Dimitrakipoulos and Anor v Farm Pride Foods Ltd
[2000] QCA 80
•24 March 2000
SUPREME COURT OF QUEENSLAND
CITATION: Dimitrakipoulos and Anor v Farm Pride Foods Ltd [2000] QCA 80 PARTIES: CHRISTOS DIMITRAKIPOULOS and MAGADALENE DIMITRAKIPOULOS
(plaintiffs/respondents)
v
FARM PRIDE FOODS LIMITED
(ACN 080 590 030)(defendant/appellant)
FILE NO/S: Appeal No 6480 of 1999
SC No 5641 of 1999DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane
DELIVERED ON: 24 March 2000 DELIVERED AT: Brisbane HEARING DATE: 6 March 2000 JUDGES: Davies and Thomas JJA, Williams J
Separate reasons for judgment for each member of the Court, each concurring as to the order made
ORDER: Appeal dismissed with costs to be assessed CATCHWORDS: GUARANTEE AND INDEMNITY - THE CONTRACT OF GUARANTEE - CONSTRUCITON AND EFFECT – GENERALLY - form of guarantee signed by one director – whether such form to be signed by co-director - whether intention guarantors should be jointly and severally liable – whether guarantee enforceable against one who signed when other not signed – intention of parties is to be objectively determined – test in Taubmans Pty Ltd v Loakes applied – determination of question summarily
Marston v Charles H Griffith & Co Pty Ltd (1985) 2 NSWLR 294, considered
Re Burman’s Caveat [1994] 1 Qd R 123, considered
Stramit Industries Ltd v Reinhardt [1985] 1 Qd R 562, consideredTaubmans Pty Ltd v Loakes [1991] 2 Qd R 109, applied
COUNSEL: Mr G H Brandis for the appellant
Mr P W Hackett for the respondentsSOLICITORS: Mullins & Mullins for the appellant
H Drakos & Company for the respondents
DAVIES JA: I agree with the reasons for judgment of Williams J and with the orders he proposes.
THOMAS JA: I agree with the reasons of and orders proposed by Williams J.
WILLIAMS J: This is an appeal against a decision of a Trial Division judge sitting in Chambers. A declaration was made that a document in the form of a guarantee dated 30 April 1999 signed by Christos Dimitrakipoulous (“CD”), was unenforceable; consequential orders for the removal of certain caveats were also made. The purported guarantee was in favour of Farm Pride Foods Limited (“the appellant”), and that company has appealed against the decision.
In his reasons the learned Chamber judge applied a test based on the decision of the Full Court in Stramit Industries Ltd v Reinhardt [1985] 1 Qd R 562 rather than the test formulated by the Full Court in the later decision Taubmans Pty Ltd v Loakes [1991] 2 Qd R 109; indeed it would seem that his attention was not drawn by either counsel to that case. Each side on the hearing of the appeal submitted that its position was supported by Taubmans and in consequence it is necessary for this court to look beyond the reasons of the learned Chamber judge in order to resolve the appeal.
Christos and Magadalene Dimitrakipoulos are the directors and sole shareholders of GCS Seafoods Pty Ltd (“GCS”) which trades under the registered business name Queensland Egg Supplies. As the name implies the business is that of egg wholesaler, principally in Queensland. The appellant, a company based in Victoria, is a distributor throughout Australia of eggs and egg product. In about October 1998 GCS applied for a credit facility with the appellant. Consequently trading arrangements between the companies were agreed to in terms of which GCS was to pay for goods received no later than 30 days from delivery. It is sufficient for present purposes to say that after the last delivery of goods on 22 April 1999 (and making allowance for credits claimed and allowed) as at 29 April 1999 the appellant alleged that GCS was indebted to it in the sum of $313,686.63, much of which had been outstanding for some months.
Against that background an arrangement was made, probably through one Buffey who was the agent in Queensland of the appellant, that CD should attend a meeting with representatives of the appellant on 29 and 30 April 1999 in Melbourne.
On 29 April CD met with the secretary of the appellant, G B DeLacy. It seems to be agreed that at that meeting DeLacy demanded that the appellant be given a guarantee and indemnity by the directors of GCS, and CD raised issues such as the quality of product delivered, the commission to which GCS was entitled, and credits for bad and damaged product. It is accepted by all parties that no guarantee was signed on that day, 29 April. According to CD he stated that he did not understand the document as he could not read very well and would consult his Brisbane solicitors. When DeLacy insisted he sign, CD left the premises. DeLacy concedes in his affidavit that when he gave CD the guarantee on 29 April the response was that he would need to seek advice in relation to it.
