Burrell & Family Pty Ltd v Harris - [2010] SASC 184

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
BURRELL & FAMILY PTY LTD v HARRIS
[2010] SASC 184
Judgment of The Honourable Justice White
24 June 2010
GUARANTEE AND INDEMNITY - THE CONTRACT OF GUARANTEE - PARTIES AND CAPACITY
GUARANTEE AND INDEMNITY - THE CONTRACT OF GUARANTEE - CONSTRUCTION AND EFFECT - GENERALLY
Defendant is the sole director of a company which borrowed money from the plaintiff - written loan agreement executed by the defendant as director of the borrower contained in cl 4(d) an acknowledgment of personal liability by the defendant but no provision for signature by him in two capacities.
Whether the defendant executed the loan agreement in his personal capacity as well as in his capacity as director of the borrower - whether the acknowledgment of personal liability constitutes an enforceable guarantee by the defendant.
Held: defendant executed the loan agreement in both his personal capacity and in his capacity as director of the borrower - cl 4(d) of the loan agreement constitutes an enforceable guarantee - plaintiff's claim upheld.
Limitation of Actions Act 1936 (SA) s 42, referred to.
McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503; Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99; Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160; Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067, applied.
Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909; Stage Club Limited v Millers Hotels Pty Ltd (1981) 150 CLR 535; Surrendra Overseas Ltd v Government of Sri Lanka [1977] 1 WLR 565; Bush v Stevens [1963] 1 QB 1; Spencer v Hemmerde [1922] 2 AC 507, distinguished.
Ariadne Steamship Company Ltd v James McKelvie & Co [1922] 1 KB 518, not followed.
Hardel Pty Ltd v Burrell & Family Pty Ltd (2009) 103 SASR 408, discussed.
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310; Rawcliffe v Bianco Hiring Service Pty Ltd (2002) 224 LSJS 266; Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773; Ontario Marble Co Ltd v Creative Memorials Ltd (1963) 39 DLR (2d) 149; Wharf Street Pty Ltd v Amstar Learning Pty Ltd [2004] QCA 256; Universal Steam Navigation Co Ltd v James KcKelvie & Co [1920] AC 492; Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549, considered.

