Creswick v Coast RV Pty Ltd

[2013] NSWSC 1078

Supreme Court

New South Wales

Medium Neutral Citation:

Creswick v Coast RV Pty Ltd [2013] NSWSC 1078

Hearing dates:

9 August 2013

Decision date:

09 August 2013

Jurisdiction:

Common Law

Before:

Beech-Jones J

Decision:

(1) The plaintiffs' summons be dismissed

(2) The plaintiffs to pay the defendant's costs.

Catchwords:

LOCAL COURT APPEAL - guarantee - whether principal debtor entered into agreement to obtain goods on credit - capacity of named persons to bind company - sections 127 and 129 of the Corporations Act - whether guarantee discharged - whether Court's reasons adequate - discretion to grant relief.

Legislation Cited:

- Corporations Act 2001 (Cth)
- Local Court Act 2007

Cases Cited:

- Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; 162 CLR 549
- ECS Services Pty Ltd v DGA Holdings Pty Ltd [2013] NSWSC 869
- Sayed v Deng [2012] NSWSC 851
- Suttor v Gundowda Pty Ltd (1950) 81 CLR 418

Category:

Principal judgment

Parties:

William Gerard Creswick (First Plaintiff)
John Francis Creswick (Second Plaintiff)
Coast RV Pty Ltd a.t.f. Coast RV Unit Trust t/as Cost to Coast RV Services (Defendant)

Representation:

Counsel:
B. Le Plastrier (Plaintiffs)
Ms B.K. Nolan (Defendant)
Solicitors:
Lynch Morgan Lawyers (Plaintiffs)
JHK Legal (Defendant)

File Number(s):

2013/165309

 Decision under appeal 

Jurisdiction:

9109

Date of Decision:

2013-04-30 00:00:00

Before:

Bradd LCM

EX TEMPORE Judgment

1. The plaintiffs, William Creswick Gerard and John Francis Creswick, were the second and third defendants in proceedings in the Local Court brought by the defendant in this court, Coast RV Pty Ltd ("Coast RV"), as the trustee for the Coast RV Unit Trust, which trades as Coast to Coast RV Services.

1. In the Local Court proceedings Coast RV sued T2 Projects Pty Ltd ("T2 Projects"), trading as "Lifestyle RVs", for monies said to be owing by reason of the supply on credit of what was described as caravan goods and services. Coast RV also sued William Creswick and John Creswick as the alleged guarantors of the obligation that T2 Projects was said to owe to Coast RV.

1. As I will explain, the principal issue in the proceedings appears to have been whether T2 Projects validly entered into an agreement to obtain goods on credit from Coast RV. The presiding Magistrate resolved that issue in favour of Coast RV and upheld its claim against T2 Projects, William Creswick and John Creswick. His Honour entered a verdict against them in the sum of $21,324.50 with interest and costs. T2 Projects has not appealed the verdict.

1. William Creswick and John Creswick now appeal the Local Court judgment on a question of law pursuant to s 39(1) of the Local Court Act 2007. They have not sought leave to appeal on any question of mixed law and fact pursuant to s 40(1). I discussed the operation of both of those provisions in Sayed v Deng [2012] NSWSC 851 at [26] to [34]. I will not repeat that discussion.

The Evidence in the Local Court

1. In light of the matters sought to be raised by William Creswick and John Creswick, it is necessary to describe the evidence that was tendered by the parties in the Local Court. Coast RV read four affidavits. Two of the affidavits annexed what on its face appeared to be a five page facsimile. However, the header markings on the facsimile indicated that it was composed of two separate documents.

1. The first and third pages bore header markings indicating that they were part of a three page facsimile sent on 17 November 2006 and re-sent on 22 November 2006. The first page was entitled "Credit Application Form" and included a table listing each of "Bill Creswick" and "John Creswick" as a director of T2 Projects. The third page was headed "Credit Application Form (cont)". It bore a signature that appeared to be that of Bill Creswick, who was described as the "proprietor". Beneath the signature section was a section entitled "Office Use Only". It bore handwriting that indicated that an account was opened on 13 December 2006. Against the entry "credit limit issued" was written the figure "$4,000".

