GC Leasing Sydney Pty Ltd v Language Smart Pty Ltd

[2022] NSWLC 12

Local Court

New South Wales

Medium Neutral Citation:

GC Leasing Sydney Pty Ltd v Language Smart Pty Ltd [2022] NSWLC 12

Hearing dates:

18 November 2021

Date of orders:

1 February 2022

Decision date:

01 February 2022

Jurisdiction:

Civil

Before:

Shields LCM

Decision:

(1)   GC is entitled to a verdict and judgment against:

(a)   LS for the amounts owing under the Agreement and claimed in the ASC; and

(b)   Bhalla for the amounts for which LS is liable to GC under the Agreement pursuant to the Guarantee;

(2)   The Cross Claim stands to be dismissed;

(3)   GC is entitled to an order that LS and Bhalla pay its costs of the proceedings, including the Cross Claim.

Legislation Cited:

Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law, ss 60 to 61, 278 to 282

Conveyancing Act 1919 (NSW), s 38

Property Law Act 1958 (Vic), ss 73 to 73B

Cases Cited:

Beesly v Hallwood Estates Ltd [1960] 2 All ER 314; [1960] 1 WLR 549

Ex parte Ryrie [1983] 2 Qd R 194

Howard F. Hudson Pty Ltd v Ronayne (1972) 126 CLR 449

Interchase Corp Ltd (in liq) v Cmr of Stamp Duties (Qld) (1993) 27 ATR 154; 93 ATC 5120

Keith v Pratt (1862) 10 WR 296

Lady Naas v Westminster Bank Ltd [1940] AC 366; [1940] 1 All ER 485; (1940) 109 LJ Ch 138; (1940) 162 LT 277

McKinlay v Dodds (1984) 3 BPR 9259

Reid Murray Holdings Ltd (in liq) v David Murray Holdings Pty Ltd (1972) 5 SASR 386

Scook v Premier Building Solutions Pty Ltd (2003) 28 WAR 124; [2003] WASCA 263

Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500

Xenos v Wickham (1867) LR 2 HL 296

Category:

Principal judgment

Parties:

GC Leasing Sydney Pty Ltd – Plaintiff / Cross Defendant
Language Smart Pty Ltd –First Defendant / Cross Claimant
Shivam Bhalla – Second Defendant

Representation:

Counsel:
Ms E. Keynes of Counsel, for the Plaintiff
Mr. V. Mishra, Solicitor, for the Defendants

Solicitors:
O’Neill Partner - Plaintiff
Ajay Singh - Defendants

File Number(s):

2020/001174742

Publication restriction:

NIL

JUDGMENT

1. By an amended Statement of Claim filed on 31 May 2021 the plaintiff, GC Leasing Sydney Pty Ltd (‘GC’), seeks to recover monies said to be owed by the defendant, Language Smart Pty Ltd (‘LS’) under a leasing agreement following termination of that agreement for default by LS. As against the second defendant, Mr Bhalla (‘Bhalla’), GC seeks recovery of the same amount pursuant to a guarantee and indemnity given by him concerning LS’s obligations under the lease.

Background

2. GC is a finance company whose business involves the purchase of equipment, software, and other goods on behalf of a customer which are then leased to the customer. The customer orders or arranges the purchase of the asset from a supplier and then applies to GC for finance. GC has no role in the discussions between the customer and the supplier of the asset. If the application for finance is accepted, GC purchases the asset from the supplier and asset is provided by the supplier directly to the customer after execution of the documentation; Tan, at [4] to [10].

3. Prior to 29 November 2018, LS and Bhalla dealt with 1800bizphone (‘the Supplier’) concerning the purchase of software described as ‘Student Testing Software’ (‘the Software’) for LS to use in its business. GC had no role in those discussions.

4. On 29 November 2018, LS executed and returned to the Supplier:

1. A signed copy of a GC Equipment Lease Agreement (‘the Agreement’); and

2. A Software Acknowledgement Form.

5. The Agreement:

1. Is titled ‘Classic Lease – Equipment Lease Agreement for Business Purposes’;

2. Names LS as the lessee, with Bhalla’s email address for contact purposes, and 1800bizphone as the Supplier of the Equipment which defined as the Software;

3. Is for a fixed term of 24 months with the monthly rental of $1600;

4. Contains a declaration by LS under the National Credit Code that the credit under the agreement is to be used for business or investment purposes and an acknowledgement by LS that the effect of the declaration is that it may lose protection under the National Credit Code.

