Eagle Fuels Pty Ltd - v - Slidecross Pty Ltd
[2014] VCC 596
•14 May 2014
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised |
COMMERCIAL LIST
GENERAL CASES DIVISION
Case No. CI-13-03930
| EAGLES FUELS PTY LTD (ACN 136 452 429) | Plaintiff |
| V | |
| SLIDECROSS PTY LTD (IN LIQUIDATION) (ACN 006 529 559) | First Defendant |
| and | |
| PAUL RIBBERA | Second Defendant |
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| JUDGE: | HER HONOUR JUDGE KENNEDY | |
| WHERE HELD: | Melbourne | |
| DATE OF HEARING: | 6, 7, 8 May 2014 | |
| DATE OF JUDGMENT: | 14 May 2014 | |
| CASE MAY BE CITED AS: | Eagle Fuels Pty Ltd – v – Slidecross Pty Ltd & Anor | |
| MEDIUM NEUTRAL CITATION: | [2014] VCC 596 | |
REASONS FOR JUDGMENT
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Catchwords: CONTRACT – claim on guarantee – whether guarantee covered amounts owed by first defendant under binding agreement as claimed – whether guarantor discharged by reason of variation of the guarantee – whether repayment of $50,000 should have been allocated to amount allegedly owing by first defendant
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G. Mukherji | Slater & Gordon |
| For the First Defendant | No appearance | No appearance |
| For the Second Defendant | Mr W. Gillies | Ferraro & Company Pty Ltd |
HER HONOUR:
The current proceeding concerns a claim for $150,000 pursuant to a guarantee given by the second defendant, Mr Ribbera, in relation to amounts owing for the supply and delivery of fuel to the first defendant, Slidecross Pty Ltd.
The first defendant is in liquidation such that the proceeding is currently stayed against it.[1] The liquidator is aware of the proceeding and has indicated that he did not intend to participate in the proceeding .[2] The parties thereby accepted that the proceeding could be dismissed as against the first defendant with no order as to costs.
[1] Corporations Act 2001 (Cth) s471B
[2] Email correspondence from the liquidator to the second defendant’s solicitors dated 6 May 2014
Although the second defendant raised various issues in his Amended Defence, only three issues remained for determination at trial.
The first issue concerned the proper identity of the primary debtor. Thus, Mr Ribbera alleged that the contract for the supply of fuel was in fact with a company named El Zorro Transport Pty Ltd, not Slidecross, which was not covered by the guarantee.
The second issue raised was whether the extension of credit to the primary debtor beyond an amount of $200,000 discharged the guarantee pursuant to the principles in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd .[3]
[3] (1987) 162 CLR 549
Finally, there was an issue as to the proper accounting of two repayments of $50,000 each made on 28 March 2013 and 15 April 2013.
The parties therefore agreed that the issues to be determined were as follows:
(a) whether moneys were owing by Slidecross Pty Ltd to Eagle Fuels Pty Ltd for the supply and delivery of fuel which form the subject of the guarantee executed by Mr Ribbera?
(b) if yes to (a):
(i) whether the amount owing was limited to $200,000?; and
(ii) whether Eagle Fuels had failed to properly credit two amounts of $50,000 paid on 28 March and 15 April?
By reason of the tender of a remittance advice of 15 April from El Zorro the issue concerning the repayments was further contained. This advice gave instructions that the payment of 15 April was to be for invoices sent to the first defendant, Slidecross. In the light of this specific advice, the plaintiff accepted that the payment of $50,000 of 15 April should be credited to the total amount claimed.
This left an amount outstanding against the second defendant of $150,000. ($200,000 - $50,000).[4]
[4] See plaintiff’s outline of closing submissions dated 8 May 2014, paragraph 1, where an amount of $200,000 only was sought.
Background facts
The plaintiff was a provider of fuel. Its CEO, Mr Kelly, described its “niche” market as being the speedy provision of fuel to people on site in circumstances where they could not necessarily go to a service station (for example because they might have a train or a boat). Mr Cowie, who had the initial contact with Mr Ribbera, was the operations manager of the plaintiff.
