Leader Computers Pty Ltd v Longcake
[2019] WASC 381
•24 OCTOBER 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: LEADER COMPUTERS PTY LTD -v- LONGCAKE [2019] WASC 381
CORAM: TOTTLE J
HEARD: 15 OCTOBER 2019
DELIVERED : 15 OCTOBER 2019
PUBLISHED : 24 OCTOBER 2019
FILE NO/S: CIV 2214 of 2019
BETWEEN: LEADER COMPUTERS PTY LTD
Plaintiff
AND
CHRISTOPHER LONGCAKE
First Defendant
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Application for extension of caveat - Whether serious question to be tried - Whether balance of convenience favours extension - Turns on own facts
Legislation:
Transfer of Land Act 1893 (WA) s 138C
Result:
Application successful
Extension of caveat granted
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr M C Goldblatt |
| First Defendant | : | Mr J Jacobson |
| Second Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Oakbridge Lawyers Pty Ltd |
| First Defendant | : | Jacobson and Associates |
| Second Defendant | : | No appearance |
Case(s) referred to in decision(s):
Bashford v Bashford [2008] WASC 138
Bride v Registrar of Titles [2015] WASC 11
TOTTLE J:
Introduction
By originating summons filed on 10 July 2019 the plaintiff applied pursuant to s 138C of the Transfer of Land Act 1893 (WA) to extend the operation of a caveat registered against the title of a residential property in Meadow Springs and a caveat registered against a residential property in Tapping. The first defendant is one of the registered proprietors of each of those properties.
At the hearing of this matter on 15 October 2019 I made orders extending the operation of the caveats and said I would publish reasons for doing so. These are those reasons.
The evidence
The plaintiff relied on the following affidavits:
(a)an affidavit of Montgomery James Vallve sworn 10 July 2019;[1]
(b)an affidavit of Christopher John Pittman sworn 26 September 2019; and
(c)an affidavit of Alan Tan sworn 25 September 2019.
[1] The plaintiff did not read par 6 of Mr Vallve's affidavit.
The first defendant relied on two affidavits sworn by him on 9 August 2019 and 8 October 2019, and two affidavits sworn by his son, Mr Daniel Longcake, on the same dates.
Factual background
The plaintiff is a wholesaler of computer equipment. In March 2017 Mr Longcake conducted a business as a sole trader in the field of information technology. For that purpose Mr Longcake purchased computer equipment from the plaintiff.
In March 2017 Mr Longcake was introduced to Mr Alan Tan, the State Manager of the plaintiff. Emails sent by Mr Longcake to Mr Tan on 18 and 20 March 2017 disclose that Mr Longcake used a logo which incorporated the words 'Longware IT Solutions' to promote his business.
Mr Longcake established a trading account with the plaintiff. He did this by completing a form available on the plaintiff's website. To complete the form Mr Longcake was required to provide his Australian Business Number (ABN). On provision of the ABN the form was partially populated automatically with information derived, I infer, from a searchable database of ABNs maintained by the Commonwealth Government. This form included a space for the insertion of a company name. Mr Longcake inserted the name 'Longware' in this space.
Following completion of the form Mr Longcake placed his orders for computer equipment with the plaintiff.
In June 2017 Mr Longcake applied to the plaintiff for credit. Mr Tan provided Mr Longcake with the plaintiff's pro forma application for credit and a pro forma guarantee and indemnity. Mr Longcake's evidence is that Mr Tan told him that the plaintiff would not provide him with credit unless both Mr Longcake and the first defendant provided personal guarantees. Mr Tan does not recall making the statement attributed to him by Mr Longcake. When regard is had to the fact that the first defendant provided a guarantee I find it is likely that there was some discussion between Mr Tan and Mr Longcake to the effect that a personal guarantee from the first defendant was required before the plaintiff would provide Mr Longcake with credit.
Mr Longcake asked the first defendant whether he would be 'prepared to provide [his] business with a personal guarantee for a credit facility provided by Leader'. The first defendant agreed to provide such a guarantee.
On 22 June 2017 Mr Longcake signed a pro forma form entitled 'Application for Credit' (Credit Application). He said he completed the Credit Application by inserting the required information but he did so with assistance obtained from Mr Tan during a telephone conversation. Relevantly the Credit Application contains the following details:
(a)Next to the printed words 'Company Name' is the handwritten word 'Longware'.
