Khouri v Bayside Hire Pty Ltd - [2012] FMCA 320

FEDERAL MAGISTRATES COURT OF AUSTRALIA

KHOURI v BAYSIDE HIRE PTY LTD

[2012] FMCA 320

BANKRUPTCY – Review of Registrar’s sequestration order – debt arising from personal guarantee – signature – application granted.

Bankruptcy Act 1966

Corney v Brien [1951] HCA 31; (1951) 84 CLR 343; [1951] ALR 525; 15 ABC 154
Re Crum; Ex parte Noyes Bros. (Sydney) Ltd 9 ABC 281
Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212; [1972] ALR 307; 46 ALJR 163

Applicant:

JACQUES KHOURI

Respondent:

BAYSIDE HIRE PTY LTD

File Number:

MLG 396 of 2011

Judgment of:

Riethmuller FM

Hearing date:

29 February 2012

Date of Last Submission:

29 February 2012

Delivered at:

Melbourne

Delivered on:

20 April 2012

REPRESENTATION

Counsel for the Applicant:

The Applicant appearing in person

Solicitors for the Applicant:

Self-represented

Counsel for the Respondent:

Mr Mukherji of Counsel

Solicitors for the Respondent:

JHK Legal

ORDERS

The sequestration order of 1 September 2011 be set aside.
The creditor’s petition be dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 396 of 2011

JACQUES KHOURI

Applicant

And

BAYSIDE HIRE PTY LTD

Respondent

REASONS FOR JUDGMENT

In this matter the Applicant applied for a review of a registrar’s decision to make a sequestration order against him on 1 September 2011. As this is a de novo review of an order of a registrar of the Court the matter was heard and determined on its merits.
The Respondent petitioning creditor sought the sequestration order on the basis of the applicant’s failure to pay the sum of $16,534.50 pursuant to a judgment (entered in default) of the Magistrates’ Court of Victoria, which was said to be with respect to the hire of goods and chattels.
The bankruptcy notice (relying upon the judgment order) was served on 8 November 2010, and was not complied with by the Applicant.
The Applicant, in the time between the sequestration order and the hearing before me, attempted to have the default judgment set aside in the State Magistrates’ Court, without success.
The Applicant maintained that he was not liable for the debt, and sought leave to challenge the underlying debt. As there was no finding on the merits in the state court and the Applicant raised a serious prima facie case, the question of whether there was actually a debt owing to the Respondent was the subject of evidence: see Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212; [1972] ALR 307; 46 ALJR 163; Corney v Brien [1951] HCA 31; (1951) 84 CLR 343; [1951] ALR 525; 15 ABC 154; Re Crum; Ex parte Noyes Bros. (Sydney) Ltd 9 ABC 281.
The parties therefore agreed that the proceeding be conducted upon the basis that the only issue was whether the Applicant was liable on the guarantee.

The Basis of the Underlying Debt

The Respondent alleges that the underlying debt arises from a personal guarantee which the Applicant entered into, to guarantee Prime Advice Pty Ltd’s (“Prime Advice”) payment pursuant to a chattel hire agreement with Bayside Hire Pty Ltd (“Bayside Hire”). The Applicant maintains that he did not sign the personal guarantee, and that the signature which appears upon the copy of the agreement is not his signature.