The second defendant, Mr Ribbera, had been an “operations manager” for the first defendant, Slidecross Pty Ltd, during 2012 to 2013. Mr Ribbera’s wife was a director of Slidecross. This company obtained fuel from various sources (including the plaintiff and biofuel) for delivery.
In January 2013 Mr Ribbera was also employed by a company called El Zorro Transport Pty Ltd as a project manager. El Zorro was a rail company which operated locomotives and carted rail freight. It was not related to either the plaintiff or the defendants.
The evidence of Mr Kelly was that fuel was delivered to El Zorro on three different bases during 2013.
During the first period in early January to 21 February 2013, the plaintiff delivered fuel on a “cash sale account” basis. He described this as being akin to El Zorro “going into a milk bar and buying sandwiches”. A set of invoices were produced dated between 14 January and 11 February related to this first period which are not directed to any particular entity but are described as being on a “cash sale account” (see exhibit 1).
The second period concerns the invoices the subject of this proceeding which were in the name of Slidecross and covered the period from 21 February until 5 March 2013.
The final period from 8 March 2013 covered a period in which EL Zorro was invoiced directly as a customer.
February arrangements (second period)
In terms of the second period, the evidence of Mr Cowie was that he was advised that Mr Ribbera’s truck was in the plaintiff’s workshop, having broken down, and that he needed some fuel delivered.
He called Mr Ribbera on the telephone in February 2013. Mr Ribbera said he needed to get someone to cart some fuel for Slidecross to El Zorro’s fuel tanks. He was now the fuel supplier for El Zorro in New South Wales and Victoria.
The two men agreed to meet. The evidence of Mr Cowie was that this occurred at a café whereupon he was told that Slidecross was the fuel carrier for El Zorro and that Mr Ribbera’s truck was out of action so he needed someone else to cart some fuel for him.
Mr Cowie thereupon provided Mr Ribbera with a credit application for him to complete. Mr Ribbera advised him that he would only need 14 days credit as he was getting paid from El Zorro on a 7 day basis.
Mr Ribbera did not dispute any of the conversations with Mr Cowie. He also accepted that he executed the account application and the guarantee. Further that after he filled in the documents he got his wife to forward them, but that he never heard anything back about the result of his application.
The document tendered into evidence is dated 21 February 2013 and has three parts: an “Account Application”; two pages of “Terms and Conditions”; and a “Deed of Guarantee”.
The account application gives Slidecross Pty Ltd as the “legal entity” with the trading name of “Slidecross”. The payment terms given are “14 days from delivery.” The document also states that the “credit limit requested” is $200,000.
The “Terms and Conditions” are said to bind both Eagle Fuels and the Customer with the parties agreeing that all future dealings between them would be governed by those Terms and Conditions. They set out general terms including terms as to payment terms and interest.
The “Deed of Guarantee” contains a clause whereby the Guarantor “guarantees the payment to Eagle Fuels by the Customer of all the moneys owing to Eagle Fuels now or which hereafter during the continuance of this guarantee may become owing by the Customer on any account whatsoever”.
Delivery and invoicing
The evidence of Mr Ribbera was that he subsequently ordered fuel from Mr Cowie. Further that invoices were then raised and sent to him. He then passed these invoices to El Zorro who made the payments.
It was also accepted by Mr Kelly that it was El Zorro which was the entity receiving the fuel (direct into their trains and also into a tank in Junee).
Further, although the evidence of Mr Kelly was that a risk assessing company, Atradius, had approved a $200,000 credit limit for Slidecross by internal correspondence of 1 March 2013 addressed to the plaintiff, Slidecross was never notified as to whether its credit request of $200,000 had ever been approved.
Despite this, between 22 February and 5 March invoices to an amount of $303,265.47 were issued to Slidecross (see exhibit C).
This outstanding amount was subsequently reduced by a payment of $97,969.18 which was made on 7 March (by El Zorro) leaving an outstanding amount of $205,296.29.
