Brown v Elite Nominees Pty Ltd
[2020] WADC 156
•9 DECEMBER 2020
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).
The appeal must be decided on the material and evidence before the Magistrates Court.
The appeal is by way of a 'reconsideration of the evidence before the Magistrates Court'.
The appeal court is not to retry a case or substitute its own view of the facts of that of the magistrate. The appeal is by way of a rehearing. The appellant must demonstrate that there has been an error of law or fact: MCCPA s 40(3), s 40(4), s 40(5); District Court Rules 2005 (WA) (DCR) r 50(1).
The appeal court may confirm, vary or set aside all or part of the lower court's judgment or order a new hearing or trial before the Magistrates Court: MCCPA s 43(7).
The contract
The contract was constituted by two documents being the (TOT) and ACA. It is necessary to repeat some of the terms of those documents.
Terms of Trading Agreement
I.The Customer hereby warrants that the information comprised in the First Schedule hereto is true, accurate and correct and is supplied for the purpose of obtaining credit.
II.The Customer warrants that the persons' signature appearing on this Agreement are dully [sic] authorised by the Customer to apply for credit and execute this Agreement.
III.The Customer agrees to adhere to the terms and conditions of this Agreement.
IV.The Customer agrees that they are [not] entitled to any credit facilities until it receives notice in writing from the Supplier stating that credit facilities have been given and specifying the terms and conditions upon which such credit facilities are given. Until the Customer receives such notice in writing from the supplier any goods that are supplied by the Supplier to the Customer shall be on the basis of cash upon delivery.
V.The parties agree that in the event of the Supplier, prior to approving credit, grant to the Customer time to pay for any goods supplied than such supply shall not amount to a waiver by the Supplier of any of the terms of this Agreement nor be construed or be taken either directly or by implication as a granting by the Supplier of the credit facilities to the Customer and no credit facilities shall be granted unless stated in the notice.
The ACA is in the following format:
Account Application Details
Full Trading Name [completed in handwriting] Phone [completed in handwriting]
Surname [completed in handwriting] Mobile [completed in handwriting]
Christian [completed in handwriting] Fax [completed in handwriting]
Address (Postal) [completed in handwriting] Email [completed in handwriting]
Address (Delivery) [completed in handwriting] ABN [completed in handwriting]
Has either the business or any of its directors ever had, or are there now, any legal judgments or proceedings filed against them or ever been registered under any part of the Bankruptcy Act?
Yes/No If yes please provide details and attach to the application
TRADE REFERENCES
(Name, Address and Telephone or 3 Trade References)
Name ……………………
[completed in handwriting]
Address ………………….….
[completed in handwriting]
Ph ……………………
[completed in handwriting]
Name ……………………
[completed in handwriting]
Address …………………..…
[completed in handwriting]
Ph ……………………
[completed in handwriting]
Name ……………………
[completed in handwriting]
Address ……………………..
[completed in handwriting]
Ph ……………………
[completed in handwriting]
Personal/Directors Guarantee
• I/We in consideration of Gnowangerup Fuel Supplies agreeing to supply
• (Applicant).……….………………with goods on credit, hereby jointly and severally guarantee that we will abide by the Terms of Trade and hereby guarantee to Gnowangerup Fuel Supplies the payment of any monies advanced by way of credit.
• We agree to pay 1.5% per month on overdue accounts and all legal costs and other costs incurred by Gnowangerup Fuel Supplies in collecting any monies owing
Signed [Signed C M Brown in handwriting]
Printed Name [Christine Brown in handwriting]
Signed ………………………………….
Printed Name [John Brown in handwriting]
• Gnowangerup Fuel Supplies shall be entitled without notice to terminate any credit arrangements in the event of the applicant defaulting in any of the Term.
• We agree to Gnowangerup Fuel Supplies obtaining from a credit report agency(s) a credit report containing personal credit information about me/us in relation to commercial credit by Gnowangerup Fuel Supplies.
• I/We agree that all accounts will be paid as ordering over the phone is considered approval of purchase from Gnowangerup Fuel Supplies.
Date [10-11-11 in handwriting]
Date [10-11-11 in handwriting]
It is not disputed that Ms Brown signed the form above where she had handwritten her name and faxed it to the respondent.
It is not disputed that John Brown's name was also handwritten on the form however he did not sign the document although the date appears in handwriting opposite his handwritten name.