BURRELL & FAMILY PTY LTD v HARRIS
[2010] SASC 184
Civil

WHITE J: The plaintiff seeks to recover more than $2m from the defendant (Mr Harris) on the basis of a guarantee. For this purpose it relies upon an acknowledgment of personal liability by Mr Harris, as the sole director of the borrower, contained in a written loan agreement dated 1 April 2008 (the 2008 Agreement).
There are two principal issues in the trial. First, whether Mr Harris executed the 2008 Agreement in his personal capacity, as well as in his capacity as director of the borrower. Secondly, whether cl 4(d) of the 2008 Agreement, on its proper construction, constitutes an enforceable guarantee by Mr Harris of the borrower’s obligations.
The Plaintiff Lends Money
The evidence at the trial was of relatively narrow compass. The plaintiff led oral evidence from Mr David Burrell. I considered Mr Burrell’s evidence to be generally credible and reliable. In addition, the plaintiff tendered an agreed book of relevant documents, and the parties also agreed several facts. Mr Harris did not give evidence. At the conclusion of the trial, there were relatively few factual matters in issue. I will make findings about those matters, to the extent that it is necessary to do so, in the reasons which follow.
The plaintiff is a family owned company deriving its income from the provision of management services and property rentals. Mr Burrell’s wife, Helen, is its sole director. However, Mr Burrell has been its principal human agent in relation to the matters relevant in these proceedings. I am satisfied that Mr Burrell is an experienced businessman.
Hardel Pty Ltd (Hardel) is a company which has been involved in some way in property development. At all times relevant to these proceedings, Mr Harris has been its sole director. Since 15 June 2009, Hardel has been in liquidation.
Mr Harris is also the sole director of 11 other companies[1] which together can be referred to as the Hardel Group of Companies. The precise business activities or functions of these other companies is unclear. Some act as trustees of trusts, and some appear to be involved in property development. Some of the companies have borrowed substantial sums of money. I am satisfied that Mr Harris is also an experienced businessman and familiar with the documentation associated with financial transactions.
[1] Agreed Fact No 10.
The Burrells and Mr Harris came to know each other in early 2004 through their involvement in the Assemblies of God Church at Paradise. Mr Burrell and Mr Harris became friends and investigated the possibility of pursuing some business prospects together.
In early January and February 2005, as a result of requests by Mr Harris to Mr Burrell, the plaintiff lent $100,000, and shortly afterwards $200,000, to Hardel. The first loan was to be for a period of four weeks, and the second for 12 months, in both cases commencing on 1 February 2005. Both loans were interest bearing. The plaintiff and Hardel entered into separate loan agreements, each dated 1 February 2005, in relation to these two loans. I accept Mr Burrell’s evidence that both these loan agreements were prepared by him without obtaining any legal assistance.
In June and July 2005, the plaintiff lent further amounts to Hardel, again at the request of Mr Harris. It lent $750,000 in June and $150,000 in July. Each loan was for a period of 12 months. In addition, in June 2005 the plaintiff agreed to lend Hardel $10,000 per month for a period of 12 months. Under this arrangement, the plaintiff did lend $10,000 each month commencing with an advance on 22 June 2005 and concluding on 22 May 2006.
The parties did not enter into any written loan agreements in relation to these additional loans. They appear to have been interest bearing.
In total, as a result of the loans described above, the plaintiff advanced $1,320,000. None of the loans were secured in any way at all at the time that they were made. All of the loans were made to Hardel. The evidence does not disclose with any precision how Hardel applied the advances. It is possible that some of the monies were applied by Hardel for the purposes of other members of the Hardel Group of Companies but, if this was so, it is not reflected in the financial statements for the financial year ending on 30 June 2006 of those members of the Hardel Group which were provided to Mr Burrell by Mr Harris on 21 November 2006.
