Bowen Buchbinder Vilensky (A Firm) v Frigger
[2011] WADC 12
•2 FEBRUARY 2011
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: BOWEN BUCHBINDER VILENSKY (A FIRM) -v- FRIGGER [2011] WADC 12
CORAM: REGISTRAR KINGSLEY
HEARD: 18 JANUARY 2010
DELIVERED : 2 FEBRUARY 2011
FILE NO/S: CIV 2603 of 2010
BETWEEN: BOWEN BUCHBINDER VILENSKY (A FIRM)
First Plaintiff
BBV LEGAL PTY LTD
Second PlaintiffAND
ANGELA CECILIA THERESA FRIGGER
Defendant
Catchwords:
Practice - Summary judgment application - Defendant guarantor of debtor company - Debtor company in liquidation - Change in constitution of creditor firm by admission of new partner
Legislation:
Nil
Result:
Application dismissed - Arguable guarantee discharged as to future transactions
Representation:
Counsel:
First Plaintiff : Mr J C Yeldon
Second Plaintiff : Mr J C Yeldon
Defendant: In person
Solicitors:
First Plaintiff : Bowen Buchbinder Vilensky
Second Plaintiff : Bowen Buchbinder Vilensky
Defendant: Not applicable
Case(s) referred to in judgment(s):
Bruns v Colocotronis [1979] 2 Lloyds Rep 412
Dance v Girdler (1804) Bos & PNR 34
Elpis Maritime Co Ltd v Marti Chartering Co Inc [1991] 3 All ER 758
International Leasing Corp (Vic) v Aiken [1967] 2 NSWR 427
Leeman v Stocks [1951] Ch 941
Muntz v Elkington (1891) 17 VLR 23
Riley v Melrose Advertisers (1915) 17 WALR 127
Rossiter v Miller (1878) 3 APP CAS 1124
Schneider v Norris (1814) 2 M and S 286
Shaw v Yarranova Pty Ltd [2005] VSC 9
REGISTRAR KINGSLEY: The plaintiffs' action is straightforward. Computer Accounting and Tax Pty Ltd (CAT) through Angela Frigger, the defendant, retained the first plaintiff to undertake legal work. The retainer was sent to the defendant by letter dated 28 February 2007. CAT, through Angela Frigger, signed and dated the retainer agreement and pursuant to the retainer agreement, the first plaintiff performed legal services for CAT. The second plaintiff acquired the practice of the first plaintiff and commenced trading from 1 January 2008.
The plaintiffs rendered tax invoices to CAT for the legal services and disbursements undertaken by the firm and CAT has failed or refused to pay any of those invoices. CAT was placed into provisional liquidation on 21 January 2010.
In May 2010, the plaintiffs were given leave pursuant to s 471B Corporations (Taxing) Act 1990 to proceed with the taxation of costs and the plaintiffs' bill of costs was taxed at $252,489.47 inclusive of disbursements and counsel fees. The taxing officer has signed the allocatur.
The plaintiffs sue the defendant on the guarantee contained within the retainer agreement.
The plaintiffs have brought an application pursuant to O 14 Rules of the Supreme Court 1971 (RSC) and the application is supported by two affidavits sworn by David Vilensky, the first sworn 28 September 2010 and the second sworn 11 January 2011.
The defendant (who acts in person) opposes the application and has filed two affidavits, the first sworn 25 October 2010 and the second sworn 13 January 2011.
On 10 January 2011, the plaintiff filed a list of objections to the defendant's affidavit sworn 25 October 2010. In broad terms, the objections are principally to par 7 of the defendant's affidavit and contend that, within that paragraph, the defendant has made assertions that are without foundation, are argumentative or are irrelevant.
Sensibly, the plaintiffs' counsel did not propose to argue each paragraph but left it to me to make a determination when considering the evidence of the defendant as a whole.
The defendant has opposed the plaintiffs' application on a number of grounds.
