| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : K K MACHINERY PTY LTD -v- SOUTH COAST EXCAVATION AND PLANT HIRE PTY LTD [2013] WADC 29 CORAM : EATON DCJ HEARD : 25 FEBRUARY 2013 DELIVERED : 1 MARCH 2013 FILE NO/S : CIV 1476 of 2011 BETWEEN : K K MACHINERY PTY LTD Plaintiff (Respondent)
AND
SOUTH COAST EXCAVATION AND PLANT HIRE PTY LTD
First Defendant
MICHAEL SCOTT MARTIN
Second Defendant (Appellant)
Catchwords: Practice and procedure - Appeal from a registrar - Defendant's application for summary judgment - Leave to apply - Significance of a typographical error Legislation: Rules of the Supreme Court 1971 O 16
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Result: Appeal dismissed
Representation: Counsel:
Plaintiff (Respondent) : Ms T McAuley
First Defendant : No appearance
Second Defendant (Appellant) : Mr M A Detata
Solicitors:
Plaintiff (Respondent) : Ellery Brookman Pty Ltd
First Defendant : Not applicable
Second Defendant (Appellant) : O'Connor Partners
Case(s) referred to in judgment(s):
Bell v Cribb [2013] WASC 32
Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3] [2012] WASCA 157
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1 EATON DCJ: On 4 May 2011 the plaintiff filed a writ of summons accompanied by an endorsement of claim against the first and second defendants. The plaintiff sought judgment in the sum of $316,441.22 with interest and associated fees against the first defendant for machinery and equipment supplied and services rendered between 31 December 2010 and 5 April 2011, pursuant to the terms and conditions of a trading agreement, performance of which was guaranteed by the second defendant pursuant to a guarantee in writing dated 20 July 2010.
2 An administrator was appointed to the first defendant on about 23 May 2011. By a special resolution made pursuant to s 446A of the Corporations Law the administrator became the liquidator on about 28 June 2011. By a letter of 23 January 2012 the liquidator acknowledged to the solicitors for the plaintiff an indebtedness on the part of the first defendant to the plaintiff in the sum of at least $360,025.45. The first defendant has, in effect, taken no part in these proceedings. 3 The second defendant entered an appearance to the writ on 31 October 2011. 4 On 14 December 2011 the plaintiff filed a statement of claim against the second defendant asserting, inter alia, that he was at all material times the sole director and the sole secretary of the first defendant carrying on the business of providing mining services under the name 'Martin's Mining and Civil'. The plaintiff further asserted that, on or about 20 July 2010, the parties (being the plaintiff and the first and second defendants), entered into an agreement pursuant to which the plaintiff agreed to hire equipment to the first defendant in consideration of payment by the first defendant of any amounts invoiced by the plaintiff and both defendants agreeing to be bound by the terms and conditions of the plaintiff's credit application form. The plaintiff assets that under those terms and conditions the second defendant guaranteed payment by the first defendant. The plaintiff particularised the unpaid invoices rendered by the plaintiff to the first defendant and asserted that the first defendant had failed, within the time period required by the agreement, to pay the invoices with the exception of a relatively small amount. Finally, the plaintiff pleaded that, despite demand, the second defendant had failed to pay the invoices, with the exception of the relatively small amount, pursuant to the guarantee. 5 The second defendant (Mr Martin) applied for security for costs on 30 December 2011 filing, in support of that application, an affidavit by one Kevin Colin Staffa sworn 28 December 2011. The application was (Page 4)
opposed. Karl Prall, a director of the plaintiff, filed an affidavit in opposition to the application sworn on 25 January 2012. Mr Martin filed a supplementary affidavit by Kevin Colin Staffa sworn 2 February 2012 filed on that day. Further affidavits were filed by both sides such that an enormous amount of paperwork was generated and an enormous amount of work done in respect of the issue of security for costs. 6 On 12 March 2012 Mr Martin filed a defence. In it he asserted that in or about early June 2010 Karl Prall, on behalf of the plaintiff, told the first defendant that the plaintiff required a credit application in order to continue trading as between the plaintiff and first defendant. On about 20 July 2010 the plaintiff emailed a document to the first defendant which Mr Martin referred to as the 'credit application'. On or about 20 July 2010 he completed that document and signed it. 7 Mr Martin further pleaded that the plaintiff was estopped from asserting that the credit application gave rise to a guarantee by him for any debt or default of the first defendant because the plaintiff had represented to the first defendant that it was a credit application 'and nothing more'. He further asserted that he reasonably expected that if the plaintiff had sought a guarantee from him it would have