A further payment of $50,000 made on 28 March was also originally applied to the Slidecross invoices (as shown in a schedule attached to an email from Mr Kelly of 15 April). Despite this, in oral evidence Mr Kelly described this as an “error”.
In the result, the plaintiff demanded the outstanding amount and issued these proceedings
Witnesses
The plaintiff called Mr Cowie, its operations manager, as well as its CEO, Mr Kelly.
Mr Ribbera was the only witness called for the second defendant.
The evidence of the witnesses was generally of very little assistance. Thus, the evidence of Mr Cowie was somewhat vague. The evidence of Mr Kelly was more confident, but at times was conclusory and generalised.
Mr Ribbera presented as relatively unsophisticated, but readily gave appropriate concessions. There was one aspect of his evidence, however, that I found to be unsatisfactory. Thus, upon being asked about his response to advice received on 1 March that Slidecross owed some $198,000, he gave evidence that he rang someone at El Zorro to suggest the debt was owed by El Zorro. I did not find this evidence to be credible, particularly since he appeared to have never communicated any objection to the invoices in the name of Slidecross (which commenced on 22 February). In any event, there was no evidence of any objection being communicated to the plaintiff.
The oral evidence was therefore generally of limited utility. I have accordingly placed considerable weight on the contemporaneous objective evidence, to the extent it was available.
Was Slidecross the primary debtor for the purposes of the guarantee?
The language of the Account Application, when read with the Terms and Conditions, is clear. The documentation identifies the first defendant as the Customer. This is also confirmed by the subsequent invoices which are in the name of Slidecross. As indicated already, there was also never any written objection to the invoices on the basis of identity.
In terms of whether a binding contract was made, it is true that Mr Ribbera did not receive any formal acceptance. However, acceptance can be conveyed by conduct.[5] In this case, I consider that the subsequent delivery of fuel and invoices to Slidecross constituted an acceptance of the terms and conditions by conduct. In particular, I consider that the plaintiff clearly agreed to provide fuel to Slidecross on the terms and conditions set out on 14 day terms.
[5] See N Seddon et al, Cheshire & Fifoot Law of Contract, (LexisNexis Butterworths Australia 10e 2012) at [3.23] and cases cited therein
Mr Ribbera emphasized that delivery was actually made to El Zorro which also made the payments. Further, that consideration of the terms related to storage and handling, particularly clause 4, suggested that the “Customer” was the entity actually receiving the goods.
However, the fact that delivery was made to a third party does not alter the identity of the contracting party; nor does the fact that El Zorro made payments. In particular, there was no evidence from which to infer that the contract was really between the plaintiff and El Zorro by reason of agency. To the contrary, the oral evidence confirmed that the contracting party was intended to be Slidecross.
Moreover, there was nothing in clause 4 or any other of the terms which suggest that delivery could not be made to premises of a third party. Clause 4 simply indicated that the Customer should comply with all relevant laws relating to storage and handling. This would only operate insofar as any such laws were applicable.
A potentially complicating feature of the case was that the Slidecross invoices were later “reissued” in the name of El Zorro. Thus, in an email of 7 March from Ms Navneet Arora of El Zorro to the plaintiff she stated that “we are authorising you to change Slidecross invoices to El Zorro Transport Pty Ltd”. This subsequently occurred with Mr Kelly giving evidence that El Zorro advised him that it needed to have the re-invoicing done “for tax purposes”.
Although this is not entirely satisfactory, such action does not alter the identity of the contracting parties. In particular, the mere administrative act of reissuing invoices did not evidence some novation agreement under which El Zorro was substituted for Slidecross through the consent of all three relevant parties (which was not pleaded in any event).
I am therefore satisfied that moneys were owing by Slidecross Pty Ltd (and not El Zorro) to Eagle Fuels Pty Ltd during February 2013 for the supply and delivery of fuel which form the subject of the guarantee executed by Mr Ribbera.
The answer to question (a) is therefore “yes.”
Was the guarantor discharged by reason of the extension of credit beyond $200,000?