There is then an uncontested statement by CD that later that day he received a telephone call from Buffey who persuaded him to return to the offices of the appellant the next day for further discussions at which Buffey would be present. It would appear that on 30 April the first meeting was between Westhorpe, the Marketing Manager of the appellant, Buffey and CD. Subsequently DeLacy again became involved in the discussions. Again on 30 April CD raised his contention that his company was being unfairly treated; in his view if counter claims were recognised it was within the terms of the supply agreement. Such is only of background relevance, but it is not entirely irrelevant when one is assessing CD’s state of mind at the time.
Against that background on 30 April DeLacy again presented CD with a guarantee with a request that he sign one copy then and there and arrange for his wife to sign another.
CD’s affidavit gives the following account of what then happened:
“Mr DeLacy said to me that I was to fax my wife’s guarantee to her and get her to sign and fax it back immediately. He said that without both guarantees being executed they were of no value and that the document was just a draft until approved by my solicitors. I said I am not prepared to do this until my solicitors peruse these papers. With that I threw the papers on the boardroom table and left.
I was followed out by Mr Westhorpe and Mr Buffey who both spoke to me. Both Mr Westhorpe and Mr Buffey said “Look lets not act hastily, lets go back into the room and see if we can work this out. It is only a piece of paper. You heard what Mr DeLacy said without the signature of your wife on the other guarantee, the one that you sign is worthless and a draft and lets try to continue the good relations between ourselves and continue the business.” Paul Buffey then asked me to sign the draft guarantee as a sign of good faith.
I calmed down and I entered the boardroom again and signed the draft guarantee.”
Buffey’s account of those events is stated in his affidavit as follows:
“At that meeting Mr Dimitrakipoulos was reluctant to sign the guarantee until the same was viewed by his solicitor so that he could obtain advice on the same. In reply Mr DeLacy said to Mr Dimitrakipoulos: -
(a)The guarantee was to be signed by Mr Dimitrakipoulos and his wife and that unless his wife signed the guarantee was worthless;
(b)The guarantee was only a draft and had not yet been seen by Mr Dimitrakipoulos’s solicitor or his wife;
(c)Farm Pride Foods Limited required Mr Dimitrakipoulos to sign the guarantee immediately as a sign of his good faith even though it was only a draft.
At that meeting Mr Dimitrakipoulos said that he would sign the draft guarantee as a sign of good faith as requested and did so in my presence. After being told by Mr DeLacy that it was draft, not binding as it had not been seen by Mr Dimitrakipoulos’s solicitor and not signed by his wife.”
The second affidavit of DeLacy responds to the affidavit of Buffey. At the time that second affidavit was prepared DeLacy had not seen CD’s affidavit containing the passage quoted above. However, no further affidavit was prepared by DeLacy specifically answering the matters raised by CD. It follows that, except in so far as they were challenged by DeLacy in his second affidavit, the allegations of both CD and Buffey as to what transpired when the document was signed were unchallenged. The following are the relevant passages in the second affidavit of DeLacy:
“Mr Dimitrakipoulos returned on 30 April and negotiations then continued which negotiations culminated in an agreement which was recorded in the letter dated 30 April 1999 which is the agreement referred to in the guarantee dated 30 April 1999.
Mr Dimitrakipoulos executed the guarantee on 30 April and he provided the original of the guarantee to me and I still have the original guarantee in my possession.
A further guarantee and indemnity document was given to Mr Dimitrakipoulos which was to be executed by Mrs Dimitrakipoulos by 4 May 1999.
The agreement of 30 April 1999, specifically recorded, that Mr Dimitrakipoulos was to request his wife to sign the other guarantee and indemnity document.
It was never the intention of any of the parties that the one guarantee document be signed by both Mrs Dimitrakipoulos and Mr Dimitrakipoulos. It was always contemplated that Mr Dimitrakipoulos would sign one guarantee and indemnity document and Mrs Dimitrakipoulos would sign a further guarantee and indemnity document.
Neither Mr Buffey, Mr Dimitrakipoulos, myself nor Mr Westhorpe stated or intimated in any manner, that the guarantee was a draft document and that it was not to be binding.
Further, the guarantee signed as part of the agreement reached on 30 April 1999.”
Specifically the evidence of both CD and Buffey that DeLacy said that the guarantee was “worthless” unless Mrs Dimitrakipoulos signed the other document was not challenged. Further, there was no challenge by DeLacy to the evidence that CD was asked to sign the guarantee immediately “as a sign of good faith”.