told him so, but it did not, asserting that the plaintiff's silence in that regard was misleading or deceptive conduct in trade or commerce, invoking the provisions of s 52 of the Trade Practices Act 1974 (Cth) and s 10 of the Fair Trading Act 1987 (WA). He pleaded that, in addition, and in the alternative, it did not comply with the Statute of Frauds 1677, that it did not and could not constitute a promise by him to answer for the debt or default of the first defendant because 'the dollar amount of the credit is not referred to', that it was unenforceable because it was limited to a 30 day period, because none of the goods supplied by the plaintiff to the first defendant were supplied pursuant to it, that he was not liable as a guarantor because the plaintiff granted indulgences to the first defendant by continuing to supply the goods to the first defendant notwithstanding that it was in breach and, finally, because the relevant term provided that Mr Martin would guarantee '… all monies now and hereafter owned [sic] by the applicant to the supplier'. 8 On 13 March 2012 the parties filed a memorandum of consent orders under O 43 r 16 to vacate a special appointment listed to deal with the issue of security for costs. They agreed that Mr Martin's application for security for costs against the plaintiff be dismissed and the costs of the application, including reserved costs, be in the cause. (Page 5)
9 On 13 June 2012 Mr Martin applied by chamber summons for the following orders: 1. leave to bring the application; 2. judgment be entered for him against the plaintiff pursuant to Order 16 rule 1(1); 3. The amended statement of claim against him dated 8 June 2012 be struck out; and 4. the plaintiff pay his costs of the application and the costs of the action be taxed if not agreed, including reserved costs. 10 Order 16 r 1 of the Rules of the Supreme Court 1971 (RSC) provides that a defendant to an action may, within 21 days after appearance, or at any later time by leave of the court, apply to the court for summary judgment, and the court, if satisfied that the action is frivolous or vexatious, that the defendant has a good defence on the merits, or that the action should be disposed of summarily or without pleadings, may order that judgment be entered for the defendant with or without costs or that the plaintiff proceed to trial without pleadings or that, if all parties consent, may dispose of the action finally and without pleadings in a summary manner. An application under O 16 r 1(1) is to be made by summons supported by an affidavit verifying the facts upon which the application is based. Such an affidavit may contain statements of information or belief with the sources and grounds thereof stated. 11 Mr Martin's application for summary judgment was filed some seven months late. The application was initially supported by two affidavits, one sworn by Kevin Colin Staffa on 2 July 2012 comprising 69 pages and another sworn by Mr Martin on 2 July 2012 comprising 64 pages. 12 In opposition to the application the plaintiff filed an affidavit sworn on 25 July 2012 by Karl Prall comprising of 106 pages and an affidavit by Lisa Michelle Ellery sworn 25 July 2012. 13 Kevin Colin Staffa and Mr Martin each filed supplementary affidavits in response to those filed by the plaintiff. 14 On 15 August 2012 Mr Martin filed an amended application for summary judgment and to strike out amendments to the plaintiff's statement of claim. In support of that document Kevin Colin Staffa filed yet another affidavit sworn 15 August 2012. In it he said: (Page 6)
The reason the application for summary judgment was not made sooner (and in particular between November 2011 and April 2012) is that I did not have all the documentation I required in order to advise Mr Martin. He further deposed that it was not until shortly before he made the application for summary judgment that he was satisfied that he had all the documents in order to make the decision to apply for summary judgment. He said that he 'held off' making the application because the plaintiff's solicitors requested that he not make it until such time as he had considered amendments proposed by them to their statement of claim. 15 On 24 August 2012 the plaintiff filed a substituted affidavit of Karl Prall in opposition to the application for summary judgment comprising 108 pages. 16 Mr Martin's applications were eventually the subject of a special appointment before Deputy Registrar Harman on 26 October 2012. In the lead up to that special appointment the parties filed a further welter of documents including objections to affidavits, responses to objections to affidavits, written submissions, lists of authorities and so forth. Lisa Michelle Ellery filed a further supplementary affidavit on about 25 October 2012. 17 The Deputy Registrar dismissed the application for summary judgment and to strike out and ordered that the costs of the application be paid by Mr Martin. 