6. The Agreement also contains a section titled ‘Our Acceptance’ under which LS, by signing the Agreement:

1. Offers to lease from GC the Software on the terms and conditions set out in the Agreement;

2. Confirms the accuracy of the information provided by LS to GC and that the Agreement was completed by LS;

3. Acknowledges that LS selected the Software and has read clause 2 of the Terms and Conditions set out in the agreement and that clause 2 is a reasonable term.

7. The Terms and Conditions are set out in the Agreement and relevantly include the following:

1. No dealer or supplier who supplied the Equipment, or any other person, not employed by GC who the transaction may have been introduced, negotiated or conducted by or through has the authority to act as GC’s agent, and GC will not be liable for any actions or statements of such people under any circumstances (Clause 1.2);

2. The Agreement will be automatically extended by a six-month period, and may be terminated by giving at least three months written notice before the end of the term or the further term (Clause 1.6);

3. Punctual payment of the Rental Payments, as that term is defined, is of essence under the Agreement (Clause 2.1);

4. An acknowledgement by LS it has used its own judgement to select the Equipment and the Supplier and that GC is not able to give LS any advice or assurances regarding the equipment or its suitability for any use by LS (Clause 3.1);

5. To the extent permitted by law, all conditions, warranties or consumer guarantees concerning the Equipment, including but not limited to its quality or fitness for any particular’s purpose are excluded (Clause 3.2);

6. If the Equipment includes or consists of software LS must agree with the Supplier the license for use of the software, and ensure that the software is suitable for LS (Clause 3.3);

7. LS must inspect the Equipment on delivery by the Supplier to ensure it is complete, free of defects and in full working order and if that is the case sign the confirmation of receipt which confirms the delivery, it examination and condition of the Equipment (Clause 3.4);

8. LS will indemnify GC against all claims, damages, loss, costs and expenses including legal costs on a full indemnity basis arising out of LS’s possession of the Equipment (Clause 4.1);

9. If LS does not observe any of the terms of the Agreement and fails to remedy any non-compliance within seven days after it has been brought to its attention, GC can terminate the Agreement (Clause 5.1); and

10. If the Agreement is terminated under clause 5, LS must immediately pay all rental payments and other monies due at the time the Agreement is terminated, and all Rental Payments it should have paid had the agreement continued for the remainder of the lease term less any maintenance charges (Clause 6).

8. On 29 November 2018, Bhalla, who is a director of LS, executed and returned to the Supplier a Deed of Guarantee and Indemnity and Charge in favour of GC (‘the Guarantee’). By that Guarantee, Bhalla:

1. Guaranteed payment of all monies and performance of all obligations by LS; and

2. Indemnified GC against all losses and expenses sustained as a result of GC’s dealings with LS including legal costs.

9. On 17 April 2019 the Software was delivered to LS by the grant of access by the Supplier. On that day Bhalla signed a Confirmation of Delivery Form confirming that LS had received the software, it was without defects and in proper working order and conformed to the descriptions set out in the application to GC by LS, the Agreement and all agreements made by LS with the Supplier, and the quality of the Software was as guaranteed by the Supplier; Tan, at [21] and Exhibit JT1 at p 30.

10. Between 23 April 2019 and 15 October 2019 GC issued invoices to LS pursuant to the Agreement. The first four invoices, respectively dated 23 April 2019, 23 April 2019, from 15 May 2019 and 17 June 2019 were paid by LS and collectively totalled $6,101.34.

11. Invoices issued by GC to LS and dated 15 July 2019, 16 August 2019, 17 September 2019 and 15 October 2019 was not paid by LS. The total of the unpaid invoices is $7,040.00, and those invoices remain unpaid. Interest and administration charges pursuant to the terms of the Agreement in respect of the unpaid invoices were charged by GC in the amount of $181.03.

12. Between 14 June 2019 and 16 July 2019 GC and LS corresponded concerning the amounts due under the Agreement but unpaid. None of that correspondence contains any complaint by LS about the adequacy of the Software.