As a general proposition, a surety’s obligation will be discharged when conduct on the part of the creditor, without the consent of the surety, has the effect of altering the surety’s rights, unless the alteration is unsubstantial and not prejudicial to the surety.[6]
[6] Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; Hickory Developments Pty Ltd v Brunswick Retail Investment Pty Ltd & Anor [2012] VSC 224 at [4]
In order to assess whether this principle has operation it is necessary to consider whether the extension of the further credit constituted a variation within these principles and, further, whether such extension was consented to in any event.
By clause 1(a) of the Terms and Conditions the Customer agreed to pay in full the invoice amount prior to or upon delivery, unless the plaintiff had agreed in writing to provide credit terms to the Customer. Pursuant to clause 1(b), where the plaintiff had provided credit terms, the plaintiff “must receive payment within these terms”. Otherwise, payment was due 21 days from the end of the month in which the invoice was dated.
The account application included the amount of $200,000 as being the credit limit “requested”. Payment terms were said to be 14 days from delivery.
As indicated already, no formal notification was communicated in response to this application. Indeed, as at 1 March, the plaintiff wrote to Mr Ribbera asking him to pay one or two of the outstanding invoices (with a total of $198,813.82) “as we have not had your credit limit approved yet” .[7] This was notwithstanding the internal approval of Atradius was dated 1 March.
[7] Exhibit F, further emails at CB 119
It therefore appeared to be the case that the approval of credit had been determined on an “order by order” basis (as the price was determined[8]) depending on the choice of the supplier, with no actual authorised credit limit agreed.
[8] Clause 2 of the Terms and Conditions provided that price would be determined at the time of delivery
Although then credit was sought and granted from 1 March beyond the amount of $200,000 initially requested, the agreement between the parties was not altered given no fixed credit was ever communicated. Instead, the plaintiff chose to provide further credit facilities as requested on 14 days terms pursuant to clause 1(a) of the original Terms and Conditions.
Seen in this light, the granting of credit beyond $200,000 was not a material variation which attracted the Ankar principles.
In any event, the terms of the guarantee provided for a guarantee “of all the moneys” owing to Eagle Fuels now or which hereafter during the continuation of the guarantee may become owing by the Customer “on any account whatsoever”. This is also emphasized by the second last paragraph of the guarantee which provides that the guarantee was to secure “all monies” which may become payable by the Customer.
On a proper construction of the guarantee, the obligations of Mr Ribbera thereby included an unlimited amount under any agreement to provide credit, even if that agreement constituted a variation of the initial terms and conditions.[9]
[9] A similar finding was made in Paradise Constructors Pty Ltd & Anor v Lofts Quarries Pty Ltd [2003] VSC 370
Finally, I find that Mr Ribbera has given his consent to the extension of the credit. [10]
[10] And see Hickory Developments Pty Ltd v Brunswick Retail Investment Pty Ltd & Anor [2012] VSC 224 at [44]- [64]; Paradise Constructors Pty Ltd & Anor v Lofts Quarries Pty Ltd [2003] VSC 370 at[40]
The evidence showed that, by 1 March, the credit extended was some $198,000. The evidence also showed that Mr Ribbera was explicitly aware of this fact given he received an email of 1 March which attached a list of invoices showing a total invoiced as at that point of $198,813.82. However, despite the state of the account, further orders for fuel were placed between 1 March and 5 March which resulted in the total credit being extended of some $300,000. The evidence also showed that Mr Ribbera was the only person responsible for ordering fuel.
Under cross examination Mr Ribbera claimed that he did not have figures in front of him that he was going over the limit because he was out in the field. However, in an email of 6 March Mr Ribbera stated that “we” will be paying all of the invoices or at least 90% by Friday. This suggested that he was generally taking the responsibility for arranging payments and was in a position to determine that no payments had in fact been made.
Given he was made explicitly aware of the balance on 1 March (which was almost at $200,000) but chose to place further orders, I consider that his actions in ordering further fuel from 1 March amounted to a consent to the further extension of credit.
