Capricorn Society Ltd v Lear
[2003] WADC 100
•9 MAY 2003
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: CAPRICORN SOCIETY LTD -v- LEAR & ORS [2003] WADC 100
CORAM: NISBET DCJ
HEARD: 30 APRIL 2003
DELIVERED : 9 MAY 2003
FILE NO/S: CIV 2696 of 2001
BETWEEN: CAPRICORN SOCIETY LTD
Plaintiff
AND
N J & F J LEAR PTY LTD (ACN 074 722 606)
First DefendantNATHAN JOHN LEAR
FELICITY JOY LEAR
Second DefendantsPETER EDWARD RAWLINSON
Third Defendant
Catchwords:
Practice and procedure - Summary judgment - Appeal from refusal of Registrar to enter - Defence of non est factum - When available - Other defences - Whether arguable.
Legislation:
Co-operative and Provident Societies Act 1903
Property Law Act 1969
Result:
Appeal allowed in part
Representation:
Counsel:
Plaintiff: Mr G F McGrath
Second Defendants : Mr J M Wojtowicz
Third Defendant : Mr J Eastoe
First Defendant : No appearance
Solicitors:
Plaintiff: Durack & Zilko
Second Defendants : Wojtowicz Kelly
Third Defendant : Jonathon Eastoe
First Defendant : No appearance
Case(s) referred to in judgment(s):
Carlisle and Cumberland Banking Co v Bragg [1911] 1 KB 489
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Dean v Lloyd [1990] WAR 42
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Gallie v Lee [1969] 2 Ch 17
Garcia v National Australia Bank Ltd (1998) 194 CLR 395
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Mostyn v Mostyn (1989) 16 NSWLR 635
Petelin v Cullen (1975) 132 CLR 355
Saunders v The Anglia Building Society [1971] AC 1004
Yerkey v Jones (1939) 63 CLR 649
Case(s) also cited:
Caltex Oil (Aust) Pty Ltd v Bawden [1979] Qd R 62
Clarke v Union Bank of Australia Ltd (1917) 23 CLR 5
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Daimler Co Ltd v Continental Tyre & Rubber Co (Great Britain) Ltd [1916] 2 AC 307
Evans Deakin & Co Pty Ltd v Kaiser Engineers & Constructors Inc [1968] Qd R 379
Evans v Bartlam [1937] AC 473
Gillon & Ors v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991
Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co Pty Ltd (1978) 29 ACTR 21
Jacobs v Booth's Distillery Co (1901) 85 LT 262
Lewkowski v Bergalin Pty Ltd, unreported; FCt SCt of WA; Library No 7675; 26 May 1989
Spellson v George (1992) 26 NSWLR 666
Taylor v Johnson (1983) 151 CLR 422
Three Rivers District Council v Bank of England (3) [2001] 2 All ER 513
White v Johnston (1886) 8 ALT 53
Whitehall Holdings Pty Ltd & Ors v Custom Credit Corporation Ltd, unreported; FCt SCt of WA; Library No 920347; 19 June 1992
NISBET DCJ: On 16 January this year the learned Deputy Registrar of the court refused an application by the plaintiff for summary judgment giving the third defendant unconditional leave to defend and giving the second defendants leave to defend conditional upon them paying into court the sum of $10,000 within 60 days or providing security in that amount, the nature of the security to be agreed by the parties and approved by the court. There was liberty to apply granted in respect of any proposal for security and finally, the plaintiff was ordered to pay the third defendant's costs of the day in any event, with costs otherwise being in the cause, including any costs reserved on the summary judgment application.
From those orders the plaintiff appealed by notice of appeal dated 24 January 2003 and filed in the court that day. An appeal from a decision of a Registrar is a hearing de novo: Hazart Pty Ltd v Rademaker (1993) 11 WAR 26.
The plaintiff's application for summary judgment was supported by an affidavit of its officer Ursula Johnston sworn 22 October 2002. In that affidavit Ms Johnston deposed that the plaintiff is a duly registered cooperative and provident society, entitled to sue and be sued pursuant to the provisions of the Co‑operative and Provident Societies Act 1903. Ms Johnston further deposed that by an agreement in writing dated 17 January 2001 made between the plaintiff and the first defendant, the plaintiff agreed to provide trade credit to the first defendant for the purchase of goods for the first defendant's business known as "Ian Diffen World of Tyres & Mufflers" in consideration for an administrative charge. A copy of the agreement is exhibited to the affidavit. By the agreement all accounts issued by the plaintiff to the first defendant were to be paid on the last day of each calendar month in which the account was sent, failing which interest would accrue on the outstanding amount at the rate of 15 per cent per annum. As further deposed by Ms Johnston and as is evident from the statements of account exhibited to her affidavit, between June 2001 and August 2001 the first defendant ordered goods from suppliers to the value of $51,073.64 using credit provided by the plaintiff. That amount has not been paid by the first defendant and judgment has been entered against the first defendant in default of appearance. I was advised (without demur) on the hearing of the appeal that the first defendant is either in liquidation or in the process of going into liquidation.