I have described the loans as being made to Hardel. However, it is very apparent that it was the personal relationship between Mr Burrell, on the one hand, and Mr Harris, on the other, which was central to the loans being made, and to the form in which they were made. This explains the absence of any written documentation at all in relation to the last three loans, the relative informality of the first two loan agreements, and the absence of any provision for security. I am satisfied that it was Mr Burrell’s trust of Mr Harris personally which was at the heart of the loan agreements.
The 2006 Agreement
Hardel did not make any payments whether of interest or of principal during 2006. Mr Burrell became concerned about this state of affairs and he pressed Mr Harris for repayment. In late September, or early October 2006, Mr Harris agreed to pay $1m by 30 October 2006, but he did not meet that commitment.
Mr Burrell continued to press Mr Harris for repayment. It is not necessary to record the detail of their discussions or communications on this topic. In about November 2006, the two men agreed that the plaintiff and Hardel should enter into a new loan agreement consolidating all of the plaintiff’s loans to Hardel. The consideration for the new agreement was the plaintiff’s agreement to an extension of time in which the monies could be repaid.
Messrs Burrell and Harris agreed that Mr Harris would draft the terms of the new agreement. However, when Mr Harris delayed doing so, Mr Burrell prepared a draft, again without legal assistance. Subsequently the parties entered into an agreement dated 30 November 2006 (the 2006 Agreement). Although bearing the date 30 November 2006, I find that the 2006 Agreement was not executed by Hardel until 29 December 2006.
Clause 1, which was the principal operative clause in the 2006 Agreement, is somewhat inaptly expressed: on its terms it contemplates the plaintiff making a new loan of $1,464,511.28 to Hardel for a period of two months commencing on 30 November 2006. In fact, the figure of $1,464,511.28 was the aggregate of the five previous loans together with accrued interest. Sub-cll 5(c) and 5(d) of the 2006 Agreement provided:
(c)Whilst it is not the intent of the lender, failure to fully discharge the loan on the repayment date may result in recovery action and it is agreed that all costs associated with recovery will be charged to the borrower. Such recovery action will not be limited to Hardel Pty Ltd but will extend to include all related entities, parties and trusts and will continue until all of the debt is fully recovered.
(d)The director of the borrowing entity also acknowledges personal liability for all debt remaining after the loan repayment date inclusive of all interest and recovery costs.
The execution clause of the 2006 Agreement was as follows:
EXECUTED by  EXECUTED by
BURRELL & FAMILY PTY LTD  HARDEL PTY LTD
(ACN 104 734 929)  (ACN 68 231 962 9300)
(signed)(signed)*
HELEN BURRELL  PETER HARRIS
Director  Director
By the asterisk which Mr Harris placed next to his signature, he indicated that the signature was subject to some handwritten notes which he had made on the reverse side of the Agreement. Aspects of those handwritten notes were discussed by Kourakis J in Hardel Pty Ltd v Burrell & Family Pty Ltd.[2] Insofar as it is relevant in the present proceedings, the handwritten notes provided as follows:
The borrower makes the following addendum to the Agreement:
…
(4)The borrower undertakes to represent the true nature of the lender’s intentions that this was not an investment loan, rather a loan of grace intended to assist the borrower from a Christian perspective.
(5)The borrower will actively seek to provide security/rights/ownership within existing Hardel property ventures to ensure the return of capital. This will be actively pursued throughout January `07.
…
(Signed)
Peter Harris
[2] [2009] SASC 77 at [56]-[61]; (2009) 103 SASR 408 at 426-7.
Hardel did not make any repayment at all by 31 January 2007. However, during 2007 it did make payments to the plaintiff as follows:

2 May 2007

$9,000

23 July 2007

$10,000

10 December 2007

$40,000

29 December 2007

$250,000

During 2007, Mr Burrell became increasingly insistent upon repayment. He complained repeatedly to Mr Harris about the latter’s failure to honour commitments, or to provide relevant information, or even to respond to telephone calls or emails. Again, it is unnecessary for present purposes to make detailed findings concerning the parties’ respective communications.
The 2008 Agreement
In January 2008, Mr Harris raised with Mr Burrell the prospect of the parties entering into an updated loan agreement. This was very shortly after the payment of the substantial sum of $250,000 on 29 December 2007, referred to above. On 13 March 2008, Mr Burrell agreed that the parties enter into an updated agreement. Mr Harris agreed to have his solicitors draw up a “new simple agreement” to replace the 2006 Agreement. When Mr Burrell did not receive any draft from Mr Harris, he prepared his own draft, using the 2006 Agreement as its basis. This was done without seeking legal advice. The terms of the draft were very similar to, but not completely identical with, those in the 2006 Agreement.
Although bearing the date 1 April 2008, the 2008 Agreement was executed by Mr Harris at a meeting with Mr Burrell on 21 April 2008. I infer that Mrs Burrell had previously signed the Agreement as director of the plaintiff.
On its face page the 2008 Agreement stated that it was an “Agreement for Loan” between “Burrell & Family Pty Ltd … (Lender) and Hardel Pty Ltd … and associated entities including but not restricted to: (Harris Family Trust, Hardel Group Trust, Hardel Consulting Trust, Hardel Property Holdings, 60 On Child’s Trust, Stanhope Apartments Unit Trust, Avpri Unit Trust and Hardel Investments Unit Trust) (Borrower)”. This description of the borrower is the same as that contained in the 2006 Agreement. The relevant portions of the 2008 Agreement are in the following terms:
PARTIES:
BURRELL & FAMILY PTY LTD jointly and severally together with its successors and assigns called (“The Lender”)
- and –
HARDEL PTY LTD together with its successors, assigns and associated entities called
(“The Borrower”)
NOW THIS AGREEMENT WITNESSES as follows:
1.     The Loan
The Lender agrees to lend to the Borrower and the Borrower agrees to borrow from the Lender the sum of ONE MILLION, FOUR HUDNRED AND FORTY THOUSAND, SEVEN HUNDRED AND EIGHTY-SIX DOLLARS AND EIGHTY-SEVEN CENTS (“the Principal Sum”) for a period of two months (“the Term”), commencing on Tuesday the 1^st of April 2008. ($1,440,786.87).
2.     Purpose of Loan
The Purpose of the loan facility is to continue the provision of short-term capital until the Borrower is able to re-finance for property development activity and in accordance with the time lines as advised by the Borrower.
…
4.     Repayment of The Principal Sum
(a)The Borrower must repay and fully discharge the loan on or before the Repayment Date of 1 June 2008. The Borrower must also pay any interest accrued on the loan and not then paid, and all other amounts payable under or as a consequence of this agreement and unpaid, to the Lender on or before the Repayment Date.
(b)The Borrower shall have the right from time to time and at any time during the term of the loan to repay to the Lender the whole or any portion of the Principal Sum.
(c)Failure to fully discharge the loan on the repayment date may result in recovery action and it is agreed that all costs associated with recovery will be charged to the borrower. Such recovery action will not be limited to Hardel Pty Ltd but will extend to include all related entities, parties and trusts and will continue until all of the debt is fully recovered.
(d)The director of the borrowing entities also acknowledges personal liability for all debt remaining after the loan repayment date inclusive of all interest and recovery costs.
…
EXECUTED as an agreement the day and year first herein before mentioned.
EXECUTED by  EXECUTED by
BURRELL & FAMILY PTY LTD  HARDEL PTY LTD
(ACN 104 734 929)  (ACN 68 231 962 930)
(signed)(signed)
HELEN BURRELL  PETER HARRIS
DirectorDirector
(emphasis in original)
Clause 1 indicated that the plaintiff lent $1,440,786.87 to the borrower for a period of two months commencing on 1 April 2008. Clause 4(a) required repayment in full of the loan on or before the “Repayment Date” of 1 June 2008.
The 2008 Agreement comprised three pages: the face page and two pages containing the terms of the Agreement. The execution clause is at the foot of the second of those pages. As well as signing the execution clause, Mr Harris also entered his initials at the foot of the first two pages. It was not suggested that his initialling of those pages has any significance for the issues in this trial, and it need not be mentioned further.
After 21 April 2008, Hardel made only one further payment to the plaintiff, namely, $3,000 on 15 August 2008.
The Plaintiff’s Claim
The parties agreed that as 7 June 2010, interest on the sum of $1,440,786.87 calculated in accordance with cl 3 of the April 2008 Agreement totalled $704,274.50. The parties also agreed that the total amount outstanding to the plaintiff at 7 June 2010 is $2,145,061.31.
In these proceedings the plaintiff seeks to recover that amount from Mr Harris. It contends that Mr Harris signed the document on 21 April 2008 both on behalf of Hardel Pty Ltd and in his personal capacity. It contends further that, on its proper construction, cl 4(d) of the April 2008 Agreement constitutes an enforceable guarantee by Mr Harris of Hardel’s obligations to the plaintiff. Mr Harris disputes each of those contentions.
Construction of Commercial Contracts
The general principles relating to the construction of commercial contracts are well established. Such contracts are to be given a business-like construction.[3] This requires regard to be had to the language used by the parties, the commercial circumstances which the document addresses, and the objects which the contract is intended to secure.[4] The rights and liabilities of the parties are to be determined by an objective assessment of their beliefs and intentions, and not by reference to the parties’ own subjective beliefs or understandings.[5]
What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.[6]
[3] McCann v Switzerland Insurance Australia Ltd [2000] HCA 65 at [22]; (2000) 203 CLR 579 at 589.
[4] Ibid. See also Wilkie v Gordian Runoff Ltd [2005] HCA 17 at [15]; (2005) 221 CLR 522 at 528-9.
[5] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 at [40]: (2004) 219 CLR 165 at 179.
[6] Ibid. See also Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 at [22]; (2004) 218 CLR 451 at 461-2.
In the present case both the 2006 and the 2008 Agreements were prepared without the benefit of legal assistance. The observation of Lord Wright in relation to contracts of that kind in Hillas & Co Ltd v Arcos Ltd,[7] to which Gibbs J referred in Australian Broadcasting Commission v Australasian Performing Right Association Ltd,[8] is particularly pertinent. That is, courts should construe such contracts “fairly and broadly, without being too astute or subtle in finding defects”. Courts will endeavour to avoid a construction which makes commercial nonsense or which is shown to be commercially inconvenient. That is because courts infer that commercial parties would not themselves normally agree in such a way.[9]
[7] (1932) 147 LT 503 at 514.
[8] (1973) 129 CLR 99 at 109-10.
[9] Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4.
Did Mr Harris Intend to be Personally Bound?
The two principal issues in the case overlap. However, it is convenient to consider first whether Mr Harris intended, by his signature of the 2008 Agreement, to bind himself in his personal capacity. As the authorities cited above indicate, this question is to be determined by an objective assessment, and not by an enquiry about Mr Harris’ subjective intentions.[10]
[10] See also Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160 at 174.