Principles of law
The principals of law were not seriously in dispute and can be summarized as follows.
The construction of terms in commercial contracts is determined by what a reasonable business person would understand those terms to mean viewed objectively by reference to the contract's text, context and purpose: Westgyp Pty Ltd v Northline Ceilings Pty Ltd [No 2] [2019] WASCA 145 [8] - [9].
A commercial contract should be construed as to avoid making commercial nonsense or giving rise to commercial inconvenience: Black Box Control Pty Ltd v TerravisionPty Ltd [2016] WASCA 219.
The construction of a guarantee is governed by the settle principle that a doubt as to the construction of the provision in such a contract should be resolved in favour of the surety or indemnifier, which in this case, is the appellant: Westgyp Pty Ltd v Northline Ceilings Pty Ltd [No 2] [11]; Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549.
Such a doubt may arise not only from the uncertain meaning for a particular expression but from its apparent width of possible operation: Ankar Pty Ltd v National Westminster Finance (Australia) Ltd.
A guarantor's offer must be clear and definitive, vague or equivocal statements will not suffice. They must be promissory and show an intention to be legally bound: O'Donovan J and Phillips J, The Modern Contracted of Guarantee (3rd ed, 1996) (O'Donovan).
The relevant parties to a guarantee must be specifically expressed in the contract or be identified by reasonable construction of the contract or by a linked document: O'Donovan, page 82.
The principal transaction to which the guarantee relates and the amount of the guarantor's liability must be properly identified: O'Donovan, page 62.
A person does not become liable on the guarantee just by signing the document if it was never intended that the person would become a guarantor if he or she was not named as a party in the guarantee: O'Donovan, page 94.
The parties will look at the whole of the document and the surrounding circumstances known to the parties to ascertain whether there is any objective evidence of an intention by the signature to assume a personal liability as a guarantor: O'Donovan.
The question of the capacity in which a party has executed a document is determined by assessing the objective intention on a construction of a document as a whole in the context of the surrounding circumstances: Westgyp Pty Ltd [No 2].
The subjective intention of the parties is not relevant: Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168.
Ground 1 of the appeal
Ground 1 of the appeal reads as follows:
1.The learned magistrate made an error of law in finding that in signing the credit application dated 10 November 2011 (Credit Application), the appellant had, on a proper construction of the document, guaranteed the obligations of the customer.
PARTICULARS
A.The learned Magistrate should have found that on a proper construction of the Credit Application, as completed by the Appellant, the guarantee provisions had not been adopted or engaged as operative provisions of the Credit Application by reason that the customers details that were required to be inserted into the blank space within the guarantee section, had been left blank and uncompleted.
B.On a proper construction of the Credit Application as a whole, given there were no separate execution clauses for executing the document on behalf of the customer and for executing the document separately in the capacity of guarantor, the learned Magistrate should have found that the execution by the Appellant at the foot of the document, was for and on behalf of the customer solely, and not as guarantor.
The appellant's submissions
The appellant says that any guarantee offer must be clear and definitive on the construction of the document as a whole. The appellant says the mere attachment by her of her signature at the foot of the document is not a clear and definitive offer of a guarantee by her.
The appellant points out that the ACA, by its very design, did not allow for separate execution by the customer and the guarantor. There is no separate place for a customer to sign as customer and then a guarantor to sign as guarantor. The ACA makes no delineation of whether the signature was being attached as customer or as the guarantor or as both. Neither the TOT nor the ACA provide for the insertion of the particulars of the name and contact details of the person assuming liability as guarantor.
The appellant points to cl 2 of the TOT which states:
The Customer warrants that the persons' signature appearing on this Agreement are dully [sic] authorised by the Customer to apply for credit and execute this Agreement.
The appellant says that the reference in that clause to the signature appearing on the agreement must be a reference to the ACA and it is the only document that needed to be signed.
The appellant says there was nothing within the TOT which refers to the need for a guarantee nor was there anything said or done between the parties at the time of execution of the document in which the requirement for the appellant to provide a guarantee was addressed or raised.
The appellant points out that in the second dot point clause within the 'Personal/Directors Guarantee' section of the ACA there is a space for the person who is to receive the credit to be completed and because the appellant did not complete that section, says the appellant did not manifest an objective intent to be bound as a guarantor. That is, the appellant did not adopt or engage with the guarantee because she did not complete the particulars of the guarantee clause.
