Lang v The Leasing Centre (Aust) Pty Limited
[2014] VCC 910
•20 June 2014
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL LIST
EXPEDITED CASES DIVISION
Case No. CI-13-00472
| DANIEL JOHN LANG | Plaintiff |
| V | |
| THE LEASING CENTRE (AUST) PTY LIMITED (ACN 057 766 551) | First Defendant |
| and | |
| CAPRICORN SOCIETY LIMITED | Second Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9-13 September 2013 | |
DATE OF JUDGMENT: | 20 June 2014 | |
CASE MAY BE CITED AS: | Lang v The Leasing Centre (Aust) Pty Limited & Anor | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 910 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT, EQUITY, EVIDENCE
Catchwords: CONTRACT – Contractual liability – Consent – Application and effect of signature.
EQUITY – Declaratory relief – Setting aside contract.
EVIDENCE – Whether person should have been called – Whether witness in a party’s camp – Operation of Jones v Dunkel inference.
Legislation Cited: Electronic Transactions Act (NSW) 2000; Electronic Transactions (Victoria) Act 2000; Instruments Act 1958 (Vic).
Cases Cited:Fabre v Arenales (1992) 27 NSWLR 437; Garden City Transport v National Manufactured Products No 2 Ltd (1995) 65 SASR 109; Ghazal v GIO (NSW) (1992) 29 NSWLR 336; Goodwin v National Bank of Australasia Pty Ltd (1968) 117 CLR 173; Jones v Dunkel (1959) 101 CLR 298; L’Estrange v F Graucob Ltd [1934] 2 KB 394; Modern Building Wales Ltd v Limmer and Trinidad Co Ltd [1975] 1 WLR 1281; Sabah Flour and Feed Mills SDN BHD v Comfez Ltd [1988] 2 Lloyds Rep 18; Smith v Samuels (1976) 12 SASR 573; Spence v Dimasi (1988) 48 SASR 536; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Wilton v Farnworth (1948) 76 CLR 646.
Judgment: The plaintiff’s claims against the first defendant and second defendant are dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Freire | Wisewould Mahoney |
| For the First Defendant | Ms M Harris | Deborah Lim |
| For the Second Defendant | Ms K Moran | Leonard Legal |
HIS HONOUR:
Background
1 The plaintiff (“Lang”) is a motor mechanic. He left school after completing year 10, and undertook a motor mechanic’s apprenticeship. He has been a mechanic for almost all of his working life.
2 In January 2012, after ceasing work at Jefferson Ford Braeside, Lang applied for, and was offered, a job at Car Solutions in Hallam. Lang accepted the offer and started working at Car Solutions in mid-January 2012. At Car Solutions, he was under the management of Dwayne Lord (“Lord”), who was a manager in the business.
3 In mid-July 2012, Lord approached Lang about his interest in opening up a business around the corner. Lang declined partly because he could not afford it and partly because he was not “business-minded”. Shortly after, Lord asked Lang if he wanted to work for him in a new business he was establishing in Hallam. The new business operated through a company which was incorporated on 29 July 2012, Hallam Automotive Pty Ltd (“Hallam Automotive”). Lord was appointed as the sole director on that day. Later on 13 August 2012, Lang was appointed as the second director of the company.
4 Lang became an “F Class” shareholder in the company with a single $5 share. The ASIC search document reveals that the rest of the company’s shareholding comprised Lord’s 10 ordinary shares with a paid up value of $100.
5 Lang gave evidence that he was appointed a director at the request of Lord for the purpose of obtaining a “roadworthies” licence for the business. According to Lang, Lord approached him in August 2012 and told him that he previously had a licence to do roadworthies but he no longer had it, and could not get his licence back because of his criminal record. Lang had obtained a roadworthy licence from Box Hill TAFE in 2001, but he was not permitted to do what he described as “the clerical side”. Lang’s evidence was that he became a director of the company for the sole purpose of enabling the business to do roadworthies, and that he did not want to assume any responsibility for the new business. Indeed, Lang left his previous job to join Lord in the new venture partly because he feared that when Lord left, the owner would expect Lang to assume Lord’s managerial and other responsibilities. Lang had no interest in doing this.
6 Lang regarded himself as Lord’s employee in the company. He worked under Lord’s direction and drew a weekly wage. Lang did not act as a director and did not have the authority or responsibilities traditionally associated with being a director of a company: he had no authority to operate the company’s bank accounts; he had no authority deal with the company’s correspondence; he had no authority make employment decisions regarding staff; he had no authority to make payments on behalf of the company or to have access to its bank statements. Even the shares he held had no voting rights attached.
7 In mid August 2012, the company applied for a loan to purchase equipment for the workshop through Dimitros (Jim) Simos (“Simos”), of Jim’s Finance Professionals. As part of this application, Lang, at the request of Lord, completed an “assets and liabilities” sheet. Lang said that he understood this to be a reference only. In any event, the loan application was unsuccessful.
8 On 23 August 2012, Lang and Lord signed The Leasing Centre’s Finance Application for Hallam Automotive (“the Finance Application”). The purpose of the application was to enable the company to obtain equipment for use in the business.
9 The Leasing Centre (“TLC”) approved the Finance Application conditionally on 29 August 2012. TLC also provided a Master Rental Agreement (“MRA”) Drawdown and Tax Invoice bearing no. R004649595 (“the Tax Invoice”) made between, on the one hand, TLC as the owner of certain equipment, comprising Repco hoist, Burson wheel balance and tyre changer ultra scan (“the equipment”), and on the other, the company and Lord as the trustee of the Dwayne Lord Family Trust (jointly and severally) as renter. This document contained a guarantee and indemnity (“the Guarantee”).
10 TLC used the EchoSign system, an electronic system for affixing electronic signatures to documents, to send the contracts. It was a matter of contention between Lang and TLC as to who signed the documents and whether Lang is bound by them. Lang claimed that he did not sign them, while TLC contended that either Lang signed the documents or someone with authority signed on his behalf.