'Defence on the merits'
Vilensky, in his affidavit sworn 28 September 2010, deposes at par 15 that he verily believes 'the defendant has no defence on the merits…'. The defendant, citing Muntz v Elkington (1891) 17 VLR 23, submits that this form of words is insufficient and that Vilensky's affidavit does not properly support the application.
Muntz is authority for the proposition that the form of words used by Vilensky are not sufficient for the purposes of an application pursuant to O 14 RSC. However, that choice of words is an irregularity and, whilst an application for summary judgment is a technical application, that irregularity falls within O 2 r 1 RSC. That being the case, it is an irregularity that can be cured by filing a fresh affidavit that complies with the technical requirements (Shaw v Yarranova Pty Ltd [2005] VSC 94).
Ambiguous terms of cost agreement
The defendant submits that the terms of the cost agreement are ambiguous and this affords a defence.
The guarantee clause is contained at par 19 of the retainer agreement. The guarantee clause begins:
I understand that if you are instructed by me to act on behalf of a company of which I am a director of shareholder, in consideration of agreeing of (sic) act I guarantee the payment of all money payable by the company to you on any account, as and when it becomes due and I further agree that: …
It is clear on the face of the document that the solicitors are being retained by CAT and that the defendant is a director of CAT. The defendant acknowledged from the bar table that she had carefully read the retainer agreement.
In my opinion the guarantee clause is unambiguous. The defendant is instructing the firm of solicitors to act on behalf of CAT and that in consideration of so agreeing to act, the defendant guarantees the payment of all monies payable by CAT to the solicitors. I am of the opinion this submission does not afford a defence.
The agreement is not signed by the defendant as guarantor
The defendant's submission is that the agreement is not signed by her in her personal capacity as guarantor.
The clear intent of par 19 of the retainer agreement is that on signing, where a company is involved, the defendant signs the agreement in two capacities, as director of the company, and in their personal capacity as guarantor. Generally, the intention or capacity of a party signing a guarantee is immaterial (Elpis Maritime Co Ltd v Marti Chartering Co Inc [1991] 3 All ER 758). However, intention may be important where the guarantee is executed by a person as officer of a company, and also in their private capacity.
So long as there is nothing to indicate the person signed solely for and on behalf of the company, then both the company and the person in their private capacity are bound (Schneider v Norris (1814) 2 M and S 286 and Leeman v Stocks [1951] Ch 941). This submission does not give rise to an arguable defence.
It is unclear who the parties to the cost agreement and guarantee are
The defendant submits that the relevant parties to the retainer agreement, and to the guarantee, have not been properly identified. Whilst best practice may be that the parties to a contract of guarantee be specified expressly, it is sufficient if the parties are identifiable by a reasonable construction of the contract (Riley v Melrose Advertisers (1915) 17 WALR 127) and it is not necessary that the parties be named in the guarantee itself (Rossiter v Miller (1878) 3 APP CAS 1124).
The retainer agreement is clear in that the client is CAT and that at cl 19 of the agreement and from the letter of 28 February 2007, that instructions on behalf of CAT are being given through the defendant. On a reasonable construction of the retainer agreement, it is clear the parties are CAT as principal debtor and the defendant as guarantor.
In my opinion this submission does not raise an arguable defence.
The second director of CAT did not sign
The defendant submits that if a guarantor signs a contract which, on its face, shows that other joint and several co-sureties are intended to be parties, then there is no contract at all. As a broad generality that submission is correct.
There is nothing on the face of the retainer agreement to show that any other person was to sign as co-surety. The cost agreement under consideration makes no mention of any co-surety and cl 19 of the agreement is expressed in the singular. Accordingly I am of the opinion this argument does not afford a defence to the defendant.
The guarantee is revoked pursuant to s 25 Partnership Act 1895
The retainer agreement was entered into on 6 March 2007. At that time, the partnership consisted of Messrs Bowen, Buchbinder and Vilensky. Sometime early in 2007, but certainly by 1 May 2007, the firm Bowen Buchbinder Vilensky was reconstituted with the admission of Morgan Solomen as a partner.