1. The second, fourth and fifth pages of the document that was annexed to the affidavits bore header markings indicating that they were three of four pages of a facsimile sent on 14 December 2006. The second page, being page "02/04", was entitled "Credit Application Form (cont)". Its printed terms were the same as those on the page from the facsimile sent on 17 November 2006 that I have described. However, the document was executed differently. Although it contained a signature said to be that of William Creswick, on this document he is described as a "director" and his signature is witnessed. The section of this page entitled "Office Use Only" was not completed.

1. The fifth page of the annexure, being page "04/04" of the facsimile sent on 14 December 2006, was entitled "Terms and Conditions of Trade". It contained a set of standard terms in a very small font.

1. The fourth page of the annexure, being page "03/04" of the facsimile sent 14 December 2006, was entitled "Credit Application/Declaration". It contained a series of warranties, acceptances, agreements and acknowledgments concerning the supply of goods and the provision of credit. It bore the signature of each of William Creswick and John Creswick, who were each described as "director". Further, underneath their signatures as director there appeared the following:

"IN CONSIDERATION of you granting credit to the company/trust/ partnership/individual so named in this application, I/We whose names appear below, agree to be individually responsible for the payment of all moneys now or at any time due and remaining unpaid by the said company/trust/partnership/individual. This guarantee is to be a continuing guarantee and my/our liability under it shall not be affected by you granting time or any other indulgence."

1. Underneath this there appear the signatures of William Creswick and John Creswick, with each again described as directors. Neither in the Local Court nor before this Court was it contended that by giving the description "director" that each of them ever intended to provide the guarantee in anything other than their personal capacities.

1. The two affidavits to which I have referred also sought to prove the delivery of goods to T2 Projects between September 2011 and November 2011, totalling $24,307.02. The bulk of that amount was said to be owing. The affidavits annexed a series of invoices and credit notes that were said to demonstrate those facts.

1. The other two affidavits relied on by Coast RV also provided an updating of the amount said to be owing by T2 Projects, and sought to demonstrate that Coast RV did not have any knowledge of any defect in the authority of either William Creswick or John Creswick to bind T2 Projects.

1. T2 Projects, John Creswick and William Creswick only read an affidavit from their solicitor at the hearing. He annexed a company search of T2 Projects. It indicated that during the period October to December 2006 John Creswick was the sole director and company secretary of T2 Projects. William Creswick was only appointed a director in mid-2007. Both of those men appear to have ceased being officeholders in mid-2012.

The issues in dispute and his Honour's judgment

1. As stated, the principal issue in dispute appears to have been whether T2 Projects validly entered into an agreement to obtain goods on credit from Coast RV. At least as far as William Creswick and John Creswick were concerned, the unstated assumption in their case appears to have been that, if no agent with proper authority caused T2 Projects to enter into the agreement to obtain goods on credit from Coast RV in late 2006, then their obligations under the guarantee were not engaged.

1. I will proceed upon the same assumption. However, I note that the terms of the guarantee would appear to be sufficient to embrace any indebtedness of T2 Projects that might arise, even if it only arose because at a later time it ordered goods and did not pay for them, as it appears to have done.

1. The contention as to whether any person with authority to bind T2 Projects signed the relevant documents required that consideration be given to s 127 to s 129 of the Corporations Act 2001 (Cth). They relevantly provide:

"Chapter 2B - Basic features of a company

Part 2B.1 - Company powers and how they are exercised

127 Execution of documents (including deeds) by the company itself

(1) A company may execute a document without using a common seal if the document is signed by:

(a) 2 directors of the company; or

(b) a director and a company secretary of the company; or

(c) for a proprietary company that has a sole director who is also the sole company secretary - that director.

(2) ...

(3) ...