11 In August 2012, Hallam Automotive was involved with Capricorn Society Limited (“Capricorn”), a finance service which enabled businesses in the automotive industry to make purchases from a range of specified suppliers and receive a consolidated monthly account from Capricorn.
12 On 24 August 2012, at the request of Lord, Heath Plunket (“Plunket”) of Capricorn attended the premises of Hallam Automotive. There, he provided the company with the documentation (an Application to Trade) which enabled Hallam Automotive to access the benefits offered by Capricorn.
13 Lang and Lord executed the Application to Trade. The Application to Trade included a personal guarantee and indemnity clause (“the Capricorn Guarantee”). According to Capricorn, Plunket witnessed their signatures. The circumstances in which Lang executed the Application to Trade were disputed.
14 On 11 January 2013, Lang was working at Hallam Automotive when police officers attended to execute a search warrant on the premises. They informed Lang that Lord had been arrested for armed robbery. Lang resigned as a director of the company and ceased working at Hallam Automotive that day. He has not returned to the workshop since.
15 Lang gave evidence that it was only after Lord’s arrest that he became aware that he was a guarantor pursuant to the agreements between the company and TLC and the agreement between the company and Capricorn.
16 The critical issue between Lang and TLC was whether Lang:
· executed; or
· is deemed pursuant to the Electronic Transactions Act 2000 (Vic) or Electronic Transactions Act 2000 (NSW) to have executed and become bound by certain documents, including a guarantee in favour of TLC.
17 The critical issue between Lang and Capricorn was whether Lang is bound by his signature of pages 5 and 7 of the Capricorn Application to Trade document.
Credit of witnesses
18 This was a case in which the credit of the witnesses was of some significance. There were limited contemporary documents available to assist the court in determining the issues.
(a) Lang
19 Counsel for Lang argued that, in assessing Lang’s evidence, I should take account of the following considerations:
· Lang’s limited formal education.
· Lang’s limited ability to understand difficult concepts.
· Lang’s occasional difficulty in articulating his thoughts.
· The evident physical and emotional toll that the events have taken on Lang – this was a reference to the loss of his partner, his son and the imminent loss of his house. In addition, Lang claimed he had received threatening phone calls in which he was told that if he did not return certain documents, he would be put in a “pine box”. He claimed he slept badly and kept a baseball bat with him in the house in case the house was attacked.
· The prolonged nature of the cross-examination which was said to involve serious and sustained attacks on his credit.
20 I do not think that any of the above factors relate directly to the credibility or honesty of a witness. However, I accept that matters such as limited education might affect how questions are answered or responded to. I further accept that the stress and upset connected with the events in which Lang has been involved could adversely affect his memory.
21 Lang presented at court as a person who had limited education and had spent his working life with cars. Although it was suggested he had difficulty understanding complex concepts and occasionally articulating his thoughts, I do not think either of those matters, assuming they existed, affected his ability to grapple with and follow the principal issues raised in the case. Certainly, Lang was forthright in acknowledging some personal limitations regarding commercial matters, computers and his own best interests. One could imagine that Lang might readily assist a friend or colleague without being particularly inquisitive or demanding of information. He seemed a simple and trusting person without sophistication or pretence.
22 His recollection faltered at times and he acknowledged that his memory was “not real good”. Hence:
· He was unable to recall a conversation with Simos regarding the possible financing of equipment to be used in the company’s business.
· He was confused as to the dates when he became a director of the company, when he finished working at his previous job at Car Solutions and when he commenced work in the new business at Hallam.
· He was unable to remember whether he provided to Plunket of Capricorn at their meeting a copy of his driver’s licence. Nor could he remember whether, at that time, Plunket took a photo of the licence with his mobile phone.
23 Lang also had trouble explaining the issue of travel times between his son’s school, the childcare centre and Hallam Automotive. Lang said he usually dropped off his son at school in Mundaring Drive, Cranbourne at 8.20am before he began work at 8.30am. He said further that the school and childcare centre were about 5 minutes apart. He denied it was possible to drive between Hallam Automotive and the childcare centre in 10-15 minutes in the evening. He said that was peak hour traffic whereas it was not peak hour traffic at 8.30am.
24 Lang said that when he worked at Hallam Automotive, he did not work outside the hours of 8.30am to 5.00pm. This was because Lord did not pay overtime and Lang was responsible for collecting his son from afterschool care.
25 Lang insisted that, of an evening, it took on average 25-30 minutes to get from Hallam Automotive to the childcare centre. He said that, depending on the traffic in the peak hour, it could be a longer trip but very rarely quicker.
26 I find Lang’s explanation puzzling. It did not address why, if there were road works in Hallam South Road at the time as he alleged, the trip to work in the morning from the school was at least twice as quick as the evening trip on the same road.
27 Likewise, I have concerns about Lang’s inability to be more precise about when he left his former job and began work at Hallam Automotive. After leaving school, Lang worked as a motor mechanic. Apart from a period of about 18 months, Lang had apparently worked primarily at President Ford and then Jefferson Ford before joining Car Solutions in early 2012. Given the significance of the events relating to his job at Hallam Automotive and the time he would have spent on discovery and preparing a proof of evidence for trial (in addition to the police statements he made) I would have expected Lang to be considerably more precise about the timing. This was especially the case when, at the time of trial, the events in question were only about 12 months old.
28 Finally, in his police statement of 15 January 2013 Lang said in relation to the TLC lease or MRA:
“I had no knowledge of the lease or being used as a signatory to it. I have not authorised my name to be used as signatory or any sort of guarantor. I am not sure at this point if I am held financially liable in any way. If so, I wish to press charges against Lord for forging my name”.
Then in his police statement of 28 June 2013 Lang said in relation to the TLC lease:
“I sat down with Dwayne and created this signature, I created this signature. It was large and bulky so it needed to be modified which Dwayne proceeded to do in my presence. I saw the finished product of this signature and approved it. I was aware that this electronic signature was going onto the leasing agreement but I was in the belief it was only as a referee and that I would not have any financial obligations in relation to it”.