The letter of 30 April was addressed to CD and signed by DeLacy. It is in the following terms:
“Confirming our discussions this morning, we list below the following points upon which agreement was reached:
1.You acknowledge that you (GCS Seafood Pty Ltd) owe Farm Pride Foods Limited $313,686.63 as at 30 April 1999;
2.$20,000 will be transferred by Mr C Dimitrakipoulos of GCS Seafood Pty Ltd to Farm Pride Foods Limited’s bank account today, 30 April 1999;
3.Both Christos Dimitrakipoulos and Magadalene Dimitrakipoulos, both directors of GCS Seafood Pty Ltd trading as Queensland Egg Supply, will sign a Guarantee and Indemnity;
4.The Guarantee and Indemnity signed by Magadalene Dimitrakipoulos will be received by Farm Pride Foods Limited no later than Monday, 3 May, 1999;
5.Future shipments of eggs to Queensland Egg Supply will be sold on a COD basis. This means goods will be released for shipment after funds have been transferred into Farm Pride Foods Limited’s bank account; and
6.The Accountant acting for GCS Seafoods Pty Ltd is to contact Farm Pride Foods Limited by 3 p.m. Tuesday, 4 May 1999 for the purposes of providing a detailed payment plan, the aim of which is to have the amounts owing to Farm Pride Foods Limited paid in full within 4 to 6 weeks but no later than 15 June 1999.
Subject to these matters being satisfied Farm Pride Foods Limited will not take proceedings to recover the outstanding debt prior to 3 p.m. Tuesday, 4 May 1999.”
The terms of the letter do not precisely correspond with the terms of the agreement as detailed in DeLacy’s first affidavit. There DeLacy says that Mrs Dimitrakipoulos was “to execute a further guarantee”, but the word “further” does not appear in either paragraphs 3 or 4 of the letter. If the word “further” was contained in the agreement then a question might have arisen as to whether the proposal was that there be two entirely separate guarantees rather than a joint and several one (though the signatures of the guarantors appeared on separate documents). Given the negotiations, the terms of the letter, and the wording of the guarantee document it is clear that the intention of the parties was that the liability of Mr and Mrs Dimitrakipoulos if they each signed a copy was to be joint and several.
It is clear that 30 April was a Friday, and the guarantee signed by Mrs Dimitrakipoulos was to be received in Melbourne by the Monday; the clear inference is that at the time she was in Brisbane. The agreement contemplated contemporaneous execution of a guarantee by each of the directors of GCS so far as was permitted by their geographical separation.
The document on which CD placed his signature was headed “Guarantee and Indemnity”. It recited that the guarantee was given in consideration of the appellant agreeing with GCS to accept payment of all monies due and owing “by instalments pursuant to a written agreement dated 30/4/99.”. It was described as a continuing guarantee. Clause 4 provided that the “Creditor may act as though we the Guarantors were a principal debtor …”. The document uses the plural throughout, though cl 14 provides that the plural shall include the singular. Clause 13 provided that “we the Guarantors hereby charge all of our real and personal estate in favour of the Creditor …”. There then follows provision for the document to be “Signed Sealed and Delivered” by two persons. By its terms the signatories were to be “jointly and severally” liable as guarantors.
Mrs Dimitrakipoulos never signed a document in that form.
It should also be noted that the appellant did not act to its detriment in any practical way consequent upon CD placing his signature on the guarantee form. It was accepted that there was no further supply of goods consequent upon that being done. The only relevant detriment was GCS’s agreement not to take proceedings to recover the outstanding debt prior to 3 pm on the following Tuesday.
On 5 May 1999 the appellant lodged caveats over each of three blocks of land in Queensland claiming “an equitable share or interest as mortgagee of an estate in fee simple … Pursuant to a Guarantee between Christos Dimitrakipoulos and Farm Pride Foods Limited … dated 30 April 1999”. Two of the parcels were jointly owned by CD and his wife and the third by CD alone.
Then on 19 May 1999 the appellant commenced proceedings in the Victorian Supreme Court against CD claiming $313,686.63 on the basis that CD was liable for that debt pursuant to the terms of the guarantee. In an amended statement of claim delivered 22 June 1999 the appellant also claimed in that action a declaration that it had a legal interest in the properties over which the caveats had been lodged. CD filed a conditional appearance but no further steps appear to have been taken in that action.
It is in those circumstances that CD and his wife commenced proceedings in this court on 17 June 1999 by way of originating summons naming the present appellant as respondent seeking “a declaration that the guarantee dated 30 April 1999 is void and unenforceable” and an order that each of the three caveats be removed.
By that time CD had entered into a contract of sale of the land of which he was sole proprietor and the caveat was holding up settlement. On 25 June, on the return of the originating summons, there was a consent order that the caveat holding up the sale be removed upon an undertaking that the net sale proceeds would be held on trust pending the finalisation of the litigation between the parties. Argument then proceeded on the substantial issues raised by the material.
There was no agreement as such between counsel then appearing before the Chamber judge to the effect that the matter should be dealt with summarily. The submission by counsel for Mr and Mrs Dimitrakipoulos was that on the material their position was clear and they were entitled to the relief sought. Such an approach was submitted to be in accordance with the decision in Re Burman’s Caveat [1994] 1 Qd R 123. Counsel for the present appellant before the Chamber judge did not seek to cross-examine any deponent and did not seek any adjournment to permit any further challenge to be made to the contents of the affidavits in support of the application. The case advanced for the present appellant appears to have been that the material established that CD was bound by the document he had signed and that in consequence the caveats ought not be removed.