(4) ...

Part 2B.2 - Assumptions people dealing with companies are entitled to make

128 Entitlement to make assumptions

(1) A person is entitled to make the assumptions in section 129 in relation to dealings with a company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.

(2) A person is entitled to make the assumptions in section 129 in relation to dealings with another person who has, or purports to have, directly or indirectly acquired title to property from a company. The company and the other person are not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.

(3) The assumptions may be made even if an officer or agent of the company acts fraudulently, or forges a document, in connection with the dealings.

(4) A person is not entitled to make an assumption in section 129 if at the time of the dealings they knew or suspected that the assumption was incorrect.

129 Assumptions that can be made under section 128

(1) Constitution and replaceable rules complied with A person may assume that the company's constitution (if any), and any provisions of this Act that apply to the company as replaceable rules, have been complied with.

(2) ...

(3) Officer or agent A person may assume that anyone who is held out by the company to be an officer or agent of the company:

(a) has been duly appointed; and

(b) has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company.

(4) ...

(5) Document duly executed without seal A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1). For the purposes of making the assumption, a person may also assume that anyone who signs the document and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices.

(6) ...

(7) ...

(8) Without limiting the generality of this section, the assumptions that may be made under this section apply for the purposes of this section."

1. In the Local Court, Coast RV put forward two bases as to how T2 Projects became bound by the application for credit and its terms. First, it contended that, irrespective of the actual or ostensible authority possessed by William Creswick, John Creswick's signature on the document entitled "Credit Application/Declaration" which formed part of the documents faxed on 14 December 2006 was sufficient to bind T2 Projects in accordance with s 127(1)(c) of the Corporations Act.

1. Second, in the alternative, it contended that Coast RV was, by the combination of s 129(3) and 129(5), entitled to assume that the "contract" was signed in accordance with s 127(1)(a) by two of the directors of T2 Projects. This alternative submission appears to have been directed towards the same document the subject of the first submission, that is,the "Credit Application/Declaration". It was only that document that purports to be signed by two directors. Coast RV further submitted that there was no basis for finding as a matter of fact that it was precluded from relying on those assumptions by the operation of s 128(4).

1. The submissions of T2 Projects and John Creswick and William Creswick before the Local Court focused on the inability of William Creswick to bind T2 Projects. It was contended that the first set of documents, being those faxed on 17 November 2006, did not as a matter of law bind T2 Projects, because at their highest they were only signed by William Creswick, who was not a director. It was otherwise submitted that the second set were either sent too late to bind T2 Projects or, by their terms, did not have that effect.

1. His Honour's judgment commenced by reciting various background facts. His Honour then identified what his Honour described as "the issues" and then addressed the question whether "William Creswick or John Creswick executed a contract on behalf of T2 Projects". His Honour then set out the relevant parts of the Corporations Act that have been extracted above. Next came a section entitled "Analysis", to which I will refer.

1. With respect to his Honour, in light of the issues that were actually presented, the structure of his Honour's reasons was not entirely clear. In particular his Honour appears to have taken up William Creswick and John Creswick's suggestion to focus on the authority of William Creswick to bind T2 Projects. Thus, at the end of the section entitled "Analysis", his Honour found as follows:

"25. Coast RV Pty Ltd asserts that it is entitled to the assumption that Mr William Creswick had been duly appointed, pursuant to subsection 129(3) of the Act. The provision would seem to apply if T2 Projects Pty Ltd held out Mr William Creswick to have been duly appointed. I have been referred to Story v Advance Bank Australia Ltd [(1993) 31 NSWLR 722], where the Court of Appeal, in relation to a similar provision in the Companies Act stated that: 'the concept of having dealings with the company must embrace ... purported dealings. The combined effect of subsections 129(3) and 129(5) might be that, based on document 'Page 02/04 Credit Application Form (cont)' Coast RV Pty Ltd is entitled to assume that Mr William Creswick has been duly appointed as a director and was the sole director and company secretary." (emphasis added)

1. The document "02/04" that his Honour referred to in this finding is the second page of the five page facsimile, being the page entitled "Credit Application Form (cont)" that was faxed on 14 December 2006.