29 This later evidence was confirmed at trial to the extent that Lang said:
· Lord told him on 3 September 2012 that the TLC documents had to be signed on the computer by electronic signature
· Lang sat at the computer with Lord and produced a bulky signature with the mouse
· Lang produced a signature which was all lower case and said Daniel Lang. This was different from his usual signature.
· Lord made the signature smaller to fit into a box on the screen.
· Lang knew the signature was to be applied to one TLC document (which Lang thought was a reference).
30 Such contradictory evidence regarding the TLC lease is disturbing: on the one hand, Lang said he had no knowledge of the TLC lease; on the other, he knew his signature was going on to the leasing document. These items of evidence cannot sit comfortably together.
31 As a result of the matters referred to in paragraphs 19-30, I have reservations about Lang’s evidence and I do not regard his evidence as necessarily reliable.
(b) Katie Dugec
32 Ms Dugec (“Dugec”) was the principal witness for TLC. She worked in the documents and settlements section of TLC. She had a comprehensive understanding of how the Adobe EchoSign IT system used by TLC operated. I accept that she was an honest and reliable witness.
(c) Jim Simos
33 Simos was an independent witness without any vested interest in the outcome of the proceeding. I accept that he too was an honest and reliable witness.
(d) Allison Marshall
34 Ms Marshall (“Marshall”) was the childcare coordinator at the Cranbourne Day Care & Kindergarten Centre where she has worked for 25 years. I accept Marshall had no vested interest in the outcome of the trial and was a witness whose evidence could be accepted without qualification.
(e) Heath Plunket
35 Plunket was the area manager for Capricorn. It was his role to visit existing Capricorn members and suppliers and to also endeavour to attract new members to the group. Capricorn operates as a cooperative and the members are the shareholders of the organisation. The suppliers have no shareholding.
36 Plunket was an experienced sales representative who had been working for Capricorn for about 3 years at the time of the relevant events. He recalled some specific details about the particular visit to Hallam Automotive at which he said Lang signed the Capricorn documents. Other than that, he relied upon his normal practice or usual procedures to explain what took place. Plunket answered questions clearly and openly. He appeared to be forthright and not prevaricating or uncomfortable in answering questions. His explanation of events made sense. For example, his change of position from the public or customer side of the unfinished bench top area in reception to the client side in order to sign documents on a table seemed appropriate and logical.
37 Given the differing accounts which he and Lang have given of Plunket’s visit to Hallam Automotive, it would be difficult to reconcile the two. If had to be made, I would prefer the evidence of Plunket to Lang. However, I think that aspect of the matter can be resolved on the evidence most advantageous to Lang.
Jones v Dunkel inference against Lang
38 TLC and Capricorn both invited the court to draw a Jones v Dunkel[1] inference against Lang because he failed to call Lord as a witness in this case. The principle exemplified in Jones v Dunkel is that the unexplained failure by a party to call a witness may (not must) in appropriate circumstances lead to an inference that the uncalled evidence would not have assisted the party’s case.[2]
[1](1959) 101 CLR 298
[2]J D Heydon, Cross on Evidence (LexisNexis, 9th ed, 2012) para 1215
39 In this case, I reject the submission that it is appropriate to draw such an inference against Lang. Lord is not in the same camp as Lang and it does not seem reasonable to me to contend that Lang would be expected to call him as a witness. The interests of Lord and Lang are quite different and indeed opposed. Lord was keen to obtain the equipment to run his business and was happy to have Lang sign whatever documentation was necessary to obtain the requisite approval. Lang alleged that he was deceived by Lord, and in one police statement said he wanted to press charges for forgery. In those circumstances, Lord would in all probability be hostile to Lang and seek to justify his own position. He might well give evidence favourable to the defendants in order to harm Lang’s position.[3] If Lang were to succeed, then Lord would be more exposed as a co-guarantor.
[3]Such factors as the prospective witness’ hostility and the witness’ favouritism towards the other party are reasons justifying the failure or refusal to call the witness: Smith v Samuels (1976) 12 SASR 573 at 581; Spence v Dimasi (1988) 48 SASR 536 at 537, 548; Ghazal v GIO (NSW) (1992) 29 NSWLR 336 at 343.
40 Further, it seems accepted that the Jones v Dunkel inference might not arise if, for example, the witness has a reason for not telling the truth or refusing to assist and the party who it is said should call him is aware of this.[4]
[4]Fabre v Arenales (1992) 27 NSWLR 437 at 449−450 (Mahoney JA, Priestley and Sheller JJA).
Position between Lang and TLC
41 There was some history to the dealings between Lang and TLC.
(a) Nature of the application for finance
42 Before 23 August 2012, Lord had contact with Simos. Lord had encountered difficulties in securing finance through Simos’ brokerage, due to the fact that Lord was not a home-owner and that, at the time, Hallam Automotive was a start-up company.
43 Simos gave evidence that, typically, finance companies choose to deal with potential borrowers who are home-owners as this can “add strength to the deal”.
44 Pursuant to a request by Lord, Lang completed a form setting out details of his assets and liabilities to form part of the supporting documentation for an application for finance. Lang understood this document to be a reference only. Lang discussed the form with his partner Kathryn Wishart. She said it was okay to provide the information for Lord provided neither she nor Lang signed anything. While there was no express evidence on the point, I infer that Wishart (whom Lang said was smarter than he) said this to Lang because she considered that, without a signature, the document could not be enforced or used against Lang.
45 Lang provided this form and other supporting documentation – a rates notice for the family home – to Lord, and on 9 August 2012 Lord sent the completed form by email to Simos.
46 After some restructuring of the Hallam Automotive business in mid-August 2012 – at which time Lord resigned as director of Hallam Automotive and Lang commenced working at the business – pursuant to a form signed and dated 23 August 2012, Lord both in his own right and as trustee for the Lord family trust applied for finance from TLC in relation to the equipment.