On this issue, the plaintiff relies principally upon the content of cl 4(d), contending that it identifies Mr Harris sufficiently, and that it must be taken that Mr Harris intended when signing the April 2008 Agreement to signify his personal acceptance of liability, in addition to signifying Hardel’s acceptance of the terms of the Agreement.
In determining whether a person signing a contract intended to be personally bound by it, the Court must consider the contract as a whole and not just the manner of its execution. This was the conclusion of Giles J in Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd:[11]
… I conclude that the proper approach is to inquire whether there is to be found an intention that the signatory be personally bound to the contract evidenced in the document, meaning thereby not a subjective intention but an intention to be found objectively, notwithstanding a qualification attached to the signature. That intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible. The inquiry is not limited to consideration of the signature and its qualification in order to determine whether or not the signature indicates an assent to be personally bound.[12]
[11] (1989) 21 NSWLR 160.
[12] Ibid at 174.
Giles J rejected the approach suggested by Atkin LJ in Ariadne Steamship Company Ltd v James McKelvie & Co.[13] The decision of Giles J in this respect was endorsed by the Full Court in this State in Rawcliffe v Bianco Hiring Service Pty Ltd.[14]
[13] [1922] 1 KB 518.
[14] [2002] SASC 430; (2002) 224 LSJS 266.
As previously noted, both the 2006 and the 2008 Agreements included entities associated with Hardel in the description of “the borrower”. It was common ground that the attempt to bind the associated entities in each agreement was ineffective, as none of them executed either Agreement, and there was no indication that Hardel had acted as their agent when it executed the Agreements.
The ineffective attempts to bind the associated entities does not effect the overall validity and enforceability of the 2008 Agreement (or for that matter of the 2006 Agreement). It was an agreed fact that the plaintiff had advanced all the monies it lent to Hardel, and it was a further agreed fact that each of the plaintiff and Hardel had executed the two Agreements. Accordingly Hardel was the true borrower. There is no reason not to regard Hardel as being bound by each agreement. The word “borrower” and the expression “borrowing entities” should be understood as a reference to Hardel only. Doing so avoids treating the 2008 Agreement as though it had no effect at all, a conclusion which this Court should be slow to reach.
Although accepting that the purported inclusion of the associated entities as borrowers was ineffective, Mr Harris did seek to rely on that inclusion in relation to the issue of whether cl 4(d) should be properly construed as a guarantee. I will return to that submission later in these reasons.
In support of the contention that a reasonable person in the position of the parties would not have inferred that Mr Harris was intending to be personally bound, his counsel referred to a number of matters. First, Mr Harris was not named as a party to the 2008 Agreement, and when he did sign it, he inserted his signature immediately after the words “Executed by Hardel Pty Ltd” and immediately above his typed name and the typed word “Director”. The submission was that the words “Executed by Hardel Pty Ltd” indicated that he was signing for and on behalf of Hardel, and that the word “Director” went beyond a mere description of Mr Harris, and amounted to a qualification of the capacity in which he intended to sign the document. This meant that Mr Harris should be understood as having signed the document only for the purpose of binding Hardel to its terms.
Counsel referred to the judgment of Kirby P in Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd[15] as indicating the prima facie effect of a signature in these circumstances:
Where a contract, on its face, is signed by a person expressly on behalf of another, at the very least the person so signing is prima facie not bound personally but only in the capacity which is asserted on the face of the document … “Preponderant importance” must be attached to the qualification of personal assent to liability contained in the words used indicating execution in some capacity other than a personal capacity …[16]
However, the application of the principle stated by Kirby P in Scottish Amicable depends very much upon whether the word “director” is to be understood as a word of qualification, or simply as a word of description.
[15] (1985) 9 ACLR 909.
[16] Ibid at 916-7.
In my opinion, in the circumstances of this case the use of the word “director” is a neutral factor. It can be understood as word of qualification, but, given the presence of cl 4(d), the words following Mr Harris’ signature can also be understood as an identification of him for the purposes of that clause. Viewing the matter in this way would mean that his signature could be regarded as an execution by him in his capacity as director and in his personal capacity. Adapting the words of Glass JA in Helvetic Investment Corporation Pty Ltd v Knight,[17] language which indicates that Mr Harris executed the loan agreement because he was the director of Hardel falls short of stipulating that he contracted only in that capacity.
[17] (1984) 9 ACLR 773 at 774.
I agree that the words “executed by Hardel” are some indication that Mr Harris was signing for and on behalf of Hardel but they do not indicate conclusively that he was signing only in that capacity.
Counsel attached significance to the fact that Mr Harris was not named as a party especially given Mr Burrell’s extension of the definition of “Borrower” to include the “associated entities” in an apparent attempt to enlarge the plaintiff’s prospects of recovery. In that circumstance, Mr Burrell’s omission to include Mr Harris as a separate party gave rise to a negative implication, it was said, that it was not intended that Mr Harris personally was to be bound. I do not consider this to be a significant matter. It is just as plausible that Mr Harris was not included as a borrower because specific provision had been made for his liability in cl 4(d).
