Herkes Electrical P/L v Hamlo (Aust) P/L

[2001] QSC 179

SUPREME COURT OF QUEENSLAND

CITATION:

Herkes Electrical P/L v Hamlo (Aust) P/L [2001] QSC 179

PARTIES:

HERKES ELECTRICAL PTY LTD
ACN 073 693 419
(plaintiff)
HAMLO (AUSTRALIA) PTY LTD
ACN 058 336 011
(first defendant)
RONALD GEOFFREY JOHN MORRIS
(second defendant)

FILE NO:

S 8808 of 1999

DIVISION:

Supreme Court

PROCEEDING:

Civil

ORIGINATING COURT:

Supreme Court

DELIVERED ON:

14 June 2001

DELIVERED AT:

Brisbane

HEARING DATE:

4 June 2001

JUDGE:

Byrne J

ORDER:

CATCHWORDS:

GUARANTEE AND INDEMNITY – THE CONTRACT OF GUARANTEE – CONSTRUCTION AND EFFECT – GENERALLY – where handwritten information provided in guarantee – where one director executed guarantee – whether form or language of guarantee suggests co-director to execute guarantee is contemplated – whether guarantee is enforceable against sole executor

Taubmans Pty Ltd v Loakes [1991] 2 Qd R 109, distinguished

COUNSEL:

D.D. Bates for the plaintiff
W L. Cochrane for the second defendant

SOLICITORS:

Jones King for the plaintiff
Crouch & Lyndon for the second defendant

1. In July 1997, the first defendant (“Hamlo”) submitted a three page “Application for Credit” to the plaintiff (“Herkes”) containing information written in by hand on Herkes’s printed form. The writing was that of Miss A McKellar, who was employed by Hamlo as the second defendant’s secretary. She completed the form under his instructions.

1. On page 1, Miss McKellar wrote in, among other details –

(a)        against “MANAGERS’ NAMES”, “Mr Geoff Morris”;

(b)        against “FINANCIAL CONTROLLER’S NAME”, “Mr Geoff Morris”;

(c)        as the names of the “Directors”, “Mr Geoff Morris” and “Mr Lindsay Booth”;

1. On page 2, against “APPLICANT’S NAME IN FULL”, Miss McKellar put in, “Mr Geoffrey Morris”.

1. The third page is headed “DIRECTORS/PROPRIETORS GUARANTEE”. Immediately underneath appear these printed words:

“1/WE , … DIRECTORS/PROPRIETORS OF THE APPLICANT COMPANY, HEREBY AGREE TO PAY ANY OR ALL OUTSTANDING INVOICES IN THE EVENT OF DEFAULT OR NON PERFORMANCE OF THE APPLICANT IN RESPECT OF CREDIT FACILITIES PROVIDED BY THE APPLICANT COMPANY GOING INTO LIQUIDATION, OR ENTERING INTO A SCHEME OF ARRANGEMENT OR HAVING A JUDGEMENT ENTERED AGAINST IT.”

1. After “I/WE” appears “Ronald Geoffrey John Morris”.

1. Beneath the promissory words, the form provided for insertion of the name, signature, address and telephone number of the signatories to the “GUARANTEE”. There Miss McKellar put just “Mr Geoffrey Morris”.

1. Mr Morris’s signature appears twice in the document: at the foot of page 2 against “APPLICANT’S SIGNATURE”; and with his name on the third, “guarantee” page.

1. Hamlo is indebted to Herkes for at least $279,984.84 in respect of “outstanding invoices” within the meaning of those words in the material promise and seeks judgment against Mr Morris in reliance upon the “GUARANTEE”.  

1. One defence concerns interpretation of the promise. Another asserts that it was the “common intention” of Herkes, Hamlo and Mr Morris that “the document be executed” by both Mr Morris and Mr Booth and that, in the absence of Mr Booth’s execution, the promise is “not binding” on Mr Morris.