Therefore the appellant submits that the signature appearing on the ACA can only relate to the appellant signing as the customer and not as the guarantor.
The respondent's submissions
The respondent says you look at the text of the ACA and what each party, by words and conduct, would have led a reasonable person in the position of the other party to believe.
The respondent says the appropriate date for ascertaining the meaning is when the ACA was submitted by the appellant to the respondent. The respondent says there is no merit in the suggestion that the appellant signed as a director of the company as the company is not mentioned anywhere on the ACA. The ACA is completed under the name of Shell Roadhouse Williams and there is nothing within the document that indicates that it is being signed by the appellant as a director of the company.
The respondent says that objectively considered, there is nothing that would enable a person looking at the document or knowing the surrounding circumstances, to conclude that the appellant was signing as a director. They point out that there was no space on the form for the appellant to sign as a director and she made no attempt to qualify that she was signing as a director.
The respondent says that if the appellant was not signing as a guarantor then she could have struck out the guarantee provisions or signed the document with some sort of declaration that objectively demonstrates that she was not agreeing to be bound by the guarantee.
The respondent says a reasonable person in the position of the respondent would believe the appellant was consenting to the guarantee.
In relation to the suggestion the appellant was signing as a customer she points out that there is nothing in the TOT that requires it to be signed by the customer and even if it had been sent back without being signed, they argue it would be binding within its terms.
The respondent suggests that the ACA was drafted on the basis that a credit application would not be considered unless it was supported by a guarantee.
The respondent says there is no significance attached to the 'blank' in bullet point two on the ACA because the information requested to be provided there, that is, the details of the applicant have already been completed on the ACA under 'Account Application Details'.
The magistrate's decision
The learned magistrate dealt with these issues at [17] - [24] of his decision.
His Honour observed that the ACA was designed to facilitate terms of trade between the respondent and the appellant, being ShellRoadhouse Williams whoever traded under that business name.
His Honour noted the appellant had provided an ABN but did not identify the entity to which held that number.
His Honour observed that there was no space for the appellant to sign as director and no attempt to qualify that she was not agreeing to be bound by the obligations (the guarantee) above her signature.
His Honour rejected the proposition that it was signed by the appellant in the capacity as a director. His Honour concluded that the appellant could have struck out the items relating to the guarantee if she was not intending to be bound by the guarantee or sign the ACA in a way that confirmed it was not binding on her personally such as the insertion of words to that effect.
Conclusion as to ground 1 of the appeal
In construing the terms of the ACA, consideration must be given to the meaning of the language of the contract and what each party, by their words and conduct, would have led a reasonable person in the position of the other party to believe.
Considering the entire text of the contract and its purposes, I am satisfied that the learned magistrate made no error in concluding the appellant signed the document in her personal capacity intending to be bound by it.
I accept that the 'Personal/Director's Guarantee' designation was not struck through, however, in my view, there is nothing that supports the conclusion that she was signing as a director. There was no reference within the document to a company. The reference to an ABN does not support a conclusion a company is being referred to. The appellant did not qualify her signature by indicating she was signing as a director.
At least on the appeal, it seems that the appellant was placing more emphasis on her submissions that the appellant signed in the capacity as a customer. The appellant's primary submission, being that the signature appearing on the ACA indicates that its author was only signing as a duly authorized person on behalf of the customer (as referred to in cl 11 of the TOT) or as the customer warranting the information provided (cl 1 of the TOT) as there was nowhere else such a duly authorised person or customer could sign.
These clauses are not inconsistent with a conclusion that the person signing the document was signing as guarantee.
Clause 11 of the TOT clearly envisages that a person other than the customer will be signing the ACA.
The proper construction of both documents means that by the signature of the appellant, she was duly authorised by the customer to apply for credit.
The absence of the customer details in the blank space within the guarantee section is of no significance. The applicant to whom the goods were to be supplied has been completed under the 'Account Application Details'. A reasonable business person would know who the applicant was and to whom supply on credit was to be made. The signature of Ms Brown appears immediately under the guarantee section.
A reasonable person would observe that the form had been marked through to delete parts which did not apply (the provisions relating to bankruptcy) and observe that the guarantee provision had not been struck through or deleted.