13. On 12 November 2019 and because of LS’s failure to make any further payments to GC, GC terminated the Agreement by a written Notice of Termination, which contained a schedule of the remaining rental charges which became due and owing to GC upon termination of the Agreement. Those amounts total $27,200.00; Tan, Exhibit JT1 at pps 47-49.

14. On 20 April 2020 GC made a demand for payment from LS of $34,421.03 as the total amount owing under the Agreement; Tan, Exhibit JT1 at pps 50-51.

15. On 12 June 2020 GC made a demand for payment from Bhalla as the guarantor of LS’s obligations under the Agreement; Tan, Exhibit JT1 at pps 52-53.

16. No payment has been made to GC by LS or by Bhalla; Tan, at [47].

The Pleadings

17. GC moves on an Amended Statement of Claim dated 23 April 2021 (‘the ASC’). The ASC pleads the background facts, the entry into the Agreement by LS, the relevant terms of the Agreement, the entry into the Guarantee by Bhalla, the payments made by LS under the Agreement and each subsequent breach by LS in failing to make further payments, termination of the Agreement, the demands to LS for payment in accordance with the Agreement and to Bhalla under the terms of the Guarantee and consequential press for relief.

18. The Defence to the ASC was filed on 31 May 2021. The pleading in the Defence is poorly expressed, and is consequently quite difficult to follow and understand, however it appears to raise the following matters:

1. LS is a consumer within the meaning of the Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law (‘ACL’);

2. LS did not enter into the Agreement for equipment but for the Software, at [5 a.];

3. The Software was supplied by GC and/or an agent of GC and not by the Supplier; at [5 b.];

4. The Software custom built and provided to LS by GC and/or an agent of GC and LS had advised GC of its requirements concerning the Software, at [5 c.];

5. LS relied upon GC and/or an agent of GC and their skill and judgment to provide software that would meet the requirements, at [5 d.];

6. GC expressly by or implication agreed to provide software that would perform properly and without failure or breakdown so that LS would be able to use it to earn income, at [5. e.];

7. GC guaranteed by implication to LS that the software provided by GC and/or its agent ‘will be rendered with due care’ and would be reasonably fit for use in LS’s business, at [5 f.]; and

8. A consequential denial that the Software was leased by LS, at [5 g.].

9. Admit that LS received the Software but say it was provided by GC and/or an agent of GC, at [6] and [7];

10. In relation to the Guarantee:

1. Admits that Bhalla signed the Guarantee but then asserts that the Guarantee does not specify the guarantor, the Guarantee purports to be a joint and several guarantee but only applies to Bhalla and purports to be signed by Bhalla as a trustee in circumstances where there is no trust, at [8 a.];

2. The consideration for the Guarantee is not properly stated but admits it is in respect of goods and services supplied on credit, at [8 b.];

3. Asserts that the Guarantee is void and or unenforceable and/or uncertain, at [8 c.], but offers no particulars in support of that allegation;

4. Asserts that the Guarantee purports to be a deed but has ‘not been sealed or delivered’, at [8 d.];

5. Denies that Bhalla has any obligation under the Guarantee, at [8 e.];

6. Denies that the Guarantee is enforceable because GC did not render the software services with due care and skill or provide a product that would be reasonably fit for LS’s purposes, at [8. f.]. The Particulars to this sub-paragraph refer to the consumer guarantees arising from ss. 61(1) and (2) of the ACL; and

7. Sets out particulars of breach of the Guarantee due to an absence of due care and skill by GC and/or its agent and the Software’s lack of fitness for purpose;

11. Denies that GC is entitled to the amounts claimed in the ASC and asserts that:

1. The amount claimed by GC is a penalty and are therefore void and unenforceable, at [11 a.]; and

2. GC is in breach of the consumer guarantees arising from ss. 61(1) and (2) of the ACL, at [11 b.].

19. LS also filed a Cross Claim in the proceedings against GC. The Cross Claim asserts:

1. GC in the course of its business agreed to lease to LS the Software, at [4];

2. The Software was prepared by GC to LS’s specifications, at [5];

3. GC agreed to provide to LS a custom-built software package to meet LS’s specifications, at [6];

4. In making the agreement above LS was a consumer within the meaning of the ACL, at [7];

5. LS to GC and/or its servant or agent purpose for which the software was required, at [8];

6. LS took delivery of the software from GC and/or its servant or agent and paid the sum of $7,861.54 to GC as consideration, at [9];

