meaning of that phrase in s.23A of the Wrongs Act 1958. Section 23A is contained in Part IV of that Act which deals with contribution. Section 23A (1) states that:
“For the purposes of this Part a person is liable in respect of any damage if the person who suffered that damage, or anyone representing the estate or dependants of that person, is liable to recover compensation from the first-mentioned person in respect of that damage whatever the legal basis of liability, whether tort, breach of contract, breach of trust or otherwise.”
119 Section 23B (1) states that:
“Subject to the following provisions of this section, a person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with the first-mentioned person or otherwise).”
120 Counsel for Mr Vecris argued that the word “damages” should be construed broadly as including a debt owing under a guarantee, to give effect to the purpose of the provisions in Part IV. He pointed to the width of the phrase “whether tort, breach of contract, breach of trust or otherwise”.[61]
[61] In a written submissions, counsel for Mr A Vecris referred to State Electricity Commission of Victoria v Fooks [1994] 1 VR 259 at 262 and Suncorp-Metway Ltd v Panagiotidis [2009] VSC 126.
121 There are a number of authorities on the meaning of ss.23A and 23B of the Wrongs Act. In Alexander v Perpetual Trustees WA Ltd,[62] Gleeson CJ, Gummow and Hayne JJ stated:
“Two relevant propositions are, therefore, central to the proper application of s 23B as it is understood in the light of s 23A. First, the party claiming contribution (the claimant) must show that it is liable in respect of damages suffered by an injured plaintiff). Secondly, the claimant may recover contribution from any other person ( the potential contributor) who is also liable to the injured plaintiff in respect of the same damage. The relevant inquiry is not confined to whether the damage for which each is liable can be said to be the same; both claimant and potential contributor must be liable to the injured plaintiff.”[63]
[62] (2003) 216 CLR 109
[63] See also Paperlink Ltd v Ansell Ltd [2006] VSC 214 at [9] per Bongiorno J
122 I do not consider that s. 23A of the Wrongs Act applies. I do not consider that the word “damage” is intended to include a debt due under a guarantee. I consider that the Court of Appeal judgment in Commonwealth Bank of Australia v Witherow[64] is of considerable assistance. The Court was there concerned with s.24AF of the Wrongs Act which is contained in Part IVAA which deals with proportionate liability. Section 24AF(1) provides that:
[64] [2006] VSCA 45
(1) This Part applies to –
(a) a claim for economic loss or damage to property in an action for damages ( whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care….”
123 The Bank sued the defendant under a guarantee and the defendant made a third-party claim against an accountant for negligent advice. The Court of Appeal held that the guarantor and third-party were not concurrent wrongdoers. Maxwell P stated:
“The Bank’s claim is not a claim in an action for damages. It is a claim in
an action for a sum certain … .”[65]
[65] Ibid at [10]
124 This reasoning applies to the proper interpretation of s.23A. It is not applicable in the present case.
125 It was not suggested that the law relating to contribution between co-sureties was of relevance or that any right of subrogation applied.
126 Mr Andrew Vecris’ second claim in the third party notice was based on the alleged unjust enrichment of Mr Folino at the expense of Barro. Mr Folino benefited by the receipt of the goods. Mr A Vecris has suffered the detriment of not being paid for the goods. It was not explained on what basis Mr A Vecris could rely on a claim that an unjust enrichment had occurred at the expense of Barro. I do not consider that this argument succeeds. Barro does not claim to have suffered any detriment because of Mr Folino’s actions, but instead maintains that it supplied goods on the account of Vecron. I have held that its claim against Vecron has been established.
127 Therefore if I had found that Mr A Vecris was liable under the Guarantee I would not granted relief to him against Mr Folino based on the claims in the third party notice.
Conclusion
128 Barro is entitled to judgment against Vecron in the sum of $135,993.43 plus interest.
129 Vecron is entitled to judgment against Mr Michael Folino in its third-party proceeding in the sum of $135,993.43 plus interest.
130 Barro’s proceeding against Mr Andrew Vecris is dismissed. Mr Andrew Vecris is entitled to a declaration that he has no liability to Barro under the Deed of Guarantee and Indemnity.
131 Mr Andrew Vecris’ third-party proceeding against Mr Michael Folino is dismissed.
132 I will hear the parties as to costs and any orders that may be necessary.
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