This issue was not expressly the subject of a Reply. However, Mr Ribbera was cross examined generally on his knowledge of the further fuel orders and state of the account in early March without objection. The matters were also the subject of submission. His Counsel was also unable to point to any prejudice in having the matter of consent raised, other than a possible forensic advantage in eliciting evidence about consent in examination-in-chief.
I therefore consider that it is appropriate for the plaintiff to be permitted to raise the issue of consent. I am further satisfied that Mr Ribbera has consented to the extension of the guarantee if in fact any extension has occurred.
It follows that, for all of the reasons set out above, I do not consider that the principle in Ankar has operation, such that Mr Ribbera is not discharged from the guarantee.
The answer to question (b)(i) above is therefore “No.”
Should the amount of $50,000 received on 28 March be credited to the amount outstanding by Slidecross?
Evidence
In an email from Mr Kelly to Mr Weily of El Zorro of 15 April he attached a receivables schedule wherein the payment of $50,000 of 28 March is shown as having been applied to the Slidecross invoices .[11] Mr Kelly now describes this as an “error”.
[11] Exhibit C, set of emails at CB 147
The evidence of Mr Ribbera was also that he had a conversation with Mr Kelly in late April wherein Mr Kelly said he was going to recover the money from El Zorro. Further that El Zorro was “paying off the old debt” and that the last payment would be paid after they did the last delivery in Junee at which time “it would be all paid off”. Mr Kelly generally accepted that he had this conversation.
However, in a later conversation with Mr Ribbera a couple of weeks later, Mr Kelly told Mr Ribbera that El Zorro had “retracted all the payments put against my debt and so I would be liable for that money”. Mr Kelly did not remember this conversation although the objective evidence generally suggests that a revision or “retraction” did occur, consistent with Mr Ribbera’s evidence.
Mr Kelly also claimed that El Zorro paid both amounts of $50,000 on the basis that he would continue to supply to them. Mr Kelly generally described the payments as “good faith” payments for his continued support. However, he identified no document, nor any person from El Zorro who agreed to any such treatment, nor was anyone from El Zorro called. He did however adduce a formal proof of debt of June 2013 in the El Zorro administration wherein the plaintiff claimed an amount owing of $22,839.67. This was consistent with the amount of $50,000 being credited to El Zorro at some point prior to June 2013 (see exhibit 3).
Resolution
Mr Ribbera relied on the principle in Clayton’s case[12] to suggest that the payment should be attributed to the earlier invoices on the basis of the “first in first out” rule.
[12] Devaynes v Noble (1816) 35 ER 781
However, the rule has no application where the payment in question is properly appropriated by the parties. Nor does it have application where there are distinct and separate debts .[13]
[13] See Yarra Capital Group Pty Ltd & Anor v Sklash Pty Ltd [2006] VSCA 109 at [25]
In my view the treatment of the $50,000 in the accounts, together with the oral communication of Mr Kelly, suggest that the parties intended for the amount to be appropriated to the Slidecross debt. It is not open in those circumstances for the plaintiff to change its position as it now seeks to do.[14]
[14] See Cory Brothers & Co Ltd v Owners of the Turkish Steamship Mecca [1897] AC 286 at [292].
Insofar as the plaintiff suggests that there was some other arrangement to treat the $50,000 payments as “good faith” payments by El Zorro, there was no evidence to support such a proposition. Indeed the remittance advice provided in relation to the second payment of $50,000 is inconsistent with such an arrangement being generally reached.
I am therefore satisfied that the amount of $50,000 paid on 28 March should be attributed to the Slidecross invoices with the (agreed) result that the amount outstanding is $100,000.
In the light of the concession of the plaintiff about the other $50,000 payment of 15 April, the answer to question (b)(ii) is “yes.”
Conclusion
Subject to hearing from the parties as to the final form of orders I consider that the following orders are appropriate :
·there should be judgment for the plaintiff against the second defendant in the amount of $100,000 with interest to be agreed;
·the second defendant should pay the plaintiff’s costs of the proceeding on a party/party basis to be taxed in default of agreement; and
·the proceeding should be dismissed as against the first defendant with no order as to costs.
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