1. At this point two matters should be noted. First, there is nothing in that document which purported to describe William Creswick as either the sole director or the sole director and company secretary of T2 Projects. Thus that document does not appear to have been capable of giving rise to any assumption under s 129(5) as that document did not "appear to have been signed in accordance with subsection 127(1)". There is nothing in that document that expressly states or even implies, assuming an implication is sufficient, that William Creswick was the sole director and company secretary of T2 Projects.

1. Second, with respect to his Honour, Coast RV did not assert that it was entitled to act on any assumption that William Creswick had been appointed as the sole director and company secretary. It had only asserted it was entitled to assume that he had been appointed a director. Further, it had only made a submission as to its entitlement to act on that assumption in respect of the declaration and not in respect of the page headed "Credit Application Form (cont)" that was faxed on 14 December 2006.

1. Having made the above finding his Honour then considered whether there was any basis to find that Coast RV knew or suspected that the assumption his Honour had identified was incorrect. His Honour rejected that contention.

1. The next part of his Honour's judgment is entitled "Status of second set of documents". I understand this to be a reference to those documents that bore the markings of having been faxed on 14 December 2006. This is odd, because the finding that is extracted above at [21] also appears to have been directed to one of those documents.

1. Earlier in his Honour's judgment his Honour had correctly identified Coast RV's primary submission as one that relied upon the execution of that declaration as having bound T2 Projects. It was signed by John Creswick, who was the sole director and sole company secretary of T2 Projects at the time he signed. In relation to this "second set of documents" his Honour found:

"29. T2 Projects Pty Ltd asserts that Coast RV Pty Ltd cannot rely on the document of 14/12/2006 because the account was opened on 13/12/2006. There is force in the argument. There is no evidence as to why a second set of documents was transmitted to Coast RV Pty Ltd. Since the nature of the contract is a credit account for goods supplied and delivered some five years later, the documents of 14/12/2006 are relevant to the formation of the contract as it applied to goods suppl[ied] and delivered in 2011."

1. It is not entirely clear what the effect of this finding is. In the context of the recitation of Coast RV's primary submission, the opening sentence appears to involve an acceptance that the declaration was validly executed on behalf of T2 Projects because of the status of John Creswick. The balance of the paragraphs appears to then address its contractual force. His Honour appears to have noted an argument by T2 Projects and William and John Creswick to the effect that the account had already been opened by the time this document was executed. However, his Honour appears to have rejected that argument on the basis that the proceedings involved a claim for the recovery of goods that had been supplied on credit five years after the proper execution of the document by T2 Projects.

1. The next part of his Honour's judgment is entitled "Evidence of T2 Projects Pty Ltd ordering the goods". His Honour found as a fact that the goods the subject of the claim were ordered by T2 Projects in 2011 and not paid for. Finally under the heading "Conclusion" his Honour found as follows:

"31. T2 Projects [Pty] Ltd is entitled to assume that Mr William Creswick had been duly appointed as an officer of T2 Projects Pty Ltd, and had authority to enter into the contract being the credit application. T2 Projects Pty Ltd owes Coast RV Pty Ltd for the amount of the unpaid invoices in a sum of $21,324.50."

1. This finding appears to be a consequence of the finding that his Honour made and which is set out above at [21] concerning the status of William Creswick.

The appeal

1. The plaintiff's summons in this court identified three grounds of appeal. They each referred to various findings of the presiding Magistrate, and then asserted they were "contrary to law". It is far from obvious that they do raise questions of law. It is also unclear how those grounds relate to the submissions. In any case the focus of the appeal was on the matters raised in the written submissions.