7. The contract for the provision of the software contained implied terms that the software would be of merchantable quality and reasonably fit for the purposes of LS, at [10];

8. GC breached the implied terms referred to above and therefore LS was unable to use the Software, at [11] to [13];

9. By reason of the failure of the Software to perform to LS’s specifications, LS purchased replacement software, at [14];

10. GC is breached each of the consumer guarantees arising from ss. 61(1) and (2) of the ACL, at [15] to [18];

11. Claims damages for breach of contract breach of implied terms and breach of the consumer guarantees from the ACL.

20. The Cross Claim makes several assertions against GC on the basis of agency. The only particulars of the agency in the Cross Claim are those set out under [7] where it is asserted that a Mr Vijay Sai Potukuchi was acting as an agent or servant or authorised representative of GC or alternatively the Supplier. In support of that contention LS appears to claim that Mr Potukuchi is the agent of GC because handed to LS the physical copy of the Agreement upon which GC sues and took it away after it had been signed by Bhalla as the director of LS.

21. GC has filed a defence to the Cross Claim that denies all relevant matters including the alleged agency of Mr Potukuchi and/or 1800Bizphones.

Consideration

Agency

22. A significant part of the Defence and Cross Claim rest upon the assertion that Mr Potukuchi and/or 1800Bizphones were the agents of GC. The claims of agency are not properly pleaded or particularised and objection was taken by GC to reliance by LS on those allegations. While there is substance in the latter complaint, the case appears to be that:

1. 1800Bizphones, the Supplier, was the agent of GC, Defence, at [5 b.]; and

2. Mr Potukuchi was the agent of GC, by reason of his role in the execution of the Agreement and the Guarantee and because of his association with the Supplier; Cross Claim, Particulars at [5].

23. The significance of the claim of agency by Mr Potukuchi is that he is said to be conduit by which LS made known to GC it requirements for the software.

24. The evidence in the Defendants’ case concerning the role of Mr Potukuchi is as follows:

1. Mr Potukuchi was an existing supplier of Internet services to LS through his business 1800Bizphones, S. Khosla, at [6], Bhalla, at [10];

2. Mr Potukuchi was providing Internet services to LS and was present at a number of internal discussions at LS in 2018 concerning software issues. Mr Potukuchi told Bhalla that he could have software prepared that would meet LS’s specifications;

3. Mr Potukuchi told Bhalla that he had an uncle in India who could build the software for LS, Bhalla, at [13] – [14];

4. Bhalla asked Mr Potukuchi to liaise with his training manager, Mr Saurabh Khosla, and his uncle in India, Mr Kalluri Subrahmanyam, in relation to the development of the software, Bhalla, at [15];

5. There were a number of conversations between Mr Potukuchi and Bhalla concerning the cost, N. Khosla, at [9], S, Khosla, at [10];

6. After the Agreement was signed, Mr Potukuchi and his team in India began work customising software for LS, and there were a number of meetings in November 2018 between Mr Khosla, Mr Potukuchi and others concerning the customisation of the Software, N. Khosla, at [15] and [16], S. Khosla, at [11];

7. After the Software was delivered to LS and problems emerged there were complaints made to Mr Potukuchi and his team however the issues were not resolved, N. Khosla, at [24], S. Khosla, at [12];

8. Mr Potukuchi assured Bhalla that the software developed would be reliable and Bhalla communicated with Mr Potukuchi and his team in India who were working on developing the software for LS; Bhalla, at 18]- [19].

25. In contrast, LS’s contention that Mr Potukuchi and/or 1800Bizphones were the agents of GC is contrary to the terms of Clause 1.2 of the Agreement, which provides that no dealer or supplier who supplied the Equipment, or any other person, not employed by GC who the transaction may have been introduced, negotiated or conducted by or through has the authority to act as GC’s agent, and GC will not be liable for any actions or statements of such people under any circumstances.