47 An accompanying document with the header “Confirmation of Terms” bore the signature of both Lang and Lord, and each signature was dated 22 August 2012. The document featured a hand-written notation which mentioned Lord and his identity as trustee for the Lord family trust.
48 Lang said that he was not shown a copy of the finance application form signed and dated 23 August 2012.
49 Lang said that until such time as he made enquiries into the circumstances of Lord’s arrest in January 2013 he was not aware of:
· The existence of the Lord family trust.
· The fact that Lord in his capacity as trustee for the Lord family trust had applied for finance from TLC in respect of the equipment.
· The fact that the first defendant had approved an application for finance made jointly by Hallam Automotive and Lord as trustee for the Lord family trust.
50 In his evidence, Lang was not able to deny that he had seen the hand-written notation on the “Confirmation of Terms” document, nor could he provide a definitive view as to the importance of such notation at the time of signing the document. He did say that if he had seen the handwritten notation, he probably would not have signed the document.
(b) The electronic signature
51 An electronic representation of Lang’s signature featured on the face of the following documents:
· The MRA (including the “Guarantee and Indemnity” section).
· Master Rental Agreement Drawdown and the Tax Invoice.
· The Purchase Option Agreement.
· The Direct Debit Request form.
· The Authority to Settlement Finance Agreement.
52 In addition, Lang’s initials “DL” appeared at the foot of pages 4 to 10 of the MRA.
53 Lang denied executing the MRA. He also denied that the electronic version of his signature was affixed to the MRA with his authority, knowledge or consent.
54 TLC asserted that Lang either signed the MRA himself, or as a consequence of the operation of the Electronic Transactions (Victoria) Act 2000 (“ETA”) or the Electronic Transactions (New South Wales) Act 2000 was deemed to have done so.
55 In recent years, the States have introduced legislation to address legal issues created by the demands and peculiarities of electronic commerce. Material provisions of the ETA include ss8 and 9 which are in the following terms:
Section 8
“Writing
(1)If, by or under a law of this jurisdiction, a person is required to give information in writing, that requirement is taken to have been met if the person gives the information by means of an electronic communication, where—
(a) at the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference; and
(b) the person to whom the information is required to be given consents to the information being given by means of an electronic communication.
(2)If, by or under a law of this jurisdiction, a person is permitted to give information in writing, the person may give the information by means of an electronic communication, where—
(a) at the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference; and
(b) the person to whom the information is permitted to be given consents to the information being given by means of an electronic communication.
(3)This section does not affect the operation of any other law of this jurisdiction that makes provision for or in relation to requiring or permitting information to be given, in accordance with particular information technology requirements —
(a) on a particular kind of data storage device; or
(b) by means of a particular kind of electronic communication.
(4)This section applies to a requirement or permission to give information, whether the expression "give", "send" or "serve", or any other expression, is used.
(5)For the purposes of this section, giving information includes, but is not limited to, the following—
(a) making an application;
(b) making or lodging a claim;
(c) giving, sending or serving a notification;
(d) lodging a return;
(e) making a request;
(f) making a declaration;
(g) lodging or issuing a certificate;
(h) making, varying or cancelling an election;
(i) lodging an objection;
(j) giving a statement of reasons.”
Section 9
“Signatures
(1)If, by or under a law of this jurisdiction, the signature of a person is required, that requirement is taken to have been met in relation to an electronic communication if—
(a) a method is used to identify the person and to indicate the person's intention in respect of the information communicated; and
(b) the method used was either—
(i)as reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement; or
(ii)proven in fact to have fulfilled the functions described in paragraph (a), by itself or together with further evidence; and
(c) the person to whom the signature is required to be given consents to that requirement being met by way of the use of the method mentioned in paragraph (a).
(2)This section does not affect the operation of any other law of this jurisdiction that makes provision for or in relation to requiring—
(a) an electronic communication to contain an electronic signature (however described); or
(b) an electronic communication to contain a unique identification in an electronic form; or
(c) a particular method to be used in relation to an electronic communication to identify the originator of the communication and to indicate the originator’s intention in respect of the information communicated.
(3)The reference in subsection (1) to a law that requires a signature includes a reference to a law that provides consequences for the absence of a signature.”
56 Section 5(1)(d) states that the purported originator of an electronic communication is bound by it for the purposes of the law of this jurisdiction only if the communication was sent by the purported originator or with the authority of the purported originator.
57 Rules governing the attribution of electronic communications are contained in s14 of the ETA. The provision states:
“(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the purported originator and the addressee of an electronic communication, the purported originator of the electronic communication is bound by that communication only if the communication was sent by the purported originator or with the authority of the purported originator.
(2) Subsection (1) does not affect the operation of a law of this jurisdiction that makes provision for-
(a) conduct engaged in by a person within the scope of the person's actual or apparent authority to be attributed to another person; or
(b) a person to be bound by conduct engaged in by another person within the scope of the other person's actual or apparent authority.”
58 Terms of the ETA such as ss9 and 14 are in identical terms to the equivalent provisions in the New South Wales legislation.
59 Hence, in this case, this meant that Lang could be bound by the electronic signature appearing on the TLC documents only if either he affixed the signature himself or someone else affixed Lang’s signature as his authorised agent.
(c) Lang’s submissions regarding TLC
60 Lang submitted that the method by which his electronic signature was affixed to the documents listed above at paragraph 51 does not satisfy the requirements of s9(1)(b) of the ETA or the equivalent provision in New South Wales with regards to:
· all the relevant circumstances at the time of application of the electronic signature; and
· the nature and purpose of the information communicated.
(i)Alleged deficiencies in the first defendant’s electronic signature practices
61 Lang contended that the circumstances surrounding the electronic execution of the MRA and other related documentation do not satisfy the requirements of the legislation. Dugec of TLC described the protocol for affixing a person’s electronic signature to the document.