Secondly, counsel drew attention to the fact that the manner of execution of the 2008 Agreement by Mrs Burrell and Mr Harris was indistinguishable. There was no suggestion that Mrs Burrell intended by her signature to accept some personal liability. Why should it be inferred, counsel asked, that the same words gave rise to some different inference in the case of Mr Harris? This was a point to which Giles J attached some significance in Clark Equipment of Australia Ltd v Kiyose Holdings Pty Ltd.[18] As part of this submission, counsel made the further point that Hardel’s execution of the April 2008 Agreement was not expressed to be “on behalf of” Mr Harris.
[18] (1989) 21 NSWLR 160 at 175.
Thirdly, counsel referred to the fact that the April 2008 Agreement did not use the word “guarantee”. This point was made in relation to both the principal issues in the trial. The point was that both Messrs Burrell and Harris were experienced businessmen and could be taken to be familiar with guarantees and, in particular, the terminology of “guarantee”. Mr Burrell admitted his familiarity and I accept that Mr Harris must, at the least, have had a similar familiarity. In that circumstance counsel submitted that it was reasonable to suppose that if the two men had contemplated that Mr Harris was to be a guarantor, they would have used the term “guarantee” and would also have understood the need for Mr Harris to sign separately in order to indicate that he was binding himself in his personal capacity.
The next point was related to the third. Counsel submitted that the April 2008 Agreement did not contain a “clear and obvious” indication that Mr Harris was required to provide a guarantee. In this respect, counsel contrasted the facts and circumstances of this case with those considered in Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd[19] and in Rawcliffe v Bianco Hiring Service Pty Ltd[20] in which it was plain that the plaintiff had sought a guarantee, and that the defendants were willing to grant it.
[19] (1985) 9 ACLR 909.
[20] [2002] SASC 430; (2002) 224 LSJS 266.
Counsel made a further submission which was relevant both to the construction of cl 4(d) and to the question of whether Mr Harris should be regarded as personally bound. Counsel submitted that, viewed objectively, it was unlikely that Mr Harris could have intended to have undertaken a personal liability, in the event of default by Hardel, to pay the plaintiff approximately $1.4m given the relatively modest advantages which Hardel obtained from each of those two Agreements. Each Agreement had a two month term only. Despite the statement of intention contained in cl 5(c) of the 2006 Agreement, Mr Harris obtained for Hardel only a short-term forbearance by the plaintiff from taking recovery action. That being so, it was submitted that it is unlikely that Mr Harris would have been willing to expose himself to such a personal liability.
Finally, counsel submitted that even if cl 4(d) did give rise to an expectation that Mr Harris would sign the 2008 Agreement in his personal capacity, there had in fact been no execution in that way. This meant simply that the parties had not done what was necessary to bring the intended liability into existence. The deficiency should not be overcome by holding that the parties must have intended that Mr Harris sign the Agreement once, but in a dual capacity. In this respect, counsel referred to, and relied upon, the following passage in the judgment of Giles J in Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd:
The factoring agreement primarily required execution by Kiyose. It was executed by Kiyose. To conclude that signature by [the directors] as the act of Kiyose in executing the factoring agreement should be taken as signature personally binding them because there was a clause in the factoring agreement in the fulfilment of which it would have been appropriate to find signature in their personal capacities would fail to give due recognition to there having been simply a want of execution by them. … The transaction was not fully implemented, and the failure to fully implement it cannot now be rectified by calling upon signature by [the directors] as the act of Kiyose to do double duty as signature on their own behalves.[21]
[21] (1989) 21 NSWLR 160 at 176.
These matters are all of significance, albeit some more than others. However, there are a number of considerations pointing in favour of Mr Harris having accepted a personal liability.
For the reasons given earlier, although the execution clause of the 2008 Agreement considered by itself suggests that the word “director” may be a qualification of Mr Harris’ signature, that is less obviously so when the agreement is considered as a whole, and particularly, when regard is had to cl 4(d). It is possible for a person to intend his or her signature to have a dual effect: so as to bind a principal and to accept personal responsibility. Finkelstein J made this point in Follacchio v Harvard Securities (Aust) Pty Ltd[22] when he said:
…The appellant [argued] that it is not permissible for a person to affix one signature to a contract and have that signature operate in, say, two capacities: one as agent for a principal and another to assume personal responsibility. But I see no reason in principle why this could not occur. All that is necessary is that the capacity or capacities in which the person is placing his signature on a contract be clear. If it is clear that he intends to sign the contract in two or more capacities, there is no reason why that intention should not be given effect.[23]
[22] [2002] FCA 1067.
[23] Ibid at [9]. See also Ontario Marble Co Ltd v Creative Memorials Ltd (1963) 39 DLR (2d) 149 at 155; Wharf Street Pty Ltd v Amstar Learning Pty Ltd [2004] QCA 256 at [11]-[12].
Clause 4(d) is important in the assessment of whether Mr Harris intended to be personally bound. Whatever be the effect of the acknowledgment of personal liability, cl 4(d) can have an operation only if the director of Hardel (or alternatively the director of Hardel and of the associated entities) intended to make that acknowledgment. No other operation can be given to cl 4(d). Mr Harris is plainly the director to which cl 4(d) refers. That is because he is the sole director of Hardel and also of each of the other companies in the Hardel Group of Companies. These include those listed as the “borrowing entities”. This consideration points persuasively to the conclusion that the parties must have intended that Mr Harris be bound by cl 4(d). Yet the 2008 Agreement does not contain any provision for separate signature by Mr Harris. That supports a conclusion that the parties intended that Mr Harris’ signature should have a dual effect. That inference can be drawn more readily given that each of the 2006 and 2008 Agreements was prepared without legal assistance.