Ms Johnston further deposed that each of the second and third defendants executed a deed of guarantee whereby they guaranteed the performance of the obligations of the first defendant pursuant to the agreement. The guarantee is exhibited to her affidavit. Each of the second defendants and the third defendant agree that they have executed the guarantee however they resist the plaintiff's application for summary judgment. The second defendants (and the third defendant, albeit faintly on his part) resist the application on the grounds that the guarantee is void for want of compliance with s 9 of the Property Law Act in that it has not been witnessed by a person not a party to the deed. Next they say in affidavits filed in opposition to the application for summary judgment, both in precisely the same terms, that there was a meeting between them as directors of the first defendant and a representative of the plaintiff the name of whom neither can recall. They say that this meeting took place at the first defendant's premises on 17 January 2001. Paragraph 8 of each of their affidavits then deposes as follows:
"At the Meeting, the Representative said to the [other] Second Defendant and I that the Application will be limited to the amount of $10,000 and if that amount was to be exceeded, a further application would be required. If I knew that the application was not limited to $10,000 I would not have signed the application."
Each of the affidavits then go on to depose in respect of the guarantee as follows:
"10.Both myself and the [other] Second Defendant were present at the Meeting at all times and the Representative did not advise me or the [other] Second Defendant that the Application included a guarantee ('the Alleged Guarantee') nor its legal effect. We were not given the opportunity to read the Application and Alleged Guarantee.
11.Both myself and the [other] Second Defendant thought we were signing the Application and Alleged Guarantee as directors of the First Defendant only and not in our personal capacity.
12.Neither I nor the [other] Second Defendant were provided with a copy of the documentation prior to the commencement of these legal proceedings, at which time, our solicitor requested copies of the documents."
The Property Law Act defence
Section 9(1) of the Property Law Act 1969 relevantly provides:
"9. Formalities of deed
(1) Every deed, whether or not affecting property —
(a)shall be signed by the party to be bound thereby; and
(b)shall be attested by at least one witness not being a party to the deed but no particular form of words is required for the attestation."
As Kennedy J explained in Dean v Lloyd [1990] WAR 42, the first task is to see whether the document is expressed to be a deed and clearly the guarantee in this case is so expressed. It is headed in bold in large print: "DEED OF GUARANTEE". Next the guarantee in its terms purports to be a deed and accordingly the submission that the deed is void for want of compliance with s 9(1)(b) requires further examination. Regrettably no argument was addressed to me on the point. There is authority for the proposition that an instrument purporting to be a deed will not take effect as a deed unless each person who has sought to be bound by the deed has executed that deed and that person's signature is witnessed and attested by at least one independent witness: Mostyn v Mostyn (1989) 16 NSWLR 635. Assuming however, without deciding, that an employee or agent of a corporation is not an independent witness for the purpose of s 9 of the Property Law Act, there still remains the question of whether the guarantee could take effect in some other way. This question was considered in Mostyn but not reported (see p 640). Bearing in mind that attestation was not required at common law, and is a requirement of statute for the purpose of diminishing the prospect for dispute as to whether or not an instrument purporting to be a deed has been executed by the party from whom some performance of obligation is sought, the admission by each of the second (and third) defendants that they signed the guarantee strongly suggest that equity will not permit them to deny the deed's formal validity. But again it has to be stressed that these considerations only apply where an instrument is sought to be enforced as a deed. The guarantee in this case whilst on its face declaring itself to be a deed and purporting to be a deed is nevertheless in my opinion wholly enforceable as an agreement made for valuable consideration. The testatum opens with the expression "NOW BY THIS DEED" and continues:
"1.In consideration of the Society at the request and direction of the Guarantor accepting the Debtor as an Authorised Purchaser and/or granting the Debtor trade credit and other financial accommodation from time to time the Guarantor hereby guarantees to the Society the due and punctual payment by the Debtor of:"
Further, cl 2 commences:
"2.It is hereby agreed and declared as follows:"
Where, as here, directors of a company guarantee the performance of an agreement entered into by the company, consideration expressed in the manner I have set out above is a good and sufficient consideration such that whilst the deed of guarantee may not be enforceable as a deed by reason of want of compliance with s 9(1) of the Property Law Act 1969, it is enforceable as an agreement.