62 To Dugec’s knowledge, TLC omitted to do certain things in the context of using the EchoSign system to deploy Lang’s electronic signature. Specifically, Dugec gave evidence to suggest that TLC:
· did not make any attempt to seek the plaintiff’s consent to use the EchoSign system, or to explain how the system operated;
· did not make any attempt to explain to the plaintiff the nature of the documents to be e-signed using the EchoSign system; and
· did not advise Lang that he should seek independent legal advice prior to e-signing the documents.
63 Dugec gave evidence about the security features of the EchoSign system. She provided evidence to the effect that TLC:
· did not make any attempt to independently verify that the mobile phone number to which TLC sent the relevant EchoSign password was in fact Lang’s mobile phone number;
· did not attempt to contact Lang to obtain assurance that he had received the EchoSign password on his mobile phone; and
· did not take any steps in relation to verifying that the documents bearing Lang’s electronic signature had either been signed by him, or otherwise signed with his authority or knowledge.
64 As Lang submitted, TLC did not call any witnesses, other than Dugec, to refute Lang’s claims regarding deficiencies in TLC’s EchoSign system or the process by which Lang’s electronic signature was applied to the various documents.
65 During cross-examination, Dugec acknowledged that TLC’s practices with respect to the EchoSign system and the application of electronic signatures have changed since the time Lang’s electronic signature was applied to the various documents. TLC submitted, however, that this change in process did not amount to an acknowledgement of liability and that Lang had not pleaded a duty of care owed to him by TLC.
(ii) Alleged difference in electronic signature applied
66 Lang contended that the version of the electronic signature appearing on the various documents differed from that which he created in Lord’s presence on 3 September 2012.
67 Lang contended that the e-signature he created was created by hand, using a computer mouse, and manipulated by Lord to comply with the EchoSign system requirements.
68 According to Lang, the version of the electronic signature which appeared on the various documents was different from the version created by Lang in conjunction with Lord on 3 September 2012. Instead, the version which appeared on the various documents was in a form that, according to Dugec’s evidence, could not have been produced manually and instead was created using a default font of the EchoSign system.
69 Additionally, it was Lang’s evidence that he never denoted his signature using initials.
70 Lang stated that he was not present at the Hallam Automotive workshop when his electronic signature was affixed to the various documents. Lang’s evidence comprised:
· an SMS message which he sent to Lord at 5.03pm on 3 September 2012 to notify Lord that he was leaving work for the day; and
· a childcare sign-in sheet completed by Lang, indicating that he collected his son from the childcare centre at 5.30pm on 3 September 2012.
71 Lang gave evidence that it typically took up to 30 minutes in the afternoon to travel between the Hallam Automotive workshop and the childcare centre to collect his son. He gave evidence that he could not have been present at the workshop at 5.15pm when the electronic signature was applied to the documentation. He said the trip was affected by road works at the time.
72 Counsel for Lang submitted that, at the time the electronic signature was applied to the documents on 3 September 2012, Lang had no motive for creating a false alibi to account for his absence from the Hallam Automotive workshop at that time and the court should accept the reliability of the childcare register.
(b) TLC’s submissions
73 TLC bore the onus of proof in showing that Lang complied with the requirements of s9 of the ETA (and hence s126 of the Instruments Act 1958 (Vic)).
74 In seeking to meet that onus, TLC submitted that:
· the MRA either was executed by Lang or with his authority, knowledge or consent, or is deemed to have been so executed pursuant to s9 of the NSW ETA (or alternatively s9 of the Victorian ETA);
· the section of the MRA titled “Guarantee and Indemnity” either was executed by Lang or with his authority, knowledge or consent, or is deemed to have been so executed pursuant to either of the abovementioned statutory provisions;
· the electronic versions of Lang’s signature featuring in the MRA (including the “Guarantee and Indemnity” section), and the initials “DL” appearing at the foot of pages 4 to 10 of the MRA, were affixed to the MRA by Lang or with his authority, knowledge or consent; and
· Lang’s conduct constituted acceptance by him of Hallam Automotive entering into the MRA (including the “Guarantee and Indemnity” section).
(i)Alleged deficiencies in the first defendant’s electronic signature practices
75 TLC denied the assertions of Lang as to the potential inadequacy of the EchoSign system processes and the degree to which TLC did not take steps to inform Lang of various matters – as evidenced by Dugec’s concessions in cross-examination – and referred to the general legal principle that, as a creditor, TLC has no general duty of disclosure with respect to potential guarantors (such as Lang is alleged to be).[5]
[5]See Goodwin v National Bank of Australasia Pty Ltd (1968) 117 CLR 173
76 As Lang did not plead anything in the way of, for example, unconscionable conduct on the part of TLC in the course of execution of the MRA and other documentation, it cannot be said that any failure on the part of TLC to explain the documentation gave rise to an avenue for recourse by Lang.
(ii) Alleged difference in electronic signature applied
77 TLC submitted that Lang signed the MRA, or otherwise that Lord affixed Lang’s signature to the MRA with his knowledge and authority.
78 In support of this submission, TLC argued that for the purposes of the ETA s9(1)(a), the relevant “method … used to identify [Lang]” comprised:
· the wording in the MRA, specifically the reference in Section C to the “authorised signatories of the renter” and the words “executed as an agreement by the renter in accordance with s 127 of the Corporations Act 2011 (Cth)”; and
· identification of the plaintiff as director of Hallam Automotive for the purposes of signature beneath the provision in the MRA Drawdown titled “signed on behalf of the renter”.
79 For the purposes of s9(1)(a), TLC submitted that Lang’s “intention with respect to the information communicated” was evidenced by the process by which Lang was given password details for access to the EchoSign system, and the fact that Lang knew that was the process required (as was his evidence in a statement to the Victoria Police on 28 June 2013).