1. The first matter complained of concerned the finding that I have set out above (at [21]) in relation to the authority of William Creswick. Various points were raised which are not necessary to address. Allowing some latitude to the plaintiffs in this court, in my view it must follow from the observation I have made earlier that his Honour's finding, that the signature of William Creswick on that part of the document entitled "Credit Application (cont)" bound T2 Projects, was erroneous in law. As I have stated, the only indication on that document was that William Creswick was signing as a director. It was not stated either expressly or impliedly in that document that he was the sole director and sole company secretary.

1. This conclusion leaves remaining the primary basis upon which Coast RV contended before the Local Court that T2 Projects became bound, namely by the affixing of John Creswick's signature to the document entitled "Credit Application/Declaration" in circumstances where he was the sole director and sole company secretary of T2 Projects. As I have stated, his Honour appears to have assumed or accepted that John Creswick did have authority to bind T2 Projects, and I will do likewise. Even if his Honour had not so found, it would not matter, because, given John Creswick's signature and position, no other conclusion was open as a matter of law.

1. Nevertheless, William and John Creswick contend that his signature on that document does not mean that Coast RV became bound for two reasons. The first reason is that, according to his Honour's findings, the declaration was signed after an account was opened. In my view, irrespective of whether that submission raises a question of law, fact or mixed law and fact, it has no substance.

1. As appears to have been pointed out by his Honour in the passage extracted above (at [27]), the critical point is that the supply of credit the subject of the claim for recovery, took place years after these events. Although it is unclear, it appears that his Honour found that, in those circumstances, the fact that the account was identified as having been opened the day before John Creswick affixed his signature to the declaration was irrelevant. In my view, if that is what his Honour found, then his Honour was correct to so find. Even if that is not the proper construction of his Honour's finding, then, as a matter of law his Honour was bound to find that. From the date the declaration was provided by someone with the authority to bind T2 Projects, namely John Creswick, T2 Projects became bound by its terms.

1. Second, it was submitted that the declaration did not operate to constitute an execution of the contract for the provision of goods upon credit. Instead it was submitted that only a proper execution of the credit application form (ie the form entitled "Credit Application Form (cont)") constituted execution. This argument appears to have been only raised obliquely in reply before the Local Court. It was not expressly pleaded. However, it does not appear that his Honour specifically addressed an argument in those terms. That is a matter to which I will return. In any event, as a matter of law I do not think it is correct.

1. What is apparent from his Honour's findings of fact is that on 14 December 2006 the three pieces of paper that I have referred to were provided to Coast RV. They are all to be considered together. They included a document entitled "Credit Application/Declaration" which was on any view validly executed on behalf of T2 Projects. As stated, that document includes a number of warranties, acceptances, acknowledgments and agreements. Even if the "proper place" for signature of the credit application was at the bottom of the document entitled "Credit Application Form (cont)", nevertheless, objectively considered, the provision of that document, together with a document entitled "Credit Application/ Declaration" validly executed on behalf of T2 Projects, would as a matter of law bind T2 Projects.

1. Under the heading "The Guarantees are Unenforceable" John and William Creswick's written submissions raise two further matters which they contend result in the avoidance by them of their obligations under their guarantee. The first submission contends that their guarantee was not supported by any proper consideration but instead was only supported by past consideration, as the "account" was opened by Coast RV on the day prior to the execution of the guarantee by them. The written submissions assert this argument was raised before his Honour, but I am not persuaded that this is so. It was certainly not raised on the pleadings. In any event the argument has no force.

1. The terms of the guarantee recited that the consideration for the entering into of the guarantee was Coast RV "granting credit" to T2 Projects (see [9]). As at the date of the guarantee it is unlikely that any "credit", that is financial accommodation, had been granted. In any event, it is clear that after the date of the guarantee "credit" was granted in that Coast RV did not insist upon immediate payment by T2 Projects when the relevant goods in question were delivered. Hence, properly analysed, at least not all of the consideration for the entering into of the guarantee had already been provided by the time it had been executed.

