Kailis Bros Pty Ltd v Clements
[2006] WADC 48
•4 April 2006
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: KAILIS BROS PTY LTD -v- CLEMENTS & ANOR [2006] WADC 48
CORAM: MCCANN DCJ
HEARD: 5 SEPTEMBER & 16 DECEMBER 2005
DELIVERED : 4 APRIL 2006
FILE NO/S: CIV 1924 of 2004
BETWEEN: KAILIS BROS PTY LTD
Plaintiff
AND
PHILLIP CLEMENTS
First DefendantPETER E CLEMENTS
Second Defendant
Catchwords:
Practice and procedure - Summary judgment - Contract of guarantee - Turns on own facts
Legislation:
Corporations Act 2001, s 444
Rules of the Supreme Court 1971, O 14 r 1(1)
Result:
Appeal dismissed
Representation:
Counsel:
Plaintiff: Mr T Mijatovic
First Defendant : In Person
Second Defendant : In Person
Solicitors:
Plaintiff: TRM Legal Services
First Defendant : Not applicable
Second Defendant : Not applicable
Case(s) referred to in judgment(s):
Bunbury Foods Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491
Donnelly v National Bank of Australia, unreported; FCt SCt of WA; Library No 920283; 19 May 1992
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
O'Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200
Re A and K Holdings Pty Ltd [1964] VR 257
Re Taylor; Ex parte Century 21 Real Estate Corporation (1995) 130 ALR 723
Case(s) also cited:
Allen v Carbone (1975) 132 CLR 528
Bond v Hongkong Bank of Australia Ltd (1991) 25 NSWLR 286
Bradford Old Bank Ltd v Sutcliffe [1918] 2 KB 833
Exploration NL v Foyster (1972) 126 CLR 507
Gan v Sanders (1994) 15 ACSR 298
Hawkesbury Valley Developments and Anor v Custom Credit Corporation Ltd and Ors, unreported, SCt NSW, 12 May 1995
Oldershaw v King (1857) 157 ER 213
Perrott v Newton King Ltd [1933] NZLR 1131
Scammel and Nephew Ltd v Ousten [1941] AC 251
Secured Income Real Estate (Australia) Ltd v St Martin's Investment (1979) 144 CLR 596
Triaca v Summaries Pty Ltd [1971] VR 347
MCCANN DCJ: In this matter, the plaintiff has appealed from an order of Registrar Harman made in Chambers on 22 April 2005 whereby the learned Registrar dismissed the plaintiff's application for summary judgment against the defendants. The plaintiff seeks orders entering judgment in its favour in the sum of $28,768.25 together with interest and costs.
As pleaded the plaintiff's claim is for the sum of $28,768.25 allegedly owing by the defendants to the plaintiff pursuant to a guarantee of the indebtedness of Silverbird Nominees Pty Ltd ("Silverbird") to the plaintiff for, first, goods sold and delivered by the plaintiff to Silverbird in the sum of $25,943.87 and, second, $2,824.38 in "collection costs" associated with the plaintiff's attempts to recover the debt from Silverbird.
By its statement of claim, the plaintiff alleges that:
1.It carries on the business of wholesaling seafood and other food goods.
2.The defendants were directors of Silverbird which carried on the business of "C Restaurant Lounge" at 34th Floor, St Martins Tower, 44 St Georges Terrace Perth.
3.By an agreement comprised in a credit application with accompanying terms of trade and guarantee entered into by the plaintiff, Silverbird and the defendants on 20 December 2002:
(a)The plaintiff agreed to supply Silverbird with seafood and other goods on credit;
(b)All costs, expenses or disbursements incurred by the plaintiff in the maintenance of Silverbird's account or as a consequence of Silverbird's default in observing the terms and conditions of sale (including debt collection agency fees and legal fees) were payable by Silverbird upon demand;
(c)The defendants agreed that:
(i)In consideration of the plaintiff agreeing to supply goods to Silverbird on credit, the defendants jointly and severally, unconditionally and irrevocably guaranteed to the plaintiff the due payment of all monies payable by Silverbird to the plaintiff and further agreed to pay all such monies to the plaintiff upon demand.
ii)The guarantee was continuing and irrevocable until Silverbird's obligations had been paid or satisfied in their entirety and would not be affected by the plaintiff granting time, credit or any other indulgence to Silverbird.
4.The plaintiff delivered seafood and other food products and services to Silverbird and invoiced Silverbird for the same.
5.Silverbird failed to pay invoices totalling $25,943.87.
6.Despite verbal and written demands by the plaintiff to the defendants and Silverbird from in or about August 2004, the defendants failed, neglected or refused to pay the amounts owed by Silverbird to the plaintiff.