The alleged representations to the second defendants
I have already set out par 8 of the second defendants' affidavits. It is in my opinion a particularly weak averment designed to obfuscate and delay. There is no condescension to particulars and no explanation as to how "the Application" could be "limited to the amount of $10,000" when on the face of the document itself the assertion is manifestly incredible. Details of the defendants' usual trade creditors are given on the front page of the application as being Bridgestone with whom there was an average monthly turnover of $10,000, Repco with whom there was an average monthly turnover of $1,000 and Tyre Masters with whom there was an average monthly turnover of $4,000, since the years 1996, 1997 and 1998 respectively, the trading terms of which were 30 days, 30 – 45 days and 30 days respectively. This information could only have come from the defendants. Similarly, only the defendants could have advised that the estimated monthly purchases to the account of the plaintiff were in the sum of $5,000 as is evidenced by page 2 of the Application. So what is meant by an allegation of a representation that "… the Application will be limited to the amount of $10,000 …"? $10,000 a month? $10,000 in total? In the form in which the alleged representation has been deposed to, it is incapable of affording any defence to the plaintiff's claim.
The alleged guarantee – second defendants
I have difficulty with the deposition in par 10 "We were not given the opportunity to read the application and alleged guarantee." Clearly each of the second defendants had both the application and the guarantee in their possession at the time they signed these documents. I must ask what are they saying? Are they saying that the representative of the plaintiff stood over them and shielded the content of the document from them so that they could not possibly read what was in it? Are they saying that there was some statement by the representative of the plaintiff to the effect that they need not read the document at all or that the documents were only an application and not a guarantee, as in the case of the third defendant? These questions demonstrate the serious inadequacies of the affidavits filed by the second defendants. They do not condescend to particulars at all in the sense that the chapter and verse of the defence has to be set out in full and as they presently stand these averments do not afford the second defendants any defence to the plaintiff's claim.
The deed of guarantee is clearly headed up in bold print "Deed of Guarantee". The particulars in the schedule to the Deed of Guarantee are different from the particulars required on the face of the application to trade as an authorised purchaser in that in the guarantee the name of the debtor is given as the first defendant and, further, at the top of the page constituting the schedule underneath which the particulars of the second and third guarantors are placed, the word "guarantor" again appears.
Again, in my opinion, the second defendants have failed in their obligation to demonstrate that there is something about the relationship between them and the plaintiff as would put the plaintiff under the type of duty which the law recognises in cases such as Yerkey v Jones (1939) 63 CLR 649 or Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 or even Garcia v National Australia Bank Ltd (1998) 194 CLR 395, whereby the plaintiff was bound to demonstrate to the second defendants the legal effect of what they were signing.
I have already recited par 11 of the second defendants' affidavits and confess to not understanding the distinction that it there sought to be drawn between the second defendants as directors of the first defendant and the second defendants in their personal capacities. What are they trying to say? Are they saying that their liability under the guarantee is limited to the assets of the first defendant? Are they saying that the first defendant was guaranteeing its own performance of the agreement constituted by the plaintiff's acceptance of the first defendant's application to trade as an authorised purchaser made on behalf of a company whose name nowhere appears on the face of the application?
Bearing in mind the test in cases such as this: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, there is in my opinion no triable issue raised by the second defendants and the orders of the learned Deputy Registrar should be set aside and summary judgment entered for the plaintiff.
Third defendant
In his affidavit sworn 18 November 2002 the third defendant deposed that on or about 17 January 2001 his daughter Felicity, the second‑named second defendant telephoned him to say that she and her husband, the first‑named second defendant, were making a credit application to the plaintiff and because he was a director his signature was required. He deposes that his daughter told him that a sales representative of the plaintiff would come to his Canning Vale office with papers for him to sign arriving about half an hour later. The third defendant swears that he was in a meeting at the time and came out to sign the papers and was told by the salesman "I need a signature here and here" to which the third defendant says he responded "What am I signing?" He then says that to "the best of my recollection" the salesman said, "A credit application for $5,000". He says there was no mention made of a guarantee and he was not aware that he was signing a guarantee as well as a credit application. He claims never to have been left with a copy of the documents nor obtained any copies until his solicitor obtained them after the commencement of these proceedings.