The commercial purpose of the agreement was to ensure products supplied by the respondent to the customer were on credit. The layout of the ACA is that the customer's details are provided under the 'Account Application Details'. Next the trade references are supplied in the appropriate box, and then a 'Personal/Directors Guarantee' is provided.
Objectively, a reasonable business person considering the terms of the document would see that the signature is immediately below the guarantee obligations. There is not a separate clause for execution of the credit application as a customer and then a separate clause for execution as a guarantor because it is a composite document.
The plain text and form of the ACA would lead a reasonable business person in the position of both parties to the conclusion that it was a credit application and offer of guarantee. It was one composite document. The respondent was inviting the application to be made with a guarantee. The applicant could have chosen to delete or strike through the guarantee and forward a credit application however she did not do so and her signature objectively considered shows she intended to be bound by the guarantee.
There is no reference within the document to a company. The only obligation that is immediately above the signature is the guarantee.
The learned magistrate's conclusion that based on the text of the document, viewed objectively, the appellant intended to be bound by the guarantee, has not been demonstrated to be an error of law and/or fact. In my view, no error by the magistrate in his reasons has been established.
Grounds 2 and 3 of the appeal
It is convenient to deal with grounds 2 and 3 together. Those grounds read as follows:
2.Further and alternatively, the learned Magistrate made an error of law in failing to find that since the Credit Application had been drawn in a form that required it to be executed by both the Appellant and one John Brown, as joint and several guarantors, then as a matter of law (in contradistinction to equity) the obligations under the guarantee provisions of the Credit Application were conditional and dependent on the document being executed by both named guarantors.
3.Further and alternatively, the learned Magistrate made an error of mixed law and fact, in finding that the Appellants entitlement to be relieved in equity of any liability under the guarantee on the basis of the presumption that she signed it on the understanding that John Brown would also be a party with joint and several liability, had been rebutted.
The factual basis upon which these grounds are asserted is that the ACA has two names handwritten on it, being the appellant and John Brown, yet it is only signed by the appellant.
The appellant's submissions
The appellant argues that any difficulties or uncertainty as to how to interpret her actions arise because of the text and structure of the ACA which was the respondent's document and any doubt should be resolved in favour of the appellant.
The appellant points out that, as the ACA was completed by her and she included John Brown, it was clearly her intent that it be signed by both herself and John Brown.
The appellant points out that the respondent did not specify who should execute the ACA. When she faxed the document back to the respondent she had not deleted the provisions for John Brown's signature and on a proper construction of the document it was required to be executed by herself and John Brown.
In this regard they refer to Sarkans v Leasing Capital Corporation Pty Ltd (Unreported, WASC, Library No 2394, 17 August 1978). In that case the defendants contended that the plaintiff's claim must fail because the guarantee, as was apparent by its form, was intended to be executed by six co‑sureties whose liability was joint and several. Four signed but the other two did not.
Jones J, with whom Burt CJ agreed, stated:
… The consequence of that is, surprising as it may seem, that those who did sign are relieved of liability. …
His Honour continued:
The law on the subject is stated in Rowlatt on Principle and Surety … 'A surety is not bound if the instrument, when signed by him, is drawn in a form showing himself and another or others as intended joint and several guarantors, and any intended surety does not sign; and it is immaterial by whom the instrument was prepared, or whether the surety omitted was solvent or not. In such cases the creditor must show that the surety consented to dispense with the execution of the document by the other or others … The principle is that the arrangement to which the surety consented to become a party has been left incomplete, and has, in equity, never become binding upon him'. That statement of the law by Sir Sidney Rowlatt was expressly approved by the Court of Appeal in National Provincial Bank v Brackenbury (1906) 22 TLR 797, and has apparently never been questioned since.
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.
The appellant says that the onus was on the respondent to show that the requirement for the co‑surety to execute the document had been dispensed with which would require them to show that the appellant had intended to become bound to the joint and several obligations as guarantor whether or not Mr Brown executed the document.
In this regard the appellant places significance in the absence of steps taken by the respondent to clarify whether the requirement for Mr Brown's signature had been dispensed or clarify any issue about Mr Brown's name appearing on the ACA.
The respondent's submissions
The respondent says that on a proper construction of the ACA it does not have a requirement that two guarantors were required to sign, before the person who did sign, was bound by its terms.
The respondent says you have to look at both the form of the ACA and the appellant's conduct in relation to it. When the document was received by the respondent, it was received in circumstances where it was signed by the appellant in full knowledge that the other person had not signed, and that it was faxed by her with that knowledge and as a matter of construction the ACA was not conditional upon the second signature.