7.The plaintiff incurred collection costs payable to National Credit Limited in the sum of $2,824.38 in respect of its endeavours to recover the money owed by Silverbird and the defendants.
In addition to its claim under the guarantee, the plaintiff has pleaded a cause of action against the defendants founded on unjust enrichment. In my view, there is no prospect of the plaintiff obtaining summary judgment against the defendants in respect of that cause of action and the only substantive issue that I need to consider is whether the plaintiff is entitled to judgment in respect of its claim against the defendants pursuant to the guarantee.
I shall briefly set out the principles governing this appeal.
Relevant principles
The appeal is a hearing de novo. That is to say, the Court must reconsider the application before the learned Registrar as if hearing the matter for the first time, admitting additional relevant evidence unless there is a reason why it would be unjust to do so (see Hazart Pty Ltd v Rademaker (1993) 11 WAR 26 at 28, 29 per Malcolm CJ).
The discretion to enter summary judgment should be exercised with great care and it should never be exercised unless it is clear that there is no real question to be tried (see Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99).
Factual background
The facts of this matter are set out in the affidavit of Karen Richardson sworn 9 March 2005. Ms Richardson deposed to the facts pleaded in the statement of claim and annexed a copy of the alleged agreement. The agreement is comprised in a three page document entitled "Credit Application and Terms of Trading Agreement". The document comprises four separate sections on three pages. The first page sets out contact details of Silverbird and the C Restaurant Lounge. The second page comprises two sections, namely "Terms and Conditions" and a "Guarantee". Silverbird executed the "Terms and Conditions" "as a deed". The two defendants were named in the "Guarantee" section and signed it. The third page is entitled "Credit Details" and purports to be a very basic credit application. It sets out "estimated monthly purchases" ($10,000), Silverbird's bank details, the names and addresses of Silverbird's "directors/owners/trustees/partners" (the defendants' names and addresses are set out) and other information including the name of an "accounts contact" ("Blanaid Joncour").
Material terms and conditions of the Terms and Conditions were as follows. By cl 1, all accounts were due and payable within the terms stated in a notice to be given pursuant to cl 2. By cl 2, the "purchaser" (that is, Silverbird) acknowledged that it was not entitled to any credit facility until it received a notice in writing from the plaintiff stating that credit facilities had been given and specifying the terms and conditions of such credit. Clause 2 further provided that until receipt of such notice, all goods were deemed to have been supplied by the plaintiff on a cash on delivery basis.
The guarantee was expressed as follows:
"In consideration of [the plaintiff] agreeing to supply goods to Silverbird Nominees (the customer) and or the [plaintiff] granting credit (of whatever kind) to the customer, the undersigned (and if more than one of them jointly and severally) unconditionally and irrevocably guarantee to the [plaintiff] the due payment by the Customer of all monies payable by the Customer to the [plaintiff] and the due performance of all the Customer's obligations to the [plaintiff] howsoever arising and shall pay all such monies and fulfil all such obligations upon demand. The [guarantor] acknowledges that their obligations under this guarantee shall be principal obligations co‑extensive with those of the Customer to the [plaintiff] and the [plaintiff] shall not be obliged to proceed against the Customer prior to or contemporaneously with proceeding against the [guarantor] pursuant to this Guarantee. This Guarantee is continuing and irrevocable until the Customer's obligations have been paid or satisfied in their entirety and shall not be affected by the [plaintiff] granting time, credit or any other indulgence to the Customer or any variation on the terms upon which the [plaintiff] supplies goods or makes credit available to the Customer whether assented to by the [guarantor] or not".
Ms Richardson annexed copies of the invoices which the plaintiff contends Silverbird failed to pay to her affidavit. The first of these is dated 3 April 2004 and the last is dated 15 July 2004. After allowing for credits and adjustments, the total of those invoices is the sum claimed, namely $25,943.87. The plaintiff does not contend that a notice setting out the terms and conditions of Silverbird's credit facility were ever served upon Silverbird pursuant to cl 2 of the Terms and Conditions. However it is apparent from the invoices that the plaintiff granted Silverbird credit of 30 days.
On 20 April 2005 the first defendant, Mr Phillip Clements, swore an affidavit on behalf of both defendants opposing the application for summary judgment. Mr Clements admitted that the goods the subject of the plaintiff's claim had been sold and delivered by the plaintiff to Silverbird and that the total price of those goods was $25,943.87. Mr Clements then deposed to certain matters which he contended disclosed that the defendants had a good defence to the plaintiff's claim, that is to say, on 21 July 2004 Silverbird was placed in voluntary administration and on 19 August 2004 it entered into a deed of company arrangement pursuant to s 444 of the Corporations Act. Mr Clements contended that the debt owed by Silverbird to the plaintiff fell within the terms of the deed of company arrangement. A copy of the deed of the company arrangement was annexed to his affidavit.