Such a conclusion is consistent with the approach in several of the authorities. In Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd[24] McHugh JA said:
In some cases the contents of a document may indicate that the signatory is bound even though a qualification attaches to his signature. Expressly or by implication the body of the document may make it plain that the signatory is a party to the contract. … [T]he qualification to the signature may be overcome by the terms of the document and the surrounding circumstances.[25]
Similarly, Lord Parmoor in Universal Steam Navigation Co Ltd v James McKelvie & Co[26] said:
It is not impossible that by plain words in the body of the document, persons signing “as agents”, may expressly undertake some form of personal liability as principals …[27]
And later, his Lordship said:
I do not understand Atkin LJ to exclude the possibility that a person, signing “as agent”, may nevertheless in the same document expressly undertake some form of personal liability.[28]
[24] (1985) 9 ACLR 909.
[25] Ibid at 923.
[26] [1920] AC 492.
[27] Ibid at 504.
[28] Ibid at 506.
The decision giving rise to the appeal considered by the House of Lords in Universal Steam Navigation Co was Ariadne Steamship Co v James McKelvie & Co.[29]Atkin LJ’s conclusion that the question of whether a person signing a contract in one capacity also intended to be personally bound should be determined principally by reference to the manner of execution has not stood the test of time. However, Atkin LJ also accepted that in some cases the body of the contract may indicate that a person signing in one capacity also intended to be personally bound:
If the body of the contract records that the signer is a party, or leaves the name of the party to be inferred from the signature, the signature will be proof that the signer has assented to a contract made with him.[30]
[29] [1922] 1 KB 518.
[30] Ibid at 635.
Mr Burrell conceded that during the negotiations for the November 2006 Agreement and for the April 2008 Agreement, there was no specific mention of a guarantee, nor even of Mr Harris accepting a personal liability in respect of the monies lent to Hardel. This does distinguish the factual circumstances of the present case from some others. However, it does not mean that a requirement for a form of guarantee did not form part of the circumstances surrounding the negotiation of the 2008 Agreement. Mr Burrell first forwarded a draft of the 2006 Agreement to Mr Harris on 1 December 2006. By sending a draft which included cl 5(d), he put Mr Harris on notice that the plaintiff was seeking, amongst other things, some acknowledgment of personal liability. Thereafter, there was some negotiation between the two men, particularly in relation to cl 5 (the predecessor of cl 4 in the 2008 Agreement).[31] In those negotiations, Mr Harris referred specifically to cl 5(c). I am satisfied that Mr Harris must also have been aware of the sub-clause which immediately followed it, requiring him to acknowledge personal liability. I consider this to have been an important part of the factual context at that time. Mr Harris raised no protest about cl 5(d). He executed the 2006 Agreement without any alteration of cl 5(d).
[31] Exhibit P1 at pp 123-27.
Similarly, Mr Harris was provided with a draft of the 2008 Agreement, containing cl 4(d), on 8 April 2008 and did not execute the Agreement until 21 April 2008. Again I am satisfied that he must have been aware of the presence of cl 4(d), and yet he raised no protest concerning its inclusion. In those circumstances, the fact that the two men did not use the word “guarantee” and did not discuss the provision by Mr Harris of a guarantee or his acceptance of personal liability loses much of its significance.
There is another factor of the surrounding circumstances which I consider to be pertinent. The loans made by the plaintiff to Hardel had their origins and continuance in the personal friendship, mutual trust and shared religious views of Messrs Burrell and Harris. In those circumstances, it is natural that Mr Harris may have readily accepted a personal responsibility to repay his friend’s loans. I accept Mr Burrell’s evidence that an acceptance by Mr Harris of personal responsibility underpinned the discussions which he had with him concerning the loans. Mr Burrell’s inability to point to a specific discussion or to specific words does not matter in this respect. Mr Harris’ acceptance of his personal responsibility underpinned the discussions of the two men. The personal relationship, and the origins of the loans in a context of shared religious faith may also explain why the parties used the expression “acknowledges personal liability” rather than “guarantee”. If the fictional officious bystander to whom resort is made by the law in relation to the implication of terms had been present and had queried the position, it is almost inevitable that Mr Harris would have readily acknowledged his personal responsibility. Neither the 2006 Agreement nor the 2008 Agreement is to be construed as though it was the product of arms length negotiations between detached and unrelated parties.
The written communications between the parties also indicate that the plaintiff was seeking some form of security for its position and that Mr Harris was aware of that fact. His acceptance of a personal liability was one way by which he could give some security. This points, albeit only in a minor way, in favour of Mr Harris intending to be personally bound by his signature. The word “also” in cl 4(d) is another minor indication that Mr Harris intended to accept an additional liability.
Although the matters to which counsel for Mr Harris referred are significant, I am satisfied that when the 2008 Agreement is considered as a whole, and in the circumstances in which it was made, a reasonable person would have considered that Mr Harris was intending to be personally bound. Any other conclusion would fail to give effect to cl 4(d). I am conscious of the caution of Giles J in Clark Equipment that there may be cases in which it is intended that one party should undertake a personal liability but that result is not achieved because of the failure of the party to execute the document in his or her personal capacity. However, that is not this case. The parties, unassisted by legal advice, did not advert to the appropriateness of Mr Harris signing the document separately and identifiably in each of his two capacities. Instead, considered objectively, they contemplated that Mr Harris’s signature should have a dual effect.