26. The whole of the evidence in relation to Mr Potukuchi and/or 1800Bizphones is that they had a pre-existing commercial relationship with LS and Bhalla for the provision of Internet services and in that way became aware that LS was seeking a software package for use in its business, and Mr Potukuchi offered to and did in fact facilitate the development of that software package through his family connections in India. On the evidence LS, Mr Potukuchi and 1800Bizphones worked together on the development of the software package which was ultimately financed by LS through the Agreement. That conclusion is substantially based upon the evidence in the Defendants’ own the case and it is wholly inconsistent with the contention that Mr Potukuchi and/or 1800Bizphones were the agents of GC or that that GC had any role in relation to the development of the Software, and in fact properly supports a finding that Mr Potukuchi and/or 1800Bizphones were in fact the agents of LS, including in relation to the execution of the Agreement and the Guarantee.

27. Accordingly, I find that:

1. Mr Potukuchi and/or 1800Bizphones:

1. Developed the Software in consultation with LS, Bhalla and its employees and without any knowledge, involvement or reliance on GC;

2. Any communication by LS and/or Bhalla to Mr Potukuchi and/or 1800Bizphones of LS’s requirements for the Software was not notice of those matters to GC for the purposes of the ACL or any other relevant law;

3. Any representations made by Mr Potukuchi and/or 1800Bizphones to LS concerning the quality, suitability or fitness for purpose of the Software were made on their behalf only and not on behalf of GC;

4. Were not the agents of GC for the purposes of the Agreement and the Guarantee; and

5. Were the agents of LS and Bhalla in seeking the financial accommodation from GC ultimately provided under the Agreement and supported by the Guarantee;

2. 1800Bizphones were the Supplier of the Software in accordance with the terms of the Agreement; and

3. As GC did not play any part in the development of the Software it did not owe any duty of care to LS in relation to the development of the Software.

ACL

28. LS and Bhalla plead that the Agreement was subject to the ACL.

29. LS and Bhalla rely on:

1. Section 60 of the ACL for an implied guarantee as to due care and skill concerning the development of the Software.

2. Sections 61(1) and (2) of the ACL as part of the Defence and Cross Claim. Those sections provide for the implication of guarantees:

1. As to fitness for a particular purpose for any product resulting from the provision of services (s 61(1)); and

2. That the nature, to quality state or condition of any product resulting from services might reasonably be expected to achieve a result which was made known to the supplier (s 61(2).

30. In relation to s 60 and based on the finding above that the Software was developed by Mr Potukuchi and/or 1800Bizphones in consultation with LS and Bhalla, there is no factual basis for implication into the Agreement of a guarantee as to due care and skill concerning the development of the Software, because GC did not provide any relevant service to LS.

31. Under ss. 61(1) and (2) it is a requirement that the consumer expressly or by implication makes known to the supplier any particular purpose for which the services are being acquired or the result that the consumer wishes the services to achieve. To satisfy that requirement and fix GC with the required knowledge LS alleges that Mr Potukuchi and/or 1800Bizphones were the agents of GC concerning the development of the Software and the entry into the Agreement and the Guarantee.

32. For the reasons set out above the evidence does not establish that Mr Potukuchi and/or 1800Bizphones were the agents of GC in relation to the development and supply of the Software and accordingly there is no basis for a finding that GC had made known to it, either expressly by implication or through any prior negotiations or arrangements, the particular purpose for which LS required the software or the result of LS wish to achieve, such that the precondition for the implication of the terms is not satisfied.

33. Further, in relation to ss 61(1) and (2) of the ACL, and if the consumer guarantees are implied into the Agreement, the facts as I have found them bring this case within the terms of s 61(3) as the circumstances show that LS did not rely upon the skill or judgment of GC in relation to the development and ultimate supply of the Software by Mr Potukuchi and/or 1800Bizphones.

34. There is also a further difficulty concerning the reliance by LS and Bhalla on those provisions of the ACL. Division 1 of Part 5 of the ACL deals with the liability of suppliers and credit providers.

35. Section 278 provides that if a consumer who is a party to a linked credit contract suffers loss and damage because of, inter-alia, failure to comply with a guarantee under sections 60 and 61, the linked credit provider and the supplier are jointly and severally liable to the consumer for the amount of loss and damage. The term ‘linked credit contract’ is defined in s 278(2) to be a contract that a consumer enters with a linked credit provider for the supply by way of, inter-alia, lease of goods or services to the consumer.