Subsequently, the firm Bowen Buchbinder Vilensky ceased practicing and the second plaintiff commenced trading from 1 January 2008. The second plaintiff is trustee for the BBV Legal Trust trading as Bowen Buchbinder Vilensky.
Section 25 of the Partnership Act provides:
A continuing guaranty given either to a firm or to a third person, in respect of the transactions of a firm is, in the absence of an agreement to the contrary, revoked as to future transactions by any change in the constitution of the firm to which or of the firm in respect of the transactions of which the guaranty was given.
It is common law if the contract of guarantee is altered so as to prejudice the guarantor then the guarantor will be discharged from liability. This usually applies where the principal debt is owed by partners. The partners are jointly liable under the guarantee. Any change in the constitution of the partnership will affect the rights of a guarantor under a continuing guarantee.
In the opinion of the authors of The Modern Contract of Guarantee, O'Donvan and Phillips, (3rd ed, 1996) p 446, and The Law of Partnership in Australia, Fletcher (9th ed, 2007) p 224, s 25 Partnership Act applies where there is a change in the constitution of the firm to which the guarantee is given.
Thus, where there has been a change in the constitution of the creditor, there the guarantee will be discharged in relation to future transactions.
Clause 19 of the retainer agreement is a continuing guarantee – the defendant agrees to guarantee the payment of all money payable by CAT on any account as and when it becomes due. The partnership was reconstituted by the admission of Morgan Solomen as partner. In any opinion there is an arguable case that by virtue of s 25 Partnership Act, as for future transactions from the admission of Solomen, the guarantee is revoked.
In this case the partnership subsequently became incorporated. Dance v Girdler (1804) Bos & PNR 34 is authority for the proposition that incorporation of the creditor will discharge the guarantee absolutely.
It is true that if the principal obligation is assigned, and the benefit of the guarantee is also assigned, then the assignee may enforce both the principal obligation and the guarantee (International Leasing Corp (Vic) v Aiken [1967] 2 NSWR 427). In this matter I have no evidence of any assignment of the retainer agreement, and the guarantee, by the partnership to the second plaintiff. But in any event, if the guarantee has been revoked as to future transactions when Morgan Solomon joined the partnership, then there was nothing to assign to the second plaintiff.
I am of the opinion the defendant has an arguable defence in relation to s 25 of the Partnership Act.
Privity of contract
It is the defendant's submission that there must be privity of contract between the guarantor and the person seeking to recover on the guarantee. The defendant goes on to submit that even if there was a valid contract of guarantee, the guarantee did not enure to the first plaintiff and the second plaintiff without the express consent of the defendant.
As between the plaintiffs and defendant there is privity of contract by virtue of cl 19 of the retainer agreement. The guarantee, being a legal chose in action is assignable. It is not wholly necessary to give notice of the assignment to the guarantor. In any event, the issue of notice goes to priority rather than validity. In my opinion this submission does not raise an arguable defence.
Judgment or award obtained by the creditor against the principal debtor
The defendant submits that the guarantor will not be bound by a judgment obtained by the creditor against the principal. The extent of the guarantor's liability must be strictly proved. The defendant submits that the liquidator of CAT refused to allow the defendant, as director of CAT, to represent CAT at the taxation.
The authority cited by the defendant, Bruns v Colocotronis [1979] 2 Lloyds Rep 412 arises out of an arbitration award. Bruns' case is authority for the proposition that the award will not be evidence against the guarantor, and the extent of the guarantor's liability must be strictly proved. In my opinion, strict proof of the judgment is not necessary, and this submission affords no defence.
Conclusion
I am of the opinion that it is arguable the guarantee, pursuant to cl 19 of the retainer agreement, was discharged as to future obligations on the admission of Morgan Solomen to the partnership of the first plaintiff. If this is the case then it is arguable there was nothing to assign to the second plaintiff.
The plaintiffs' application is dismissed. I will hear counsel on the issue of costs and the future conduct of this action.
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