Brown v Elite Nominees Pty Ltd - [2020] WADC 156

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION:   PERTH
CITATION:   BROWN -v- ELITE NOMINEES PTY LTD [2020] WADC 156
CORAM:   BOWDEN DCJ
HEARD:   25 NOVEMBER 2020
DELIVERED          :   9 DECEMBER 2020
FILE NO/S:   APP 51 of 2020
BETWEEN:   CHRISTINE MARGARET BROWN
Appellant
AND
ELITE NOMINEES PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :   MAGISTRATES COURT OF WESTERN AUSTRALIA
Coram:   MAGISTRATE DARGE
File Number            :   PER/GCLM/8162/2015

Catchwords:

Appeal from Magistrates Court - Terms of trading - Credit application/guarantee - Capacity in which instrument executed - Only one named guarantor signing guarantee - Pleadings - Different argument on appeal than at first instance

Legislation:

Magistrates Court (Civil Proceedings) Act 2004 (WA)

Result:

Appellant's appeal dismissed

Representation:

Counsel:

Appellant	:	Mr R Nash
Respondent	:	Mr F A Robertson

Solicitors:

Appellant	:	Mossensons
Respondent	:	Mettam Legal

Case(s) referred to in decision(s):

Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549
Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219
Cai v Tsang (No 2) [2018] NSWSC 1860
Keith Murphy Pty Ltd v Custom Credit Corporation Ltd (1992) 6 WAR 332
Re Farm Pride Foods Ltd [1999] QSC 174
Sarkans v Leasing Capital Corporation Pty Ltd (Unreported, WASC, Library No 2394, 17 August 1978)
Westgyp Pty Ltd v Northline Ceilings Pty Ltd [No 2] [2019] WASCA 145

BOWDEN DCJ:

The respondent is a fuel supplier operating under the name of Gnowangerup Fuel Supplies.
The appellant and her former partner John Brown were directors and shareholders of CJWFAMB Pty Ltd which company (the company) operated the Shell Roadhouse Williams.
In November 2011 the appellant completed and signed an account/credit application (ACA) which included a guarantee and faxed it to the respondent. Subsequently the respondent supplied products on credit to the Shell Roadhouse Williams. Between September 2014 and October 2014 the respondent supplied products totalling $27,292.73 and invoiced for that supply. The company did not pay those invoices and the respondent proceeded against the appellant pursuant to the guarantee contained within the ACA.
The two documents crucial to this case are the ACA dated 10 November 2011 and the terms of trading agreement (TOT).
By agreement between the parties the matter was dealt with before the magistrate on the papers with an agreed book of documents filed and both parties providing written submissions.
On 23 July 2020 the learned magistrate found (the magistrate's decision) that the appellant was liable under the ACA in her capacity as a guarantor for the debt of $27,292.73 (together with interest) that was owed by the company to the respondent.
It is not in dispute that the ACA and (TOT) were forwarded by the respondent to the appellant as one document.
The four grounds raised in this appeal all relate to the proper construction of the ACA and (TOT).

The appeal

The appeal is made pursuant to the Magistrates Court (Civil Proceedings) Act 2004 (WA) (MCCPA).

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] WADC 156
Decision Date: 9 DECEMBER 2020

CaseChat Overview and Summary

The appeal before the Court of Appeal was from a decision of the Magistrates Court, where the appellant, Brown, sought to overturn a decision that he was liable under a guarantee he had signed for debts owed by a company. The dispute centered on the interpretation of a credit application form (CAF) and a guarantee (ACA) signed by Brown and his wife, who were the sole shareholders and directors of a company. The company had applied for credit from the respondent, Elite Nominees, and both the wife and Brown had signed the CAF and ACA. However, only the wife had signed and returned the ACA, while Brown had signed it but had not returned it. The court had to determine whether Brown's failure to return the signed ACA absolved him of his obligations under the guarantee.