36. Section 279 (1) provides that if a linked credit provider and the supplier of goods or services are liable to a consumer under s 278 the consumer may recover the amount by action in a court of competent jurisdiction. Section 279(2) provides that the consumer must bring the action against the linked credit provider and the supplier jointly unless one of the circumstances in s (3) is established, none of which apply in these circumstances. Accordingly, s 279(2) requires that Mr Potukuchi and/or 1800Bizphones be joined to proceedings for breach of s 278(1), and they are not so joined.

37. In relation to counterclaims and offsets, s 282(1) provides that if proceedings are bought against a consumer in relation to a linked credit contract the consumer is not entitled to make a counterclaim in relation to the credit provider’s liability under s 278(1), or to exercise any right of offset provided for in subsection (3), unless the consumer brings a claim in the proceedings against the supplier or by third-party proceedings or otherwise, and they have not done so.

38. It follows by reason of either s 279(2) and/or s 282(1) LS and Bhalla are not entitled to make the claims in reliance on the ACL in the Cross Claim against GC.

The Guarantee

39. The Guarantee is attached to the affidavit of Mr Tan as part of Exhibit JT1 at page 27.

40. Bhalla admits that he signed the Guarantee, and his name and signature is clearly and legibly written in the attestation section provided for the guarantor. At the top of the Guarantee under the heading ‘Applicant / Customer’ LS’s full name and a telephone number and email address for Bhalla is provided, all seemingly completed in the same hand as the signature. While it is true the document does not, other than by the insertion of Bhalla’ name and the signing of the signature in the attestation, separately name Bhalla as the guarantor it is clear from the execution of the document by Bhalla when he wrote his name and signed his signature in the attestation that he is the guarantor.

41. In relation to the contention that the Guarantee purports to be a joint and several guarantee but only applies to Bhalla, the definition of ‘we’ and ‘us’ included in the definitions section of the document makes clear that those terms apply in appropriate circumstances jointly and severally.

42. In relation to the contention that the consideration is not properly stated:

1. The Guarantee is a Deed and therefore requires no consideration to be valid and enforceable, as execution imports consideration: Howard F Hudson Pty Ltd v Ronayne (1972) 126 CLR 449 at 463, 464;

2. The first substantive paragraph of the document expressly refers to the dealings with the Customer, in this case LS, and the obligations arising from those dealings; and

3. The document contains a section headed ‘Consideration’ that refers to the provision of credit by GC to LS and related matters including GC refraining from taking legal action against LS for 30 days in appropriate circumstances.

43. The contention that the Guarantee is void and/or unenforceable and/or uncertain offers no particulars; defence at [8 c.]. The Guarantee contains terms that are common in documents of its kind, clear and unambiguous and there is no basis upon which I could find that it is uncertain.

44. As to whether the Guarantee is otherwise void and unenforceable, Bhalla submits that:

1. He is not bound by the Guarantee because it is expressed as a deed and the formality of sealing and of delivery has not been met, because the signed document was handed to Mr Potukuchi and not to GC (Defence at [8 d.]); and

2. The Deed is not witnessed. This ground is contained in the Written Submissions, at [31], but is not pleaded in the Defence.

45. Those submissions are wholly misconceived and must be rejected.

46. In NSW, Part 3 of the Conveyancing Act 1919 governs deeds and their effect. Section 38 deals with signature and attestation, and relevantly is in the following form:

(1)    Every deed, whether or not affecting property, shall be signed as well as sealed, and shall be attested by at least one witness not being a party to the deed; but no particular form of words shall be requisite for the attestation.

(1A) …

(1B) …

(2)    Indenting shall not be necessary in any case.

(3)    Every instrument expressed to be an indenture or a deed, or to be sealed, which is signed and attested in accordance with this section, shall be deemed to be sealed.

(4)    Every deed, executed and attested in accordance with this section may be proved in the same manner as a deed not required by law to be attested might have been proved heretofore.

47. Section 38 requires a deed to be signed, sealed and witnessed; although sealing is deemed if the document is signed and witnessed. The Act does not refer to the need for delivery of a deed as a formal requirement, and, to this extent, it is either no longer a requirement or the common law still applies.