At the hearing of the summary judgment application before the learned Registrar, the defendants contended that as a matter of law and on the true construction of the deed of company arrangement Silverbird's debt to the plaintiff was discharged by that deed, and accordingly the defendants' liability to the plaintiff as guarantors was also discharged (because, it was contended, the plaintiff's entitlements merged into its rights under the deed of company arrangement).
The defendants also opposed the application on other grounds which included certain alleged procedural shortcomings, in particular an alleged failure on the part of the plaintiff to prove that the statement of claim had been served in accordance with O 14 r 1(1) of the Rules of the Supreme Court 1971.
The learned Registrar dismissed the plaintiff's application for summary judgment on the ground, as I understand it, that the plaintiff had failed to prove the service of the statement of claim upon the defendants.
The grounds of appeal relied upon by the plaintiff are overly long and I do not intend to set them out. In any event, since the appeal is a hearing de novo of the original application, it is preferable to set out the issues between the parties on the rehearing, rather than embark upon a detailed analysis of the grounds of appeal. Before doing so, I shall briefly set out the further affidavit evidence that has been filed since the appeal was instituted:
1.Affidavit of Eugenia Victoria Doran sworn 16 May 2005 confirming the service of the statement of claim.
2.Affidavit of the first defendant sworn 17 July 2005 verifying the facts pleaded in an amended defence of the first and second defendants dated and filed 17 July 2005 and further deposing that he has never received any written or oral demand under the guarantee from or on behalf of the plaintiff.
3.Affidavit of Kathleen Marie Arlidge sworn 20 September 2005 (i.e. after the initial hearing of this appeal) deposing, inter alia, as to, first, the plaintiff's debt collection agents sending of written demands to the defendants (copies of which are annexed to her affidavit) and, second, the making of verbal demands by the plaintiff, its debt collection agents and process server.
4.A further affidavit of the first defendant sworn 4 November 2005 confirming that prior to the commencement of this action he had not received or been served with any of the notices referred to in Ms Arlidge's affidavit.
5.An affidavit of the second defendant sworn 16 November 2005 stating that, to the best of his knowledge, he had never received or been served with any of the notices annexed to Ms Arlidge's affidavit.
The validity of the demands (if any) made upon the defendants is a new issue raised on the evidence in the appeal. In my view, if there is a triable issue in relation to that issue then it is appropriate to allow the issue as to whether any liability of the defendants pursuant to the guarantee was discharged by Silverbird entering into the deed of company arrangement to also go to trial.
Was a valid demand served upon the defendants?
I shall firstly consider the plaintiff's claim in respect of the price of goods sold and delivered ($25,943.87). The plaintiff contends that it served written demands upon the defendants in the form of the notices annexed to Ms Alridge's affidavit, and made verbal demands between July 2004 and October 2004. The issue is whether those demands effectively enlivened a cause of action against the defendants.
In my view, the following propositions have been established by the authorities in relation to the technical requirements of a valid demand. Subject to the wording of the agreement itself, in a case of a sum of money payable on demand under a collateral contract (such as a guarantee) a cause of action does not arise until a demand is made on the guarantor (see Re Taylor; Ex parte Century 21 Real Estate Corporation (1995) 130 ALR 723 at 725 – 727). Depending, once again, upon the construction of the agreement, the position is arguably the same notwithstanding the inclusion of a principal debtor clause in the guarantee (see Re Taylor at 730). The form of, and details to be set out in, a demand depend on the requirements of the contract of guarantee itself, and it is arguable that a term could be implied requiring the creditor to set out the claimed amount in the demand, or otherwise provide the guarantors with sufficient information to enable them to ascertain the amount owed. (see Donnelly v National Bank of Australia, unreported; FCt SCt of WA; Library No 920283; 19 May 1992, per Rowland and Ipp JJ at p 6 and p 11). However, as a general rule, it is sufficient if the creditor demands the payment of all of the principal, interest and other monies owing to it provided that the debtor or guarantor (as the case may be) is allowed a reasonable opportunity to comply with the demand. In determining whether the debtor has had such an opportunity it will be relevant to take account of the debtor's knowledge or means of acquiring knowledge of the amount due, and of the information which the creditor has provided in that respect, including the response which he has made to any enquiry by the debtor. There is perhaps a stronger case for saying that the amount should be specified when a third party, for example a guarantor, is called upon to pay the debt of another. It is not necessary that any specified sum be correct, provided that the debtor is given a reasonable opportunity to comply. (See O'Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 per Starke J at 216, Bunbury Foods Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491 at 503, 504).