1. The interpretation point turns on the absence of a comma after “PROVIDED”. The defence sets up that “the document is void for uncertainty” in that “[t]he Applicant is not defined”, and “[t]he named guarantor or guarantors guarantees outstanding amounts supplied on credit by the applicant to itself”.

1. Plainly, the form was designed to accommodate credit applications by corporations. Mr Morris, and therefore Hamlo, intended that Hamlo be the applicant. So did Herkes. The inclusion of Mr Morris’s name against “FULL NAME OF APPLICANT” is an obvious mistake. Accordingly, there is nothing in the point about absence of definition of applicant. And if a comma is inserted after “PROVIDED”, the choice of words, though not especially elegant, is meaningful. Accordingly, the only substantial question in the case concerns Mr Booth’s non-execution.

1. Mr Booth is referred to once in the document: on  page 1, where he is named as a director. On the “GUARANTEE”, third page, there is no mention of him, even though the form envisages that details of more than one guarantor might be provided. So this is not one of those cases where the form or language of the guarantee suggests that execution by more than one guarantor is contemplated: cf Taubmans Pty Ltd v Loakes [1991] 2 Qd R 109.

1. Mr Morris, however, has testified to facts which, if proved, would disclose an understanding between him and a Herkes employee that the guarantee was not to be binding unless and until Mr Booth also became a signatory.

1. In July 1997, Mr Paul Butler was employed by Herkes as a salesman. He worked at the trade counter at the Brisbane office. He also had a role in procuring contracts for the sale of Herkes’ products to electrical contractors like Hamlo.

1. According to Mr Morris, he and Mr Booth shared financial responsibilities in connection with Hamlo’s affairs. He does not suggest that Herkes was aware of that arrangement.  But he did testify that he raised the matter of Mr Booth’s signature to the guarantee with Mr Butler.

1. Mr Morris testified that Mr Butler brought the application form to him for completion and execution. Mr Morris also said that he is “90% sure” that he “would have said” to Mr Butler to “chase Lindsay” Booth “to get the other signature” on the guarantee.

1. Mr Morris says Mr Booth was away working on a project at the Jimboomba State School at the time.

1. Mr Butler, who no longer works for Herkes, was not involved in processing credit applications. That work was attended to by an accountant at Herkes’s Sydney office. And Mr Butler was generally reluctant to present credit application forms to prospectively large customers. In his view, doing so risked giving offence; it could be “bad for business”.  He did, however, acknowledge having on “very rare” occasions delivered a credit application form for completion. Mr Butler has no recollection of having seen the Hamlo application before it was shown to him during his evidence. He also said, in effect, that procuring guarantees was not “part” of his duties. His job was to sell.

1. Mr Morris’s testimony concerning encouraging Mr Butler to take the application to Mr Booth in Jimboomba for his signature is not persuasive.

1. Mr Morris’s evidence is not easily reconciled with the contents of the form as he executed it: the only mention of Mr Booth is his identification as a director on page 2. Secondly, the claimed conversation does not accord with Mr Butler’s recollection, usual practice, or responsibilities. Thirdly, except, perhaps, that Mr Butler acknowledged that he may well have attended Hamlo’s premises in July 1997 and spoken to Mr Morris, there is no record or other objective fact to support Mr Morris’s belief that he spoke to Mr Butler about taking the guarantee to Mr Booth. And Mr Morris did not impress me as a reliable historian: for example, in connection with Mr Morris’s meetings with Mr Tanswell and Mr Butler in 1999, their evidence is distinctly preferable to Mr Morris’s version.

1. All considered, Mr Morris’s account of the claimed conversation in 1997 with Mr Butler seems unlikely to be correct.

1. In the result, therefore, there is no satisfactory basis for a conclusion that Herkes had reason to suppose – if indeed it be fact – that Mr Morris signed the guarantee anticipating that he would not be bound pending Mr Booth’s signature.

1. Herkes has established an entitlement to judgment. I will hear submissions as to the form of it and costs.