18 On 2 November 2012 Mr Martin filed a Notice of Appeal from Deputy Registrar Harman's decision seeking to overturn it and that judgment be entered for Mr Martin against the plaintiff, that the plaintiff's claim be dismissed and that the plaintiff pay Mr Martin's costs of the application and of the action including reserved costs to be taxed. 19 The District Court Rules 2005 provide that if a party is dissatisfied with the decision of a registrar the party may appeal to a judge. Such an appeal must be commenced within 10 days after the date of the decision or such longer period as a judge or legally qualified registrar may allow. In the matter before me, the appeal was lodged in time. Such an appeal is by way of a new hearing of the matter that was before the registrar. 20 In Bell v Cribb [2013] WASC 32 Beech J said [49]: The caution with which the power to grant summary judgment is to be exercised is well known. In an application by a defendant, the defendant bears the onus of showing that there is no serious question to be tried on (Page 7)
any cause of action raised by the plaintiff: Anderson v Effexseven (1998) 10 ANZ Ins Cas 61-424, 74, 757. The power to order summary judgment should never be exercised unless it is clear there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99. It is only in the clearest of cases, when there is a high degree of certainty about the ultimate outcome of the proceeding if it went to trial, that summary judgment ought be given: Agar v Hyde[2000] HCA 41 ; (2000) 201 CLR 552 [57]; Batistatos v Roads and Traffic Authority of New South Wales[2006] HCA 27 ; (2006) 226 CLR 256 [46]. 21 The appellant's written outline of submissions and oral submissions revolved largely around the words of the alleged guarantee. The credit application, said to be made on about 20 July 2010, is signed by Mr Martin in his capacity as 'director' of the first defendant. It is on the letterhead of and is addressed to the plaintiff. It provides trade references for the first defendant with relevant contact details and telephone numbers. It is in the form of an application for a 30 day credit account with the plaintiff and contains the words 'If this account is granted I/we agree to abide by the credit policy as per outlined hereunder'. Under the heading 'Credit Policy' appears the following: 4. IN CONSIDERATION OF THE SUPPLIER agreeing to grant credit facilities to the applicant, we the undersigned directors of the applicant do hereby jointly and severely guarantee payment of the applicant's account and all monies now due and hereafter owned by the applicant to the supplier and agree to be bound by the terms and conditions and in accordance with the CREDIT/POLICY contained in this application form and the supplier may at all times act as if we were the principal debtors. In the event of all directors of the applicant not signing this form, we the signatories of this form accept full liability under this guarantee. 22 The bulk of the argument on the hearing of the appeal revolved around the word 'owned' within the foregoing clause. 23 In my opinion, the appearance of that word is a typographical error. The phrase should read: … we the undersigned directors of the applicant do hereby jointly and severely guarantee payment of the applicant's account and all monies now and hereafter owed by the applicant to the supplier … 24 If one were to attempt a literal reading of that clause on the basis that it was not a typographical error the clause would be rendered absurd. The literal meaning would involve the applicant's directors jointly and severely guaranteeing payment of all monies due and owned by the applicant to the supplier. That reading of the clause renders it a nonsense. (Page 8)
25 This is not a case of ambiguity. There are not two or more competing meanings of the relevant clause. The learned authors of Cheshire and Fifoot, Law of Contract, 10th ed (2012) 10.35 state as follows: The court will therefore decline to apply a literal meaning where this would lead to an irrational result. Modern appellate decisions have given new life to a dictum of Dixon CJ and Fullagar J, delivered in Fitzgerald v Masters, that in a contract 'words may be supplied, omitted or corrected in order to avoid absurdity or inconsistency. In Fitzgerald the dictum was applied to a clause in which, as a result of a drafting slip, the word 'inconsistent' was insert instead of the word 'consistent'. However, the application of this dictum has since been extended beyond the mere correction of obvious and minor errors, to the open modification of important provisions in commercial contracts. They continue at page 454: The principle that the literal meaning of the language will be 'corrected' to avoid absurd consequences does not depend on the presence of ambiguity. On the contrary, it applies when the literal sense of words is all too clear. Nor does it depend on proof of a mistake in recording the agreement. The principle applies whenever it is established that unintended absurd consequences follow from the application of the literal meaning. There is, in such circumstances, no need for the court to resolve an ambiguity (because there is none) nor rectify. It is not enough to show that the literal meaning results in absurdity. It is also necessary to establish what the contracting wording should be. The court cannot be left to speculate on how the absurdity should be avoided. 