80 TLC submitted that, pursuant to s9(1)(b)(i) of the ETA, the use of the EchoSign system to apply an electronic signature was a “reliable method” for signatures given its security features. As discussed above, Lang submitted to the contrary.
81 With respect to s9(1)(c) of the ETA, TLC submitted that the overall design of the EchoSign system, and the way in which it could collect and apply electronic signatures, was such that TLC did “consent” to the EchoSign system being used to collect Lang’s electronic signature.
Court’s consideration
82 Lang contended that he did not sign the TLC documents with the electronic signature nor did he authorise anyone to affix the signature on his behalf.
83 There are several points to make regarding this issue.
84 First, I accept that Lang did not sign the TLC documents with the electronic signature. He lacked the skills to perform the electronic signature himself.
85 Second, Lang gave evidence, which I accept, that the computer would not accept his normal signature, which was his first initial and surname. He sat down with Lord at the computer and produced a big, bulky signature which the computer rejected. As a result, Lord modified the signature so that it fitted into the space on the screen. Lang said that Lord used the mouse to change it by clicking things on the computer. Dugec confirmed that the signatures appearing on the TLC documents were computer generated, using the default fonts in the computer program rather than being produced by hand. She said an operator with a mouse could not render the signatures as fluidly as they appeared in the documents. This evidence, it seems to me, is consistent with Lang’s to the extent that Lord could well have used the mouse to access those parts of the applicable program which generated the electronic signature. I find it is most likely that Lord simply modified the mouse-written signature in accordance with the default fonts in the program to produce the machine generated signature.
86 Thirdly, though Lang said that he thought he was signing the document for reference purposes, in the sense of showing the business was legitimate, there was an actual person involved in the business and the company was not going anywhere, he said he did not actually know what the TLC document was. Nevertheless, he was content to have his signature applied to the document.
87 This willingness to sign was an important additional step beyond what he was prepared to do when giving the table of assets and liabilities to Simos on the earlier finance application. It seems that Lang’s position changed and he became willing to take whatever risk attached to signing a document at the request of TLC.
88 In reaching these conclusions, I do not overlook that:
· Lang’s signature was put on a series of TLC documents, not just one (albeit the documents were related to the same transaction); and
· Lang said at one point that if he had known he was signing a guarantee, he would not have done so.
89 It seems sufficiently clear from other evidence that Lang knew his signature was being placed on the TLC lease document.
90 In one sense, I am sceptical about Lang’s comment regarding the guarantee. No doubt the events which followed Lord’s arrest and the collapse of the Hallam Automotive business have caused Lang to regret his actions in signing documents for companies supplying Hallam Automotive. However, Lang threw caution to the wind when he signed documents without reading and understanding them. Even if Lord exceeded his authority from Lang by attaching Lang’s signature to other TLC documents, Lang put Lord in a position where he was able to do so. In any case, by agreeing to have his signature affixed to the MRA, being the TLC leasing document, he implicitly if not explicitly agreed to become a guarantor of the obligations of Hallam Automotive because the guarantee formed part of the MRA. If Lang had refused to sign corporate documents for Hallam Automotive, he would not be in his current position.
91 Traditionally, the law has adopted the position that, subject to special circumstances, a person is bound by a contractual document which he or she signs whether or not the person read and understood the document before signing. In L’Estrange v F Graucob Ltd,[6] Scrutton LJ said:
“[W]hen a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not”.
[6][1934] 2 KB 394 at 403
92 Latham CJ in Wilton v Farnworth[7] stated:
“In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions.”
[7](1948) 76 CLR 646 at 649
93 More recently, the High Court in a unanimous judgment in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd[8] held:
“This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction …[9]
[I]t should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, ‘whatever they might be’ … .[10]
The importance which, for a very long time, the common law has assigned to the act of signing is not limited to contractual documents. Wilton v Farnworth was not a contract case. The passage from the judgment of Latham CJ quoted above is preceded by a general statement that, where a man signs a document knowing that it is a legal document relating to an interest in property, he is in general bound by the act of signature. Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief.[11]
[W]here a person has signed a document which is intended to affect legal relations, and there is no question of misrepresentation, duress, mistake or any other vitiating element, the fact that the person has signed the document without reading it does not put the other party in the position of having to show that due notice was given of its terms.”[12]
[8](2004) 219 CLR 165
[9]Ibid at [40]
[10]Ibid at [45]
[11]Ibid at [47]
[12]Ibid at [54]
94 Accordingly, absent special circumstances, Lang is bound by his signature. Because he agreed that his signature could be applied to the MRA document, which includes a guarantee, he is prima facie bound by his actions and signature. Even if Lord exceeded his authority, in my view, that would only provide a basis for a claim by Lang against him. However, because Lord acted within his ostensible if not actual authority, TLC would still be entitled to rely upon Lang’s electronic signature on the document.
95 I have referred earlier to TLC’s conduct regarding the steps taken to arrange for the electronic signature. TLC itself has recognised that its procedures required improvement. Further, it would be appropriate in my view for TLC to have had some direct contact with a prospective guarantor in Lang’s position. One could well imagine circumstances in which an alleged guarantor defended a proceeding brought by TLC by alleging misleading or deceptive conduct or unconscionable conduct in circumstances where TLC relied exclusively upon third parties to make the contractual arrangements. However, no such allegations were made in this case. Notwithstanding TLC’s conduct referred to by Dugec in paragraphs 62-63 above, that does not disqualify TLC from recovering against Lang.
96 Accordingly, Lang’s claim against TLC fails and I will not make the declaration which Lang sought against TLC.
Position between Lang and Capricorn
97 Lang and Capricorn agreed that there was a meeting on 24 August 2012, at the request of Lord, between representatives of Hallam Automotive (including Lang) and Capricorn, held at the premises of Hallam Automotive.