48. In Victoria, under the Property Law Act 1958 (Vic);

1. A deed must be signed and sealed (ss. 73 and 73A);

2. A document signed by an individual and expressed to be sealed, but which is not sealed nevertheless operates and takes effect as if it had been sealed (s 73A);

3. There is no express provision for attestation as a formal requirement of a Deed; and

4. There is no express provision for delivery as a formal requirement of a Deed, although it is accepted that it is implicit from the terms of s 73B that the requirement remains. Like NSW, to the extent that delivery is and requirement, and in the absence of any specific provisions specifying what will constitute delivery, the common law applies.

49. Delivery is the third common law requirement for the formal execution of deeds. Delivery occurs where there are acts or words sufficient to show that the party making the deed intends the deed to be binding on them. No particular form of words or conduct is necessary to amount to delivery and any other words or conduct which show an intention that the deed be finally executed, and the maker bound by it, will be sufficient; Scook v Premier Building Solutions Pty Ltd (2003) 28 WAR 124; [2003] WASCA 263, at [24] to [25].

50. Intention is ascertained by considering the facts, including the circumstances before or contemporaneous with delivery, although later events can be considered; Lady Naas v Westminster Bank Ltd [1940] AC 366, at 399; [1940] 1 All ER 485; (1940) 109 LJ Ch 138; (1940) 162 LT 277; Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500, at 9503; Reid Murray Holdings Ltd (in liq) v David Murray Holdings Pty Ltd (1972) 5 SASR 386. Where the evidence is that a document purports by its terms to have been signed, sealed and delivered, there is a rebuttable presumption that, in the absence of evidence to the contrary, that the instrument has been delivered and takes effect as a deed; Xenos v Wickham (1867) LR 2 HL 296, at 322; Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500, at 9503; Beesly v Hallwood Estates Ltd [1960] 2 All ER 314 at 325; [1960] 1 WLR 549; Keith v Pratt (1862) 10 WR 296; Ex parte Ryrie [1983] 2 Qd R 194 at 197; Interchase Corp Ltd (in liq) v Cmr of Stamp Duties (Qld) (1993) 27 ATR 154; 93 ATC 5120. For example in McKinlay v Dodds (1984) 3 BPR 9259, at 9263, per Cohen J, held that where an instrument is said to be formally sealed and delivered, and there is nothing to qualify that delivery, even though the instrument remains in the hands of the executing party, it is regarded as validly delivered and will operate as a deed.

51. The whole of circumstances, including Bhalla’s conduct in signing both the Agreement and the Guarantee and returning them to GC, and LS, of which he is a director, and LS thereafter gaining access to and using the Software, are consistent only with a conclusion that Bhalla intended that the Guarantee be executed and he would be bound it. Conformably with the authorities cited above that is sufficient at law to constitute delivery.

52. In relation to lack of attestation, the Guarantee is not in fact witnessed. The Guarantee is however, by its express terms, governed by the law of Victoria, which has no requirement for attestation, and accordingly the fact that the Guarantee is not witnessed does not make it void or unenforceable.

53. The remaining matters raised by Bhalla concerning the Guarantee rest upon the contention that was an absence of due care and skill by GC and/or its agent and the Software’s lack of fitness for purpose. For the reasons set out above those matters also fail.

54. Bhalla is bound by the Guarantee and liable to GC for the amounts for which LS is liable to GC under the Agreement.

Damages - Penalty

55. In relation to the contention by LS and Bhalla that the amounts claimed against them are a penalty, the amounts are calculated in accordance with Clauses 2 and 6 of the Agreement and are not excessive. There is no basis upon I could conclude that the amounts are anything other than a genuine pre-estimate of the loss suffered by GC on breach of the Agreement by LS.

Conclusion

56. It follows that:

1. GC is entitled to a verdict and judgment against:

1. LS for the amounts owing under the Agreement and claimed in the ASC; and

2. Bhalla for the amounts for which LS is liable to GC under the Agreement pursuant to the Guarantee;

2. The Cross Claim stands to be dismissed;

3. GC is entitled to an order that LS and Bhalla pay its costs of the proceedings, including the Cross Claim.

57. I will give the parties leave to bring in Short Minutes reflecting the judgments and orders foreshadowed above.

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Decision last updated: 22 February 2023