26 There can be no doubt that, in the matter before me, there is an obvious typographical error. It should be corrected. That correction involves no speculation. In Westpac Banking Corporation v The Bell Group Ltd (in liq) [No 3][2012] WASCA 157 Drummond AJA said (at [1353]): Contractual interpretation involves the identification of the objective intentions of two parties who have reached a concluded agreement and embodied it in a document. The court, particularly in a commercial context will strain to give a documentary contract a sensible meaning. Ambiguity or uncertainty will not defeat it. See Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429, 437 (Barwick CJ). If the language of a written contract is open to two constructions, the contract will be construed so as to avoid consequences which appear 'capricious, unreasonable, inconvenient or unjust'. See Cheshire and Fifoot's Law of Contract (9th Aust ed, 2008) [10.34], citing Gibbs J in Australian Broadcasting (Page 9)
Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99. If giving the language of a contract its literal or ordinary meaning leads to an absurd result, the court will interpret the contractual language so as to avoid the absurdity by supplying, omitting or correcting words, even if this extends beyond the mere correction of obvious and minor errors, to the open modification of important provisions in commercial contracts: see Cheshire and Fifoot [10.35]. 27 From the outset, the plaintiff in formulating its statement of claim has, when referring to the word 'owned', added the word 'sic' in brackets immediately after. According to the Australian Oxford Dictionary the word 'sic' is placed in brackets after a word that appears odd or erroneous to show that the word is quoted exactly as it stands in the original. The word 'sic' appears in brackets in par 12 of the plaintiff's amended statement of claim against Mr Martin dated 8 June 2012 filed on 12 June 2012. In the minute of proposed substituted statement of claim against Mr Martin filed on 23 August 2012 pursuant to orders made by Deputy Registrar Harman on 15 August 2012 the plaintiff pleads, inter alia, at par 8: By reason of the matters pleaded in paragraph 7 above, the plaintiff seeks the error be corrected as a slip, or alternatively, seeks rectification of clause 4 of the credit policy to replace the word 'owned' with the word 'owed'. 28 In a further minute of proposed substitute statement of claim filed 11 September 2012 the plaintiff seeks to plead that Mr Martin guaranteed payment of all monies owing by the first defendant to the plaintiff pursuant to the guarantee in the credit account contract signed by Mr Martin. 29 In a further minute of proposed substituted statement of claim filed, pursuant to order 1 of orders made by Registrar Kingsley on 11 September 2012, on 22 October 2012 the plaintiff sought to plead that, inter alia, on a proper construction of the credit account contract, cl 4 is to be read as if the word 'owed' appeared instead of 'owned'. 30 My understanding of the correct position is that the original pleading using the word '(sic)' to denote the error was sufficient for the court to deal with it. 31 The various objections raised to the various formulations in successive minutes of an amended statement of claim have, in my view, (Page 10)
been ill-advised, both in terms of those making the objections and those responding to them. 32 In Mr Martin's written submissions on appeal is the following: As such, the word 'owned by the Applicant (that is Second Defendant) have a clear and unambiguous legal meaning and are not ambiguous on the face of the Guarantee. Accordingly having regard to the appropriate rule of construction is that set out in Ankar Pty Ltd v National Westminster Finance (Australia) Limited set out above because the Guarantee is not a guarantee on its face, the claim of the plaintiff must fail, according to the criteria determined by the plaintiff [sic]. 33 Mr Martin goes on to submit that the plaintiff has not sought rectification of the guarantee and does not rely on any matters external to the wording of the guarantee. In my view, neither is required. His attitude to the so-called problem of the typographical error is misconceived. It is a matter of simple correction. It has led, in part, to a succession of attempts on the part of the plaintiff to formulate a statement of claim that accords with the second defendant's largely misconceived objections to it. 34 In his written submissions, Mr Martin asserts that the guarantee was not witnessed at the time he signed it. He relies upon the contention that he understood the document to be only a credit application. 