The respondent points out that the ACA was signed on 10 November 2011 and that the appellant inserted Mr Brown's name but it was faxed five days later following a conscious decision by the appellant to send it to the respondent without Mr Brown's signature.
The respondent says there is no other conclusion that could be reached from the appellant's conduct in sending the fax other than that she was aware that Mr Brown had not signed the ACA, but she was content to be bound by its terms notwithstanding his lack of signature.
The respondent says that on a proper construction of the document the ACA is an application for credit and a reasonable business person in the position of the respondent would take it to be an application with a single guarantee.
They say this is not a case like in Re Farm Pride Foods Ltd because it was not the respondent who had proposed that both the appellant and Mr Brown provide a guarantee.
The respondent's alternate position was that even if the proper construction of the document meant that both sureties were required to sign, the appellant's conduct in faxing the document signed only by herself demonstrated that she accepted that the requirement for Mr Brown to be the co‑guarantor was dispensed with. A reasonable person in the position of the respondent would conclude that the appellant was dispensing with the requirement for the co‑guarantor to sign and any onus on the respondent was therefore discharged.
The magistrate's decision
The learned magistrate dealt with these matter in [37] - [42].
His Honour noted that it was open for the respondent to return the document and require Mr Brown to affix his signature and as they did not do so, it prevented them from pursuing Mr Brown.
His Honour noted that the appellant was responsible for filling out the credit agreement and inserting her husband's name. Her evidence on this point was simply that her husband was to sign the document but he did not do so.
His Honour said that it lay within the appellant's power to require her husband to sign the guarantee and the failure on her part to demand that he sign it, is not equated with the constructive knowledge suggested in Keith Murphy Pty Ltd v Custom Credit Corporation Ltd that she signed it on the understanding that the other party would be signing and if they did not do so, the enforcement of the guarantee would be unconscionable.
Conclusion as to grounds 2 and 3 of the appeal
I agree that the learned magistrate made no specific finding that as a matter of law the obligations under the guarantee in the ACA were conditional and dependant on the document being executed by both named guarantors.
This was entirely understandable because his Honour, in effect, was taking the position at the highest for the appellant and saying that even if the guarantee was conditional and dependant on the document being executed by both guarantors, then by her conduct in faxing the ACA signed by her and not Mr Brown, the appellant was dispensing with that condition, therefore objectively construed, she was intending to be bound as a sole guarantor.
The appellant says it would have been preferable for his Honour to take the two‑step process. In the circumstances of this case, where the appellant completed and signed her name and faxed the form unsigned by Mr Brown, but with his name handwritten on it, the two issues merge to a point of almost non‑distinction. At the end of the day, it makes no difference because the ultimate conclusion reached by the learned magistrate has not been shown to be in error.
The ACA was drawn in a form which shows that objectively both Mr Brown and the appellant were intended to be joint and several guarantors. It is immaterial by whom the form was prepared, therefore the respondent bears the onus of showing that the appellant, objectively considered, consented to dispensing of the execution of the document by Mr Brown: Sarkans v Leasing Capital Corporation Pty Ltd; Keith Murphy Pty Ltd.
However, that was not the position at the time it was received by the respondent. A reasonable business person in the position of the respondent, having received an application for credit with a personal guarantee, albeit with a provision for another guarantee to sign, would objectively consider that the person who has signed was prepared to be bound by the guarantee without the other person signing it, and that is the reason they have faxed it to them. The respondent would therefore have discharged the onus on them.
The way the learned magistrate structured his reasons makes no difference to the result.
The learned magistrate correctly identified the law. I accept the magistrate did not take the two‑step process of first of all identifying objectively whether the ACA, as it was presented, had as a condition precedent the requirement that Mr Brown sign before the appellant was bound as surety and then determine whether the respondent had discharged their onus.
However, his Honour's reasons make it clear that he was satisfied that, in the best case scenario for the appellant, the respondent had discharged their onus. I agree with that conclusion.
Whilst it is not strictly necessary for me to answer the question proposed by the appellant, it is my view that the act in faxing the ACA in the manner in which it was complete, and with full knowledge that Mr Brown had not signed, indicated that the appellant was prepared to be bound by the guarantee without his signature. There was no condition precedent. Objectively considered, a reasonable business person, upon receipt of the ACA, would consider that the appellant did not intend Mr Brown to sign before the obligation became binding on her. The relevant time to consider the position is at the time the respondent received the offer by the appellant to go guarantor. As I have said, at the end of the day, it makes no difference to the result.