Early in his reasons the learned Chamber judge noted that the “only ground advanced for removal of the caveats is that the guarantee is ineffective”. He then went on to deal with a number of grounds on which it was said that the guarantee was ineffective. He rejected the submission that the guarantee was unsupported by consideration. He also rejected the argument that the guarantee was uncertain because the identity of the co-guarantor was not stated. His Honour disposed of the contention that when CD signed the guarantee he did not intend to create a legally binding relationship by saying: “This argument could not be satisfactorily resolved on affidavits on a Chamber summons. It would require the resolution of disputed questions of fact. I express no opinion on it.” That observation is of some significance because it shows that his Honour was mindful of the fact that where credibility issues were involved the matter could not be determined summarily.
His Honour referred to a passage in Rowlatt on Principal and Surety, 4th ed at 182 and the decision in Stramit. Having done that he recorded that the “applicant submitted that the form of this guarantee here in question showed that there were to be two guarantors”. It seems fairly clear that the argument before the Chamber judge concentrated on the form of the document, and that is understandable given that the submissions of both counsel were based on the passage from Rowlatt and the decision in Stramit.
The judgment then referred to the letter of 30 April which his Honour referred to as the “written agreement”. After citing paragraphs 3 and 4 thereof he went on: “It is quite clear from this that the agreement was a tripartite one involving the respondent, Seafoods and Seafoods’ directors, both of whom were to become guarantors.”
A little later in the reasons comes the following passage, which in my view is of critical importance:
“In this case the intention that both applicants were required to be guarantors appears in the agreement recorded in Mr DeLacy’s letter. This agreement is linked to the guarantee by express reference. … When one looks at that agreement it becomes clear that the parties intended that Mr and Mrs Dimitrakipoulos would guarantee their company’s debt. The relevant intention sufficiently appears from a document the terms of which are included in the guarantee by specific reference.”
Taubmans is now clear authority for the proposition that there is no rule of law that where an instrument of guarantee is in a form or in terms that imply it is to be executed by more than one guarantor who are to be jointly and severally liable, all must sign before any is bound. The true position, as established by the reasoning of the judges in that case, is that the question is to be decided in the light of the evidence as to the intention of the parties. It is the intention of the parties objectively ascertained that is determinative. Of course when there is no relevant evidence of intention other than the form of the document used, the form itself may well lead to the inference that the intention was that both would sign. To that extent the statements in Rowlatt and the reasoning in Stramit must be modified.
It is not necessary to refer to the reasoning in Taubmans in greater detail, nor to analyse again the authorities discussed therein. I would merely make a brief reference to the decision of Powell J in Marston v Charles H Griffith & Co Pty Ltd (1985) 2 NSWLR 294 which was considered by the Chamber judge in this matter but not by the Full Court in Taubmans. The passage in that judgment at 300 accords with the reasoning in Taubmans if one equates “term … of the arrangements” with “intention of the parties”. For myself, I consider it preferable to use the latter expression because the common intention may not have reached the stage of being expressed as a term of the arrangement.
Here, the learned Chamber judge placed more emphasis on the form of the document than on the intention of the parties. But it is clear from the two passages last quoted from his reasons that he made findings as to the intention of the parties.
Given the affidavit material quoted at some length above it is clear that there were other grounds for concluding that the parties intended that both Mr and Mrs Dimitrakipoulos would be guarantors. The uncontradicted evidence from Buffey (the present appellant’s then agent) and CD is that the secretary of the appellant stated that the guarantee was worthless unless Mrs Dimitrakipoulos signed. The only rational conclusion open on that evidence, supported as it is by the contents of the letter of 30 April, is that the intention of the parties was that CD was not to be bound unless and until his wife executed a document in identical terms.
Given the state of the evidence there was no point in sending the matter to trial. In fact there was no request to the Chamber Judge that it be sent to trial. On the material relevant to the critical issue there was no credibility question which could only be resolved at a trial.
As the Chamber judge correctly noted, the only ground on which the caveats could be removed was that the guarantee was ineffective. That in the circumstances was an appropriate issue to determine summarily. I am not satisfied that the learned Chamber judge erred in deciding that he should do so.
For the above reasons, though his mind was arguably directed to the wrong test, the learned Chamber judge arrived at the correct result. Given the clear evidence of intention the conclusion is inevitable that the document in the form of a guarantee signed by Christos Dimitrakipoulos is unenforceable as a guarantee binding him alone.
The appeal should be dismissed with costs to be assessed.
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