The Evidence of the Guarantee

Before the State Magistrates’ Court the Respondent relied upon an affidavit of Mr Graham Houghton, the person who signed as a witness to the signature which appears in the guarantee agreement. In that affidavit Mr Houghton said that he witnessed the applicant signing the agreement. When the proceedings came before me Mr Houghton had recanted from this position. As a result, I heard and determined the matter based upon the evidence of the transaction despite the judgment having been entered (by default) in the State Magistrates’ Court.
The Respondent called Mr Palmer, the manager of the Respondent corporation. Mr Palmer explained that Bayside Hire provides hire equipment such as hand tools, earthmoving equipment and other equipment for building sites, such as site accommodation. It is a medium size business with 10 employees, including himself, his son, three mechanics and three drivers.
The relationship between Bayside Hire and Prime Advice commenced in 2006 when Prime Advice (the company controlled by the Applicant) took over a building site where a block of units were being constructed on the Nepean Highway. Building work had formerly been undertaken by Build Rite Pty Ltd. Bayside Hire had been supplying hire equipment to the site for some time, and continued to do so once Prime Advice took over the project. Bayside Hire forwarded the credit application form that they habitually use, which is a two page document requiring details of the person applying for a credit account for the hire of equipment, together with a section that contains a briefly worded personal guarantee. The form, not surprisingly, seeks the address of the registered office of the person applying for credit, and their postal address.
This form appears to have been returned to Bayside Hire by way of facsimile containing various details of Prime Advice, three trade references, what purports to be the Applicant’s signature, and the signature and contact details of a witness.
Mr Palmer said that whilst the business prefers to have the form completed together with a personal guarantee, this is not invariably the case, for example when they are dealing with larger companies such as Bunnings, Holland Constructions and city councils. He explained that the bookkeeper of the company normally vets the accounts, and that it appears this is what occurred on this occasion from notations placed on the document. Mr Palmer said that the Applicant came highly recommended by a person known to him, Mr Dornbusch. The account was approved and equipment continued to be delivered to the site office. He accepted that the Respondent may not have undertaken many checks when vetting the applications due to the way in which the arrangement came into force. It seems that all went well on that job, and then the second job commenced at Hastings. Various goods were delivered on hire, and as a result of non-payment eventually they were recovered. In cross-examination it became clear that the credit application was never photocopied (following acceptance) and sent to the person applying for credit, but simply filed at the offices of Bayside Hire. However, in this case such a process would not have improved the Respondent’s position as it transpired that the postal address placed on the form was that of Mr Dornbusch.
I accept the evidence of Mr Palmer. He appeared to be an impressive witness. He had no personal dealings with Mr Khouri, and simply relied upon the documents that he received and the course of business in providing equipment to the building sites. Significantly, he was not able to give evidence as to whether or not the signature which appeared upon the document was that of Mr Khouri, or give evidence that Mr Khouri made any representations to him which would have confirmed that the document was signed by Mr Khouri or that a personal guarantee was given.
The Applicant, Mr Khouri, gave evidence that he has operated various businesses for 20 years. He says that he was given advice to never give personal guarantees, and has always refused to do so. He explained that he had first seen what purported to be his signature on the guarantee three to four months ago. During cross-examination he explained that he would call into the site where the work was being undertaken from time-to-time, but he was not involved in the day-to-day operations. He said that he had been to the lunch room and office on the site from time to time but did not sign the document.
The original development arrangements were a contract between himself and Build Rite Pty Ltd. Prime Advice had only taken over to complete the job when Build Rite Pty Ltd failed. The builder on site at the time of the takeover continued to conduct the building work with the assistance of Mr Houghton, who was the contract administrator for the site. The Applicant said that his court documents, and in particular his defence in the State Magistrates’ Court, were not well drawn as he had just been released from hospital as a result of a psychiatric condition. He admitted that he made no mention of the fraudulent signature in the defence, saying that he had just made anything up for that defence. He says that he has no idea who committed the fraud, but that he had not seen the guarantee until it was shown to him.
It was difficult to assess the veracity of Mr Khouri’s evidence, given his failure to disclose this defence in his defence in the State Magistrates’ Court. However, he certainly presented as a witness who genuinely believed what he was saying. On balance I accept the genuineness of his evidence.
Mr Graham Houghton was called to give evidence. He explained that he was the contract administrator on the site when the previous building company ceased operating. He explained that there were around 30 different credit applications that had to be made to allow the building site to continue operating, and that although he signed this particular credit application as a witness, he was not 100 per cent sure whether Mr Khouri had signed. He said that he did not clearly read his earlier affidavit where he swore to the allegation that Mr Khouri had signed the document. He said that when Build Rite went into receivership he was asked by the builder to come back to help finish the job as he had the contacts with the various supply contractors.
Mr Houghton said that he based his witnessing of Mr Khouri’s signature on the fact that it appeared to be Mr Khouri’s signature, but that he was not sure that Mr Khouri had signed the document. He confirmed that Mr Khouri came onto the site from time-to-time, but was not regularly there. He was somewhat vague as to who he gave credit applications to, the builder or another person, due to Mr Khouri not being at the site on a regular basis. He said that to the best of his recollection the postal address on the credit application form (a PO Box at Mount Eliza) was Mr Khouri’s post office box, however he was not certain of this.
He explained that Mr Dornbusch was the builder onsite and was in charge and that another person, Mr Sammutt, was a labourer on the building site (Mr Sammutt became relevant when another credit application witnessed by him was produced and the subject of cross-examination of Mr Khouri, despite not having been produced before trial, and Mr Sammutt not having given evidence).
Mr Houghton presented in a somewhat nervous fashion when giving evidence, and did not give the appearance of a witness who was reliable. He was somewhat evasive and equivocal. However, had he simply been attempting to change his version to assist Mr Khouri he could easily have tailored his evidence in a far more effective fashion. On balance I am not persuaded that he in fact witnessed Mr Khouri signing the document.
Mr Khouri also called Detective Sergeant McQuinn, from the corruption division of Victoria Police. It transpires that there are significant allegations with respect to a Sergeant of Police who had been working on the site, including allegations that he had ordered timber and a hot water service on the accounts of the company, but had them delivered to his own home. It became clear however, that Detective Sergeant McQuinn had no direct knowledge of facts or circumstances directly relevant to these proceedings. In substance, Mr Khouri called Detective Sergeant McQuinn to confirm that there was some form of fraud going on at the site office. This evidence does not seem to me to assist in resolving the dispute in this case.
The Applicant also called Mr Grandine who is a builder on one of the sites as he knew the person being investigated by Detective Sergeant McQuinn. His evidence is in the same category as that of Detective Sergeant McQuinn, and is of no assistance to me in these proceedings.
Mr Khouri also issued a subpoena to Australia Post which produced business records showing that the owner of the post office box listed as the postal address for Prime Advice Pty Ltd was in fact the post office box of Mr Dornbusch, the builder on the building site. Mr Dornbusch was not called to give evidence.
A lay comparison of the signature on the hire equipment guarantee form (which unfortunately was only available as a facsimile copy) with other versions of Mr Khouri’s signature on the court file shows some similarities and some differences. In the absence of expert evidence there is little assistance that can be gleaned in this case from comparing the signatures, in that they are not strikingly similar nor are they obviously signatures of a different person. I am therefore unable to draw any inference from a lay comparison of the signatures on the various documents.
A further point that was made in the hearing was that the ACN/ABN number provided for on the credit application is a non-existent number and certainly not the company number or business number of Prime Advice Pty Ltd.