There is no error in law or fact in the learned magistrate's conclusion and I would therefore dismiss grounds 2 and 3.
Ground 4 of the appeal
Ground 4 of the appeal reads as follows:
Further and alternatively, the learned Magistrate made an error of mixed law and fact, in finding that the sum being claimed by the respondent was a liability that, on a proper construction of the Credit Application and the Respondent's Terms of Trade (contract documents), had been guaranteed by the Appellant
PARTICULARS
AOn a proper construction of the Contract Documents:
athe guarantee was given in respect of the obligation to pay for goods that the Respondent agreed to supply to the customer on credit under the Respondents Terms of Trade (TOT); and
bby clauses IV and V of the TOT, until the customer receive written notice that credit facilities have been given and specifying the terms of credit, any grant to the customer of time to pay for goods supplied was not to be construed or taken as a grant of credit facilities by the Respondent under the TOT;
BThere was no evidence that the customer had ever received a written notice that the Respondent had granted it credit facilities under the TOT.
The appellant's submissions
The appellant says the claim was not within the scope of guarantee because the sum claimed related to credit advanced other than under the TOT agreement.
The appellant points out that the guarantee provides the guarantor:
hereby jointly and severally guarantee that we will abide by the terms of trade and hereby guarantee to Gnowangerup Fuel Supplies the payment of any invoice advanced by way of credit.
The appellant points to the TOT agreement cl IV which states:
the customer must receive notice in writing from the supplier stating that the credit facilities have been given and specifying the terms and conditions upon what such credit facilities are given and until the customer receives a notice in writing from the supplier, any goods that are supplied by the supplier to the customer shall be on the basis of cash upon delivery.
The TOT agreement cl V provides:
the parties agree that in the event of the supplier prior to approving credit granting to the customer time top pay for any goods supplied being such supply shall not amount to a waiver by the supplier of any terms of the agreement nor be construed or be taken either directly or have implication as granting by the supplier of the credit facilities to the customer and no credit facilities shall be granted unless stated in the notice.
The appellant says that there is no evidence that the respondent gave notice in writing stating the credit facilities have been given and specifying the terms and conditions upon which such credit was given. Therefore no evidence before the learned magistrate that any credit was given pursuant to the credit facilities approved by the respondent was given under the TOT.
The respondent's submissions
The respondent's primary submission is that this point was not raised by the pleadings nor argued in the Magistrates Court and it is therefore unfair that the appellant now be permitted to advance that argument.
The respondent states that in the appellant's amended statement of defence filed on 8 November 2018, she pleaded in par 3(b) and par 4 that there is no legally binding agreement between the respondent and appellant and there is no legally enforceable guarantee that can be enforced by the respondent against the appellant.
Alternatively in par 11 of the amended statement of defence the appellant again pleaded that she denied there was a legally binding agreement, but if there was, the respondent had released the appellant from any liability.
The respondent points out that that the amended statement of defence did not refer to the terms of trade in any shape or form whatsoever.
The respondent points out that in the appellant's outline of submissions filed before the magistrate on 1 May 2020, the appellant raised at par 34 'there is no evidence that the contemplated "notice in writing" was ever sent by the Claimant or received by the Appellant or CJWFAMB Pty Ltd'. This is repeated in particulars at par 84 ‑ par 88 of those submissions.
The respondent's submissions filed in reply dated 7 May 2020 pleaded that at no stage has the appellant pleaded that no notice was given and that the effect of no notice being given is to somehow vitiate a guarantee. The reply raised the issue that it would be procedurally unfair to allow the appellant to raise that point and stated that it would likely necessitate further discovery and cross‑examination.
The magistrate's decision
In [7] of the reasons the magistrate stated one of the grounds asserted by the appellant as a reason why the claim must fail was that 'the terms of the credit agreement are not applicable by virtue of cl IV of the TOT'.
At [26] - [29] his Honour dealt with this ground in the following way:
26… No such written notice was sent by the claimant, instead after receipt of the signed credit agreement, the claimant began supplying goods on credit and did so for three years until the default.