Frankly, I have grave doubts about the third defendant's credibility in this regard. The third defendant is a professional engineer. His personal particulars appear in the schedule to the guarantee in which the word "GUARANTOR" appears at the top of the page barely two inches above his personal details. Further, the thought that a man such as the third defendant could sign a document without knowing what it was that he was signing is difficult to believe. I would be very interested to see him cross‑examined in a trial. And therein lies the difficulty. The only evidence I have before me are the documents themselves, the agreement and the guarantee (each of which the third defendant admits having signed in his affidavit deposing to the circumstances of his execution of those documents as detailed above) and that affidavit. Hence the third defendant has raised the defence of non est factum. In Australia the High Court in Petelin v Cullen (1975) 132 CLR 355 specifically approved the House of Lords decision in Saunders v The Anglia Building Society [1971] AC 1004. [It should be remembered that this case was reported when it went through the Court of Appeal in England as Gallie v Lee [1969] 2 Ch 17.] Importantly, for the disposition of this matter, the House of Lords in Saunders overruled Carlisle and Cumberland Banking Co v Bragg [1911] 1 KB 489 which had held that the plea of non est factum was available as a defence to a party who had been careless in signing the instrument sued upon. That principle, together with its derivative that carelessness in signing was irrelevant to the plea of non est factum unless there had been a breach of a duty of care, was likewise overruled in Saunders. Again, importantly for the disposition of this case, the House of Lords in Saunders said that the old distinction between a mistake as to the contents of the instrument and its class or character whereby a party who only showed that he was mistaken as to the terms of the instrument had no defence whilst a party who showed that he was mistaken as to the class or character of the instrument was able to succeed. Instead the House of Lords said that a party pleading non est factum must show that the document signed was fundamentally or radically different from that which was in fact signed. See for example Lord Wilberforce at 1026.
The question of the careless signer was canvassed in Petelin in which case the appellant demonstrated that he had a poor understanding of English and that he was persuaded by an agent for the respondent Cullen to renew an option when he thought that he was signing a receipt. The option was exercised and the appellant refused to sell. The High Court said that the plea of non est factum cannot be availed of by a careless signer to defeat an innocent party's rights, but if the plaintiff was aware of the circumstances of signature and ought to have known that the signer was mistaken, the need for care in signing is not so stringently enforced. The court decided that in fact Petelin had not been careless when he signed and was in any case entitled to relief because the agent should have realised that Petelin did not understand. See generally the discussion in Cheshire & Fifoot's Law of Contract 8th Aust ed at par 12.64 and following.
Saunders and Petelin each call for a finding of fact as to the true subjective intention of a party who pleads non est factum. Whilst otherwise I would have thought the case against the third defendant for summary judgment is at the cusp, being of the view that the evidence is strongly suggestive of carelessness at best and disingenuousness at worst, the requirement for the court to ascertain the subjective intention of the third defendant may only be determined after a trial in which he is called to give evidence and in which one would expect that he would be vigorously cross‑examined. Accordingly it must be the case then that the plaintiff's appeal against the learned Deputy Registrar's refusal to enter summary judgment against the third defendant must fail.
I take a different view from that of the learned Deputy Registrar however as to the proper order for costs. My view of the matter is that the plaintiff's case for summary judgment against the third defendant was and is considerably stronger than the weight afforded it by the learned Deputy Registrar and accordingly I think that in the circumstances of this case the ordinary rule should apply and that is that the costs of the application should be in the cause.
Whilst I will hear the parties as to the proper form of orders I would have thought that they would be along the following lines:
1.The plaintiff's appeal from the decision of the learned Deputy Registrar refusing to enter summary judgment against the second defendants be and is hereby allowed.
2.The plaintiff do have judgment against the second defendants in the sum of $51,073.64 together with interest thereon at the rate of 15 per cent per annum from 30 September 2001 until today.
3.The second defendants do pay the plaintiff's costs of the action to be taxed including all reserved costs.
4.Orders 3 and 4 of the orders of the learned Deputy Registrar made 16 January 2003 be set aside.
5.The plaintiff's appeal from the order of the learned Deputy Registrar made 16 January 2003 granting the third defendant unconditional leave to defend be refused save as to costs shall be in the cause both as to the application and the appeal.
0
7
2