The central legal issue was whether Brown's obligation under the guarantee was conditional upon his execution of the ACA, and if so, whether the failure of the other party to sign and return it constituted a breach of that condition. The appellant argued that the guarantee was conditional upon Mr Brown's execution, and the fact that the signed ACA was faxed by the wife after Brown had signed but before he had returned it did not constitute dispensing with the requirement of his signature. The respondent, on the other hand, contended that the wife's act of faxing the signed ACA constituted an acceptance of the credit terms and an intention to be bound by the guarantee regardless of Brown's non-execution.

The Court of Appeal found that the learned magistrate had erred in not considering the construction of the ACA in its terms. The court noted that the magistrate had focused on equitable principles rather than the proper construction of the document. The appeal court held that the ACA was conditional upon the execution by all named guarantors. The court found that the form of the ACA demonstrated that Brown was to be a signatory, and the wife's act of faxing it with Brown's name included did not constitute dispensing with the requirement of his signature. The court emphasised that the weight of authority supported the proposition that obligations assumed jointly or jointly and severally are dependent on the execution by all named obligors. Therefore, the appeal was upheld, and Brown's liability under the guarantee was discharged.

The Court of Appeal ordered that the decision of the Magistrates Court be set aside and that Brown's liability under the guarantee be discharged. The case highlights the importance of considering the construction of an instrument in its terms before resorting to equitable principles. The court's decision underscores the need for all named guarantors to sign and return a guarantee for it to be binding, and the failure of one guarantor to sign and return it may nullify the contract in the sense that no contract will come into existence.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

In Keith Murphy Pty Ltd v Custom Credit Corporation Ltd (1992) 6 WAR 332 the above passage was referred to by Anderson J who opined that he was not sure that passage was intended to be a comprehensive statement of the principles that operate in the field of incompletely executed instruments, noting that the position in law is distinct from the position in equity. Anderson J went on to state:The question of whether the consequence of an incomplete execution in any particular case will be dependent on the proper construction of the instrument. At law, the failure of one of the named parties to an instrument to sign it may nullify the contract in the sense that no contract will come into existence. Equity played no part in that procedure. The equitable principle is resorted to when it is not possible to say as a matter of construction that the instrument is in its terms conditional (upon its execution by the other named party) then, if it is, the case that nevertheless a signatory executed the instrument on the faith of the other party executing it and they fail to do so, relief in equity may be available.This is not because of any incompleteness in the formation of the contract or the failure of the condition nullifying the bargain, but because the equity will intervene to prevent the signatories being unjustly held to the bargain actually made. Anderson J observed that the weight of authority was in favour of construing instruments in which obligations are assumed jointly or jointly and severally as making the contract dependent on the execution of it by all persons named as obligors. Anderson J found that it was a condition precedent that the others signed but stated that if he was wrong, the plaintiffs were entitled to succeed on the equitable grounds that it should be presumed that they did sign in the faith and on the understanding that each of the other named signatories would also execute the instrument noting that it was open to the defendants to show that the plaintiffs had consented to dispensing with the execution of the document by the others and this required the defendants to prove the plaintiff intended to become bound to the joint and several obligations whether or not the others signed: Re Farm Pride Foods Ltd [1999] QSC 174; Cai v Tsang (No 2) [2018] NSWSC 1860 are other cases were that general proposition has been accepted as correct. The appellant says that the learned magistrate did not construct the ACA by reference to how it was drawn but directed his attention to consideration of the equitable principle only and did not deal directly with their submission that as the appellant completed the ACA by including Mr Brown's name and it was conditional upon the execution of Mr Brown. The appellant says that it was an error to conclude that by faxing it after she had signed and Mr Brown had not, she was thereby dispensing with the requirement that Mr Brown's execution was a condition of her liability as a guarantor. The appellant says that the very form of the document showed that Mr Brown was to be a signatory and the appellant had not deleted Mr Brown's name when she faxed it to the respondent. They say the very fact that the appellant sent it to the respondent with Mr Brown's name on it shows her intent was for him to become a party, otherwise she would have deleted his name and a reasonable business person would interpret the ACA in that way.