Conclusion

In summary, there was evidence of the following:
a)a credit application which incorrectly states the business number of the company;
b)a disputed signature on the credit application form;
c)a witness unable to say that he in fact witnessed the signature as appeared on the face of the document, having altered his evidence from a previous affidavit and presented poorly in the witness box;
d)evidence that the PO box listed as the postal address for the company applying for the credit account was in fact the PO box of the builder on the site and not of the Applicant’s company or the Applicant;
e)the absence of any evidence of any direct dealings between the Respondent and Mr Khouri with respect to the services supplied to Prime Advice Pty Ltd; and
f)a clear although late denial by Mr Khouri of having signed any guarantee.
Considering the evidence as a whole I am not persuaded that the signature on the credit application is in fact the signature of Mr Khouri.
There is no question in these proceedings of the liability of Prime Advice Pty Ltd and/or the costs and charges of the goods hired.
A guarantee must be signed by the person giving the guarantee and be in writing. In this case I have not found that the document was signed by Mr Khouri, and therefore the guarantee is of no effect.
Thus, on the material before me there is no basis for Mr Khouri to be held liable as a guarantor, and therefore no debt due and owing to the creditor pursuant to the guarantee.
In these circumstances I therefore set aside the sequestration order and dismiss the creditor’s petition.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Riethmuller FM

Date: 18 April 2012