(b)Next to the printed words 'Trading Name' are the handwritten words 'Longware/Daniel John Longcake'.
(c)Next to the printed words 'Business Type' the 'Sole Trader' box is ticked.
(d)Next to the printed words 'Date Bus. Commenced' is the date '28/09/2016'.
(e)Under the printed words 'Directors/Proprietor' Mr Longcake's personal details together with those of the first defendant have been inserted in handwriting.
(f)In the execution clause adjacent to the printed words 'Position Held' are the handwritten words 'Owner/Managing Director'.
I infer that all the handwriting was that of Mr Longcake.
On the same day, 22 June 2017, the plaintiff, first defendant and Mr Longcake executed a pro forma agreement entitled 'Guarantee and Indemnity' (Guarantee). In the Guarantee the 'Guarantors' are listed as Daniel John Longcake and Christopher Longcake. Longware IT Solutions is defined as 'the Purchaser' and against the printed words 'Name (Company Name)' the handwritten words 'Longware IT Solutions' and the number 36 964 989 923 appear. The number is the ABN of Mr Longcake's sole trader business. Relevantly the Guarantee included the following clauses:
6.So as to better secure the liability of the Guarantors and each of them, the Guarantor(s) HEREBY CHARGE, AS A MORTGAGE, with the payment of the monies pursuant to Clause 1 hereof, all their freehold and leasehold in land which the Guarantors now have or may have acquired during the currency of this Guarantee and hereby consent, at the Creditor's election and without the need for the execution of any further documents or consent from me/us, to the lodgement of a Caveat by or on behalf of the Creditor upon the Certificate or Certificates of Title to any of the land so held by me/us as evidence of this charge over any such Certificate or Certificates of Title in such form as the solicitors for the creditor may prescribe within fourteen days of being called upon to do so.
7.A certificate signed by any Director, Secretary, Manager or Solicitors of the supplier as to any sum payable to the supplier pursuant to Clause 1 hereof shall be conclusive evidence and proof of the indebtedness of Purchase at the date of such certificate.
On 5 July 2017 Mr Longcake incorporated a company of which he was the sole director and shareholder. The company is called Longware IT Solutions Pty Ltd (the Company).
In his affidavit of 8 October 2019 Mr Longcake maintains that all orders placed with the plaintiff after the incorporation of the Company were placed by the Company and not by him in his capacity as a sole trader and thus any debt due to the plaintiff in respect of goods supplied after 5 July 2017 is due by the Company. On this basis the first defendant argues that he is not liable under the Guarantee as he guaranteed debts due by Mr Longcake in his capacity as a sole trader, not the debts of the Company.
The plaintiff's invoices and statements are addressed to 'Longware IT Solution'. Mr Longcake maintains that these references are a reference to the Company not to him and that prior to the incorporation of the Company he did not use the words 'IT Solutions' in connection with his trading activities. As the emails of 18 and 20 March 2017 show, however, this is not correct.
In accordance with cl 6 of the Guarantee the plaintiff lodged caveats against the interest of the first defendant in the properties at Tapping and Meadow Springs.
In accordance with cl 7 of the Guarantee a certificate signed on 24 September 2019 by Mr Christopher Pittman, Chief Financial Officer of the plaintiff, certifies that Mr Longcake is indebted to the plaintiff in the amount of $46,461.93.
On or about 8 August 2019 the plaintiff commenced proceedings against the first defendant and Mr Longcake in the Magistrates Court of Western Australia to recover the debt it claims is owed to it.
Legal principles
The principles applicable to an application such as this were summarised by Beech J (as his Honour then was) in Bashford v Bashford,[2] and more recently by Edelman J in Bride v Registrar of Titles.[3] Those principles are established and there is no need to restate them.
[2] Bashford v Bashford [2008] WASC 138.
[3] Bride v Registrar of Titles [2015] WASC 11.
The two questions that I am required to determine may be stated as follows:
(a)First, has the plaintiff demonstrated that its claim has or may have substance, or as it is sometimes put, has the plaintiff established that there is a serious question to be tried in respect of the interest in the land claimed by it?
(b)Second, does the balance of convenience favour the extension of the operation of the caveat?