27It is a curious argument by the defendant to suggest that there was no completion of the agreement to provide goods on credit when in fact the goods were supplied on that basis for some years.
28If, to pose a hypothetical, the company received a signed credit agreement but did not actually supply goods on credit then a guarantor could argue that the principal agreement was never initiated meaning they had no obligation to guarantee that obligation if, for example, the COD payment was discharged.
29I do not consider the terms of trade agreement had any practical effect on the operation of the credit agreement or the guarantee.
Conclusion as to ground 4 of the appeal
The appellant did not squarely raise the argument that written notice was a prerequisite of liability under the guarantee in her defence. The issue was first raised in her written submissions before the magistrate. The respondent expressly took issue and indicated in the court below that the issue was not pleaded and was disputed (reply dated 7 May 2020, pars 7 and 18) and they would need further discovery and possible cross‑examination to deal with the issue of 'no notice'.
This was clearly a submission by the respondent that if this point was going to be considered they wished to be heard, and the matter could not proceed to be dealt with on the papers.
With respect, the learned magistrate should have dealt with that issue. He should have given reasons as to why he was proceeding, whether that be because he considered the parties were bound to have the matter dealt with on the papers and therefore no further evidence could be taken, or that he considered it was in the interests of justice not to allow reopening or for some other reason. The respondent has been deprived of their right to apply for further discovery and potentially cross‑examine without being told the reasons. The magistrate found (in his reasons [26]) that no written notice was sent by the claimant.
In the appellant's written submissions before the magistrate the appellant made 'two observations' about cl IV of the TOT. The first was the need to insert the word 'not' between the words 'are' and 'entitled' in the first line (which both parties accepted was appropriate) and secondly, there was no evidence that the contemplated notice in writing was ever sent by the claimant or received by the appellant or CJWFAMB Pty Ltd.
That submission was further expanded at pars 84 ‑ 88 of the appellant's written submissions. The argument developed was that as no notice was given, the terms and conditions on which the credit facilities were granted were not notified in writing. Any orders for goods made must have been a series of independent transactions not governed by the terms and conditions of the overarching credit account, and that as the terms and conditions of the credit account were not finalised, any guarantee intending to cover such a credit agreement could not meet the requisite level of certainty to constitute a legal binding argument.
The basis upon which cl IV was raised before the magistrate was that it affected the certainty required to constitute a legally binding guarantee, not that if a legally binding guarantee was established, the goods were not delivered in accordance with the terms of trade.
His Honour dealt with the no notice issue and found that there was sufficient certainty to constitute the legal binding guarantee.
The respondent argues that the position now being put on appeal is fundamentally different. They say the appellant is now contending that there was a legally binding agreement but the credit the subject of the appeal was not advanced under the TOT, that is, the goods supplied are not within the scope of that guarantee.
In my view, the submission by the appellant before the magistrate and before this court are slightly different in form however, the substance is the same. They are different sides of the same coin. The requirement for notice appears to me to be a provision which both leads to the operation of the guarantee and specifies the terms and conditions of the supply of credit. The appellant's argument that the goods were not supplied pursuant to the credit facility and therefore the guarantee does not apply is, in effect, the same argument that the guarantee is not legally effective and binding in relation to the amount claimed: Westgyp. Put another way, the argument is that because there were no terms and conditions specified, the goods now claimed by the supplier were not covered by the guarantee.
In my view, there is merit in the argument being put by the appellant on the 'no notice' provisions. However, having been advised that the respondent wanted further discovery and potentially needed to cross‑examine over the issue of no notice, the magistrate should have specified his reasons why he was not allowing this to occur.
By not doing so the respondent has been prejudiced as the learned magistrate found no notice was given in circumstances where the respondent wished to either cross‑examine or further discover on this point. By not giving reasons as to why further discovery or cross‑examination was not allowed the respondent has been deprived of the opportunity of appealing that decision.
In those circumstances the respondent has been denied procedural fairness in respect of the no notice issue. There is no notice of contention however, in my view one is not required.
I therefore dismiss grounds 1, 2 and 3 of the appeal. In relation to ground 4, I remit the matter to the magistrate to determine whether or not he will allow the respondent further discovery and cross‑examination as the respondent effectively requested in their reply, and then having determined that issue, determine whether or not notice was given and the effect on the guarantee of that finding.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
AO
Associate to Judge Bowden
9 DECEMBER 2020
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