1. Secondly the written submissions contended that the guarantees were discharged because the original credit limit listed in the document entitled "Credit Application Form (cont)" faxed on 17 November 2006 was $4,000, whereas it is clear that credit in excess of $21,000 was provided.

1. It was submitted that the increase amounted to conduct on the part of the creditor that materially altered the guarantor's rights so as to cause the discharge of the contract of guarantee (citing Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; 162 CLR 549 at 559). This point was not raised before the Local Court. There are formidable difficulties in asserting that a question of law arises from a Local Court judgment when the point in question was never taken below. At the very least it is fatal to any such contention if the relevant point could or would have been met by evidence (see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418). On any view this point, if it had been taken, could have been met by evidence that indicated that either or both of William and John Creswick were aware that a greater amount of credit was being provided and approved of it.

1. Otherwise there are two points that seem to me, without deciding, to make this proposition very difficult. The first is that it is by no means clear that the credit limit indicated in the office use only section of the "Credit Application Form (cont)" was a term of either the guarantee or of the principal debt. Secondly, it seems to me at least arguable that that part of the guarantee which states that the "[l]iability under it shall not be affected by granting time or any other indulgence" would appear to accommodate an increase in the amount of credit provided to the principal debtor.

1. It suffices to state that I am not persuaded that any question of law wrongly decided by the presiding Magistrate is raised by this ground or any other ground.

1. In oral submissions counsel for John and William Creswick, Mr Le Plastrier, submitted that his Honour's judgment gave an inadequate explanation for the basis of his Honour's decision. I will pass over the fact that this contention was not raised either in his clients' summons or in his written submissions. It has been accepted that an established complaint of a failure by a Magistrate to give adequate reasons is capable of being agitated on an appeal under s 39(1) of the Local Court Act (see for example ECS Services Pty Ltd v DGA Holdings Pty Ltd [2013] NSWSC 869). Further, it is obvious from what I have already stated that I have considerable misgivings about the adequacy of his Honour's reasons. However, ultimately I am satisfied that the findings that his Honour made about the "second set of documents", and the factual finding that the goods were delivered and not paid for, is just sufficient to disclose an adequate basis of reasoning to support the verdict.

1. One particular complaint made in respect to his Honour's reasons is that the submission made concerning whether the execution of the declaration by John Creswick was not sufficient to constitute execution by T2 Projects of the credit application was not addressed. However, this argument was only raised in oral submissions in reply. It was not the subject of any express pleading. The authorities do not establish that his Honour was obliged to address every single matter that may have been tangentially raised.

1. Further, and perhaps more controversially, even if the matter had been raised clearly but not addressed, I would not have granted relief to the plaintiffs. Such a complaint, if it had been established, would have merely demonstrated that the reasons were inadequate in exposing his Honour's reasoning on a matter of law as opposed to a matter of fact. Once his Honour found as a matter of fact that the goods were ordered and not paid for in 2011, and that the declaration was signed by John Creswick in circumstances where it was common ground that he was the sole director and sole company secretary, then in my view as a matter of law the liability of John Creswick and William Creswick had to follow.

1. In those circumstances, even if it had been established that his Honour's reasons were inadequate, I would have refused the relief sought. The importance of Magistrates providing proper reasons for their decisions cannot be overstated. However, the underlying policy reasons for them to do so can, at least in some circumstances, be addressed when this Court considers the matter on appeal. The most obvious circumstance in which that will occur is where the Magistrate's reasons fail to properly disclose adequate reasoning on a question of law as that is a matter which this Court can nevertheless fully consider and explain. If this particular complaint about his Honour's reasons had been established, in my view this Court's explanation of why John and William Creswick's liability nevertheless followed would meet the need for proper reasons to be provided.

Conclusion

1. It follows from these reasons that the appeal will be dismissed.

1. Accordingly the Court orders that

(1)   the plaintiffs' summons be dismissed;

(2)   the plaintiffs pay the defendant's costs.

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Decision last updated: 19 August 2013