The two questions are interrelated. The court must balance the injustice that might be suffered by the first defendant if the application to extend the caveat is granted and the plaintiff later fails at trial, against the injustice that might be suffered by the plaintiff if the application is not granted and it later succeeds in establishing its interest in the property.
Analysis and disposition
The plaintiff's claim is straightforward. It argues the first defendant agreed to guarantee the payment by Mr Longcake, trading as Longware IT Solutions, and granted a charge 'as a mortgage' of all his freehold and leasehold in land which he had or may have.
The plaintiff submits that the balance of convenience weighs in its favour. It says it has a claim of substance and a proprietary interest in the two properties. It has commenced proceedings in the Magistrates Court for recovery of the debt. Any defences to the claim can be raised in that proceeding. The plaintiff says pending resolution of those proceedings, it is entitled to retain the protection of the caveats.
As I understand it the substance of the first defendant's case can be condensed into two alternative propositions. First, that the debt for which the plaintiff claims was incurred by the Company and not by Mr Longcake in his capacity as a sole trader. The debt is therefore not the subject of the Guarantee and the plaintiff has no claim against the first defendant enlivening protection by a caveat. Alternatively, there is uncertainty as to the identity of the contracting parties and the Guarantee is void for uncertainty.
In support of those related submissions, the first defendant relied on the following:
(a)In [6] of his affidavit, Mr Vallve, the plaintiff's solicitor, deposed as follows:
Relevantly, the consideration stated in the Guarantee is for the plaintiff, at the defendant's request, agreeing to supply goods and/or services on credit, previously provided, for, or on behalf of Longware IT Solutions Pty Ltd ('Longware').
Although this paragraph of Mr Vallve's affidavit was not read as part of the plaintiff's case it was relied upon by the first defendant's counsel as an admission made by the plaintiff. The statement to the effect that the stated consideration for the Guarantee was the supply of goods to Longware IT Solutions Pty Ltd is incorrect. The application is to be determined on the basis of the facts as they are established by the evidence and not on the basis of an admission that does not reflect the true position.
(b)A submission that the Credit Application is ambiguous because on one reading it purports to be an agreement between the plaintiff and Mr Longcake as sole trader but it can also be construed as an agreement between the plaintiff and the Company. As a result, it is not certain whether the Guarantee given by the first defendant was for the benefit of Mr Longcake as a sole trader or the Company.
(c)Invoices (and other documents) generated by the plaintiff indicate that products were sold to 'Longware IT Solution'. Mr Longcake deposed that prior to the incorporation of the Company on 5 July 2017, he traded as 'Longware' without the words 'IT Solution'.
(d)It is unusual for a sole trader to guarantee his own debts.
Counsel for the first defendant submitted, in any event, the fact that there is no equity in the Meadow Springs property means no purpose is served by maintaining the caveat and it should be removed.
In my assessment the plaintiff's case is a strong one. On the evidence adduced in this application it is plain that there was an agreement between the plaintiff and Mr Longcake as a sole trader for the supply of computer equipment and that the first defendant agreed to guarantee Mr Longcake's liabilities under that agreement. This conclusion is supported by the following:
(a)At the date the Credit Application was executed (22 June 2017) the Company had not been incorporated.
(b)Despite Mr Longcake's evidence that he did not trade with the name 'Longware IT Solutions' prior to 5 July 2017, the Guarantee executed on 22 June 2017 lists 'Longware IT Solutions' as a guarantor and the logo featured in email correspondence from March 2017 incorporates the words 'Longware IT Solutions'.
(c)The ABN of Mr Longcake's business, not the ACN of the Company, was included in both the Credit Application and the Guarantee. The fact that Mr Longcake described himself as the 'Owner/Managing Director' is of no contractual significance. Mr Longcake was the owner of his business. On the evidence before the court he was not, however, the managing director of any company and nor was there any evidence that at the date he signed the Credit Application he had any intention of incorporating the Company.
The plaintiff has established that it has a claim of substance. I am not satisfied that the balance of convenience favours removal of the caveat. The first defendant did not adduce any evidence of the prejudice that may be suffered if the caveat is maintained. The submission as to the amount of net equity in the Meadow Springs property does not provide a basis for depriving the plaintiff of its contractual entitlement to maintain a caveat.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JB
Associate to the Honourable Justice Tottle24 OCTOBER 2019
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