Furthermore, it has been suggested that a notice of demand must be phrased in terms of an immediate demand, rather than in terms of a wish or vague request that payment should be made, or a threat to take proceedings in the future or a general statement of the guarantor's indebtedness or a mere notice of the principal debtor's default, and that the demand must be served on the guarantor's in their capacity as guarantors rather that in their capacity of officers of a principal debtor company (see O'Donovan and Phillips, "The Modern Contract of Guarantee" 3rd ed at p 492).
Against this background I turn to consider the affidavit evidence. The first document relied upon by the plaintiff as being a notice of demand is a facsimile addressed to "C Restaurant Lounge" marked for the attention of "Chantelle" and sent by the plaintiff on 22 June 2004. This facsimile stated that the plaintiff was owed $23,044.69 in respect of its March and April invoices and further stated that no further goods would be supplied until the accounts were paid. In my view, this did not constitute a valid demand under the guarantee as it was not addressed to the defendants and did not purport to make demand upon them.
The next document relied upon by the plaintiff is a letter dated 22 June 2004 (the same date as the facsimile mentioned above) addressed to "C Restaurant Lounge" care of a post office box address in Perth. This document was entitled "Notice Before Proceeding in the Local Court of Western Australia" and was in effect a demand (for the sum of $23,044.69) upon the proprietor of the C Restaurant Lounge, that is to say Silverbird. In my view it did not constitute a valid demand upon the defendants under the guarantee.
Next, the plaintiff relies on a letter sent to each defendant on 23 July 2004 by National Credit Management Limited. The letter is entitled "Final Notice" and requires payment of $28,538.25 consisting of a "Debt Balance" of $25,943.87 and "Costs" of $2,594.38. The letter to the first defendant was addressed to him at "68 The Avenue Nedlands" and the letter to the second defendant was addressed to him at "70 Northwood Street West Leederville". Those were the addresses for the defendants stipulated in Silverbird's credit application in their capacity as "directors/owners/trustees/partners" of Silverbird. There is no provision in the Guarantee providing for such addresses to be deemed as effective addresses of the defendants for the purpose of making demands upon them as guarantors. In my view, in the absence of such a provision the plaintiff could not contend that the mere posting of notices of demand to the addresses of the defendants stipulated in the credit application would comprise effective service. In the absence of a deeming provision it would not be open to the Court to find that valid service had occurred unless it could be proved that each defendant had actually received the notice addressed to him. Both defendants have deposed in their affidavits that they did not receive the relevant notices. The first defendant deposed that he has not lived at 68 The Avenue Nedlands since July 2003 and the second defendant deposed that he has not lived at 70 Northwood Street West Leederville since in or about the middle of 2002. In those circumstances there is in my view an arguable issue to be tried as to whether the notices of demand were served upon the defendants.
Although it is not strictly necessary to do so, I turn to consider the content of the letters of 23 July 2004. Each letter seems to predicate that the first and second defendants were already indebted to the plaintiff. There is no reference to the Guarantee or to a demand being made under the Guarantee or upon the defendants as guarantors. Similarly, there is no reference to Silverbird's indebtedness. It could also be said that the notices are couched in terms of a threat, or warnings as to possible legal consequences, without using the formal terminology of a demand for payment.
Silverbird's liability to reimburse the plaintiff for default and collection costs ($2,594.38) could not accrue until a demand was served by the plaintiff upon Silverbird. There is no evidence of such a demand being served and, accordingly, there is no evidence of default on Silverbird's part. It follows that there is a triable issue as to Silverbird's liability to the plaintiff and, a fortiori, the defendants' liability to the plaintiff, in respect of the default and collection costs.
Having said that, in the light of the principles I have set out earlier, I see no deficiency in the notices merely become the amount claimed exceeded the correct amount (i.e. if the collection costs were incorrectly included). In that regard, I note that the first defendant admitted in his first affidavit that the goods the subject of the plaintiff's claim were delivered and that the price of the same was $25,943.87, and there is no denial of Ms Richardson's evidence that such sum has not been paid.
Finally, in my view there is also a triable issue as to whether any verbal demands upon the defendants constituted valid demands under the guarantors arising from the fact that the demands were not in writing. In my view it is arguable that the demands were required to be in writing.
One final issue needs to be dealt with, namely the belated timing of the defendants' reliance upon the invalidity (or non‑making) of the demands. In the case of an appeal in the strict sense in which it is necessary to point to some error of law or fact at first instance, a party's failure to raise an argument at first instance can be fatal on appeal. However, this is an appeal de novo and in my view it would not be unjust to allow the additional evidence and the non‑service of the demands to be adduced in the appeal because of the substantive merit of the argument.
For these reasons, I have concluded that the plaintiff's appeal should be dismissed. I will hear the parties in relation to costs.
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