35 As to the requirements of the Statute of Frauds O'Donovan and Phillips in the 3rd ed of 'The Modern Contract of Guarantee' at page 79 state: Section 4 requires that the guarantee itself or some memorandum or note thereof should be in writing. Since the object of the statute is to exclude parol evidence, any writing embodying the terms of the agreement and signed by the person to be charged or that person's lawfully authorised agent, is sufficient. The intention of the person who signs the document or memorandum is immaterial. All that is required is evidence under the hand of the alleged guarantor or that person's lawfully authorised agent that he or she has given a promise which falls within the terms of the terms of the statute … It is no objection in all these cases that the document signed by the party to be charged is not intended to serve as a guarantee, although the signature must convey approval of the content of the memorandum. Indeed, the idea of such an undertaking need not be present in the mind of the person signing the memorandum. Nor is it necessary for the agreement between the parties to be finalised before the memorandum is given. Thus a memorandum may be sufficient to satisfy the statute although it is signed by the party to be charged before the agreement is concluded by verbal acceptance. (Page 11)
36 On the face of it, the plaintiff's claim is a relatively straight forward one. Mr Martin appears to have guaranteed the first defendant's debts to the plaintiff in consideration of the plaintiff granting credit in certain terms to the first defendant. The first defendant has failed to pay the amounts due and owing. The plaintiff pursues Mr Martin. 37 I am not aware of the reasons given, if any, by Deputy Registrar Harman for refusing the second defendant's application for summary judgment and strike out application. It is conceivable that he refused leave to make the former. Alternatively, he granted leave but dismissed the application. During the course of the hearing I queried both counsel as to the basis upon which the Deputy Registrar disposed of the applications. There was no clear response. I am not provided with a transcript of that hearing. There is nothing explanatory on the court file. 38 It does seem to me that an extraordinary amount of time and effort went into an application for security for costs which was ultimately dismissed. The affidavit of Kevin Colin Staffa sworn 15 August 2012 seeks to explain the delay in the making of the application for summary judgment. The deponent refers vaguely to not having 'all of the documentation I required in order to advise Mr Martin'. His affidavit is less than convincing and makes no mention of the enormous amount of documentation and work involved in the application for security for costs. 39 Mr Martin's outline of submissions in support of its application for summary judgment under O 16 r 1 filed 13 August 2012 signed by Mr Staffa as counsel for him in par 6 – 12 deals with the document referred to as the credit application and asserts: If a standard form document (eg a credit application) serves or can serve more than one purpose (eg as a credit application, and a guarantee) but it is held out as serving only one purpose (such as credit application) and it is signed on that basis, no special promise by the signer arises – because the signer is merely verifying the information in the credit application. Mr Staffa continues with the contention that 'a signature of itself cannot by law create a guarantee. There must be a contemporaneous promise and agreement – a contemporaneous consensus or assent'. He accepts that, as a general principle of law, a party is bound by the terms of an agreement he enters into whether or not he chooses to read all or some of its terms. He submits, however, that where the parties choose to describe or hold out the document that is being signed as having a limited purpose they are bound by their word or conduct. (Page 12)
40 Putting aside the merits of those submissions, I fail to see how those matters were not obvious to him from the moment he took his client's instructions and perused the credit application giving rise to the assertion that his client was bound by a guarantee. In truth, there is no explanation for the long delay in filing the application for summary judgment. Indeed, the delay has been engendered, in large part, by, firstly, Mr Martin pursuing an ultimately unsuccessful application for security for costs against the plaintiff and secondly, Mr Martin repeatedly objecting to successive attempts by the plaintiff to formulate a statement of claim. In substantial part, those objections were based on suggestions that the typographical error in cl 4 of the credit application had far greater significance than it, in truth, does. Leave to bring the application should not have been granted. 41 In my view, the application for summary judgment was not only belated but also misconceived. There is, in this case, clearly a serious question to be tried revolving around the efficacy of the guarantee and the extent of Mr Martin's liability, if any, under it. This is not an appropriate vehicle for summary judgment which should always be approached with some caution in any event. I dismiss the appeal and will hear submissions as to appropriate orders and costs.
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