Accordingly I conclude that Mr Harris is bound in his personal capacity by the 2008 Agreement.
Is cl 4(d) a Guarantee?
Mr Harris submitted that even if he was bound in his personal capacity by the 2008 Agreement, cl 4(d) should not be understood, on its proper construction, as creating a personal guarantee. He contended that cl 4(d) should be construed as being no more than an acknowledgment by him, as director of Hardel, of the company’s indebtedness. Accordingly, this issue raises the question of the proper construction of cl 4(d).
Counsel for Mr Harris made four principal points in this respect. First, clear and certain words are required before a contractual provision should be construed as a guarantee. That is especially so in the present case because Messrs Burrell and Harris, despite being well familiar with the concept and terminology of a guarantee, did not use that term. Counsel referred to “The Modern Contract of Guarantee” in which the authors say:
A guarantor’s offer must be clear and definite … Vague or equivocal statements will not suffice: they must be promissory and show an intention to be legally bound. Nor will a mere overture to provide a guarantee constitute an offer capable of acceptance. The central question is whether or not it is sufficiently clear from the documentation and surrounding circumstances that there is an intention to enter a legally binding obligation.[32]
Counsel also referred to the statement in the joint reasons in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd:[33]
At law, as in equity, the traditional view that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety … A doubt as to the status of a provision in the guarantee should therefore be resolved in favour of the surety …[34]
[32] O’Donovan & Philips “The Modern Contract of Guarantee” 3^rd edn (1996) LBC.
[33] (1987) 162 CLR 549.
[34] Ibid at 561.
Secondly, counsel submitted that the word “acknowledges” and its cognates has a well-understood and confined meaning. An “acknowledgment”, he submitted, is no more than an admission of a present obligation to pay. It is an admission or recognition of the present existence of a cause of action, or an admission as to the present existence of a debt which is due or which is outstanding and unpaid. Because the word “acknowledges” and its cognates has this confined meaning, cl 4(d) is not promissory in nature and therefore does not satisfy one of the fundamental requirements for the existence of a guarantee.
In support of these propositions, counsel referred to a number of authorities decided in the context of limitation of actions legislation in which a debtor’s acknowledgment of the debt had been held sufficient to avoid the operation of a time bar which would otherwise have been applicable.[35] The authorities included: Stage Club Limited v Millers Hotels Pty Ltd;[36] Surrendra Overseas Ltd v Government of Sri Lanka;[37] Bush v Stevens;[38] and Spencer v Hemmerde.[39]
[35] See for example s 42 of the Limitations of Actions Act 1936 (SA).
[36] (1981) 150 CLR 535 at 544, 564.
[37] [1977] 1 WLR 565 at 573.
[38] [1963] 1 QB 1.
[39] [1922] 2 AC 507.
I see no reason why the meaning given to an expression such as “acknowledgment of a debt”or “acknowledgment” in the context of limitation of actions legislation should govern the meaning of the word “acknowledges” in the context of a contract. That statutory context is quite different. Instead, the Court should engage in its usual task of construing the contract by considering the meaning which, objectively, the parties should be taken to have intended.
The sixth meaning given to the verb “acknowledge” in the Macquarie Dictionary is:
Law to own as binding or legal force: to acknowledge a deed.
Similarly, the third meaning of the verb “acknowledge” in the Shorter Oxford English Dictionary is:
To own as genuine, or valid in law; to avow or assent to, in legal form.
These definitions suggest that in its ordinary meaning the word “acknowledgment” contemplates the acceptance of a matter as binding and having legal force.
Viewed in this way, an acknowledgment is a formal acceptance of some matter, fact or thing, but there is no reason why that matter, fact or thing should be confined to an existing indebtedness. A range of different matters can be the subject of the acknowledgment. There is no inaptness in a person acknowledging that he or she will, upon the happening of some future event, be obliged to meet a liability.
In the present case the liability acknowledged by the director under cl 4(d) becomes operative only if there is some amount of the loan and accrued interest which remains unpaid after the repayment date, ie, at a future time. Plainly it cannot be an acknowledgment of an existing liability.
Thirdly, Mr Harris argued that cl 4(d) should be construed as containing only an acknowledgment by him, as director of Hardel, of the existing indebtedness of Hardel.
In my opinion, this construction does not give proper effect to cl 4(d). The adjective “personal” qualifies the word “liability” and not the word “acknowledges”. Clause 4(d) should not be understood as though it provided that Mr Harris “personally acknowledges the liability of Hardel” with the effect that it meant no more than that Mr Harris, qua director, acknowledged the amount of Hardel’s liability. Such a construction would deny to cl 4(d) a real practical effect, and the purpose of such an acknowledgment is inclear.
In support of the submission on this point, counsel referred to an email of Mr Burrell to Mr Harris on 2 December 2006 in which Mr Burrell said:
… I am preparing a new loan document for the total amount owing so that it can be signed off by you, acknowledging the debt. I will combine all debt into one loan to simplify and provide a document of explanation for interest calculation.[40] [Emphasis added]
[40] Exhibit P1 at p 122.
I doubt that it is permissible to pay any regard at all to Mr Burrell’s email of 2 December 2006 in construing cl 4(d) of the 2008 Agreement and its predecessor, cl 5(d) of the 2006 Agreement. However, to the extent that it is permissible to do so, I do not consider that it is of particular assistance to Mr Harris. It simply leads to an enquiry of what Mr Burrell meant when he used the words “acknowledging the debt”. Further on one construction, the email can be seen as having put Mr Harris on notice that the plaintiff would be seeking some personal acknowledgment from him.
In my opinion, the fact that the parties did not use the word “guarantee” is not very significant. They have used other words which convey the same effect.
Finally, counsel submitted that cl 4(d) should not be construed as a guarantee because to do so would involve Mr Harris acting as guarantor of his own obligations as a borrower. The premise to the submission was that Mr Harris should be understood as one of the “associated entities” which Mr Harris had attempted to include within the description of “borrower” and therefore as a party to the contract. Although the attempt had not been successful, the fact that the parties had contemplated that Mr Harris would be a borrower had the consequence that they could not have contemplated that he would also be a guarantor of his own obligations.
I do not accept this submission. In my opinion the expression “associated entities” did not include Mr Harris personally. He is a person, not an entity. Further, the meaning of “associated entities” takes its colour from the list of entities on the face page of the 2008 Agreement. These are corporations and trusts, not individuals. Accordingly, the parties did not at any stage contemplate Mr Harris would himself be a borrower.
I see no reason not to give cl 4(d) the meaning which the words used suggest, namely, that Mr Harris acknowledged, in a formal way that, in addition to the recovery action which could be taken against Hardel, he would be personally liable for any amount of the loan and accrued interest which was unpaid at 1 June 2008. Accordingly cl 4(d) does contain an effective and enforceable commitment by Mr Harris to pay the amount of Hardel’s outstanding indebtedness to the plaintiff.
Conclusion
For the reasons given above, I uphold the plaintiff’s claim. I will enter judgment for the plaintiff in the sum of $1,440,786.87 together with interest calculated in accordance with cl 4 of the April 2008 Agreement to the date of judgment. I will hear from the parties as to the calculation.

2 May 2007	$9,000
23 July 2007	$10,000
10 December 2007	$40,000
29 December 2007	$250,000