98 The parties agreed that Lang and Lord signed Capricorn’s Application to Trade at this meeting, and Plunket was present. However, there was a conflict of evidence as to the circumstances in which Lang signed the Application to Trade. The Application to Trade document comprised several pages and included the Capricorn Guarantee. The Application to Trade referred to a separate document containing further terms and conditions of the agreement between the parties.
99 Lang gave the following evidence regarding the meeting on 24 August 2012:
· Between 9.00 and 9.30 am on 24 August 2012, Lord told Lang that a representative of Capricorn was coming to Hallam Automotive that day. Lang understood the purpose of the Capricorn representative’s visit to be to “sign up” Hallam Automotive to Capricorn.
· On the basis of Lord’s explanation, Lang understood that he needed to sign the paperwork because he was a director. Lang gave evidence that he thought that his signature was required as a reference.
· Later in the morning, at approximately 10.30 or 11.00am, Lord called Lang into the office. Lang was working in the workshop at the time. Lord introduced him to the Capricorn representative, Plunket.
· Upon entering the office, Lang observed Plunket and Lord standing approximately in the middle of the office, standing opposite to each other. There was a bench in between them, which had no top on it at the time. Plunket was on the visitor side of the bench, while Lord was standing on the employee side of the bench where once might expect an employee of Hallam Automotive to be. They were standing approximately 3-4 metres away from Lang.
· When Lang entered, Lord told him that he needed to sign the documents. Plunket did not say anything to Lang. Lord and Plunket stayed in their position while Lang went to sign the documents, which were located on a table next to the door. Lord and Plunket did not pay much attention to Lang. They were talking and laughing amongst themselves.
· When Lang went to sign the documents, he saw page 5 of the Application to Trade. His personal details had already been completed, save for his signature. Lang did not witness anyone else write on the form. He signed page 5 of the Application to Trade. As Lang was about to leave the office, Lord walked over and said, “This one needs signing as well”. Lord lifted page 5. Beneath it was page 7 of the Application to Trade. Lang observed that his details had already been completed in this document as well, save for his signature. He signed the other document.
· Page 5 and page 7 of the Application to Trade were not stapled, and they were the only two pages on the table. There were no other documents or pages attached.
· Lang signed both pages without asking any questions, making any comments and without hesitation. Lang did not read the documents before signing.
· After signing the documents, Lang returned to the workshop. There was no further interaction between Lang and Plunket or Lord. The interaction lasted approximately 4 to 5 minutes.
100 Plunket gave the following evidence regarding the meeting on 24 August 2012:
· Around the middle of the day or possibly early afternoon, Plunket attended Hallam Automotive. He entered an area he described as “the reception area”. It was Capricorn’s submission that this “reception area” was the same area described by Lang as “the office”, distinguished from the workshop section of the premises. This seems to have been agreed by Lang and I accept this submission.
· Plunket had an initial conversation with Lord in the reception area. Plunket began to complete the Application to Trade with Lord. In the process of completing the Application to Trade, Plunket asked Lord if he was the only director of Hallam Automotive. Lord indicated that Lang was also a director. Plunket then told Lord that Lang would be required to fill in the Application to Trade as well.
· Lord left the reception area and went into the workshop to get Lang.
· Lord returned to the reception area with Lang. Plunket introduced himself to Lang as a representative of Capricorn, and explained to Lang that he would also be required to complete the Application to Trade as he was a director of Hallam Automotive. Plunket and Lang had a brief discussion about Capricorn and its business. Lang indicated to Plunket that he had heard of Capricorn.
· Plunket asked Lang for his driver’s licence, and Lang provided it.
· Using the information provided, Plunket filled in the details on the top of page 5 of the Application to Trade. Plunket asked Lang for his phone number and address, which Lang provided. The Application to Trade was stapled together in the top left hand corner and included all 7 pages of the document.
· Plunket completed page 7 of the Application to Trade and asked both Lord and Lang to sign. Both did so. Plunket then turned to page 4 of the Application to Trade, and asked Lord to sign it. Immediately after Mr Lord signed it, Mr Plunket witnessed the signature.
· Lang then signed page 5 of the Application to Trade, and Plunket witnessed his signature immediately. Lang was standing on the right of Plunket while Plunket witnessed his signature.
· After the Application to Trade had been signed, and the signatures had been witnessed, Plunket placed each individual driver’s licence on the front cover of Hallam Automotive’s completed Application to Trade and took a photo of each of the licences separately with his phone. Both Lord and Lang were present when these photos were taken.
· Plunket put the completed Application to Trade in his folder. Plunket left the premises shortly after.
· Later in the day, Plunket unstapled the signed Application to Trade and scanned a copy to be sent to Capricorn’s Head Office. Plunket then re-stapled the document and sent a hard copy to Head Office. Once the Application to Trade was received at Head Office, Plunket understood that the document was once again un-stapled and scanned.
· Plunket adopted his usual procedure on the day that he attended at Hallam Automotive. It was his usual practice to present stapled documents, including Applications to Trade. Plunket never presented an unstapled document. He had completed these types of documents frequently in the 3 years before attending upon Lord and Lang at Hallam Automotive. It was also his usual practice to take a photo of the signatory’s licence.
Court’s Consideration
101 The following issues have been raised by the parties in connection with the critical issue.
(a)Whether the whole Application to Trade document was shown to Lang
102 Lang contended that the Application to Trade was unstapled, and that the only pages on the table at the time of signing were pages 5 and 7. Capricorn disputed this and submitted that the photo taken by Plunket of Lord’s licence on 24 August 2012 clearly showed a staple in the top left corner of the Application to Trade. This is the same document which Lang signed. As Capricorn pointed out, this is consistent with Plunket’s evidence that the Application to Trade was stapled when the Plaintiff signed it, and all 7 pages of the document were stapled together. It seems unlikely that Plunket would have given a stapled version to Lord to sign, but separated 2 pages for Lang to sign, unless there was some sort of improper collusion between Lord and Plunket. There is no evidence to suggest that this occurred. Indeed, Plunket says that he had never met Lord prior to Hallam’s involvement with Capricorn. He knew only that Lord was in the motor mechanic industry. Moreover, the removal of the staple and the isolation of 2 pages for Lang to sign was inconsistent with Plunket’s explanation of how the Application to Trade document was signed successively by Lord and Lang.
103 On balance, I consider it more likely that Lang was given the complete document. Plunket’s evidence about having stapled copies of different documents ready to sign makes practical and logical sense. Lang’s recollection on various matters was faulty. For reasons I have canvassed earlier, it seems he was prone to signing documents without examining or reading them carefully. His evidence is less reliable than Plunket’s. However, in this case, I consider that Lang is bound by what he signed regardless of whether he saw the full document or not.
(b)Whether Lang was provided with a copy of the Authorised Purchaser Agreement Terms and Conditions before signing the pages
104 It is clear on the evidence of Plunket that he did not give to Lang either before or after he signed the Application to Trade a copy of the further terms and conditions. Plunket did not show a copy of the further terms and conditions to Lang or bring the existence of the further terms and conditions to his attention or discuss the contents of the further terms and conditions with him before Lang signed the Application to Trade.
105 The more important question is what legal significance, if any, attaches to this conduct.
106 In my view, the fact that Lang did not see, or possibly even know about, the further terms and conditions before signing the Application to Trade is irrelevant. It is well accepted that, especially in commercial contracts but more generally in other contracts too, parties to an agreement may refer to and incorporate terms from another document into the agreement. For example, parties not infrequently incorporate the standard form terms of a trade association or the standard contracting terms of one of the parties.[13] The short point is that, as a matter of principle, the incorporation by reference of further contractual terms from another document is unexceptional.[14]
[13]LexisNexis, Halsbury’s Laws of Australia, vol 6 (at 15 February 2008) 110 Contract, “III Terms and Parties” [110-2095]
[14]See, eg, Sabah Flour and Feed Mills SDN BHD v Comfez Ltd [1988] 2 Lloyds Rep 18; Modern Building Wales Ltd v Limmer and Trinidad Co Ltd [1975] 1 WLR 1281; Garden City Transport v National Manufactured Products No 2 Ltd (1995) 65 SASR 109 at 115.
107 Here, page 7 of the application to trade, which Lang signed, said expressly:
“Authorised Purchaser Agreement Terms and Conditions
Further terms and conditions of the Authorised Purchaser Agreement are contained in the Capricorn Society Limited document “Authorised Purchaser Agreement Terms and Conditions July 2010 (Australia).
Each Applicant by executing this document agrees to be bound by the terms and conditions of this entire agreement as set out herein and as set out in the Authorised Purchaser Agreement Terms and Conditions July 2010 (Australia), as amended or varied from time to time, acknowledge they have read and understood the contents of the entire agreement, acknowledge no other terms and conditions or agreement, verbal or otherwise, shall apply in respect of the agreement’s subject matter and do by executing this document confirm provision of the consents recorded herein. Further copies of the Authorised Purchaser Agreement Terms and Conditions July 2010 (Australia) are available on request or online at
108 Hence, if Lang had read the only two papers which he asserts he saw and signed, then he would have seen the reference at page 7 of the Application to Trade to the further terms and conditions and his obligation to be bound by the entire agreement including the additional terms found in the authorised purchase agreement. However, Lang said that he did not read page 7 of the application to trade before he signed it.
(c)Whether Lang is bound by the Application to Trade which he signed
109 On the basis of the binding authorities referred to at paragraphs 91-93 above, I find that Lang was bound by the terms of the Application to Trade, including the Capricorn Guarantee. In my view, having raised no issues such as non est factum, fraud or unconscionability which would override the prima facie position regarding the enforceability of the signed document, the usual position at law must apply.
110 Lang’s position was that he did not wish to sign any document which might expose him to significant financial risk. Simos gave evidence about one or more conversations he had with Lang which corroborated this position. Simos stated:
“I did speak to Daniel [Lang] once/twice over the phone and his main concern was to me, ‘I don’t want to put the home at risk …’. And I said, ‘That’s fine, we’re not going down that path. We’re looking at it just to have security over the equipment that you want to purchase’.”
111 As a result of this evidence, I consider that at the time Lang signed the Capricorn Guarantee, he was aware of the potential risk to him as an individual in becoming a guarantor but he nonetheless signed the Capricorn documents without:
· asking for a copy of the documents to take away and consider;
· asking for the opportunity to obtain independent advice about the documents;
· asking to take the documents to show his partner; or
· reading the documents.
112 In circumstances where the law requires that contractual intention be objectively determined, Capricorn was entitled to infer and conclude from Lang’s conduct and words that:
· he had no objection to, or concern with, the Application to Trade document proffered for his signature; and
· he was agreeable to being bound by the terms and conditions of the agreement.
113 Lang advanced some other submissions which led to a conclusion that Lang was not bound by the document he signed. I do not consider that any of those submissions were of substance. For example, it is accepted on the evidence that Plunket did not give Lang an explanation of the document he signed or its purpose or effect. Nor did Plunket draw his attention to the difference between the section for the directors to sign and the section for the guarantor to sign. In my view, Capricorn had no duty to provide such explanation.
114 Further, Lang did not allege any such duty or breach of duty. These facts do not provide any proper basis for Lang to avoid the consequences of signing the Application to Trade document – especially when there is no allegation of fraud, duress or misleading conduct against Capricorn.
115 In reaching this conclusion, I have not had specific recourse to the credit of the relevant witnesses, Lang and Plunket. Rather, I have been able to focus upon the agreed evidence and the legal consequences which flow from that evidence.
Conclusion
116 Subject to hearing from the parties as to the final form of order, I propose to order that:
(a) the plaintiff’s claim against the first defendant be dismissed.
(b) the plaintiff’s claim against the second defendant be dismissed.
(c)the plaintiff pay the defendants’ costs of the proceeding including reserved costs to be taxed in default of agreement.
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