Maukad Holdings Pty Ltd v Kirk, Robert George and Kirk, Yvonne Merle

[1998] TASSC 80

80/1998

PARTIES:  MAUKAD HOLDINGS PTY LTD (ACN 009 536 072)

v

KIRK, Robert George

KIRK, Yvonne Merle

TITLE OF COURT:  SUPREME COURT OF TASMANIA

JURISDICTION:  ORIGINAL

FILE NOS:  187/1995

DELIVERED:  1 July 1998

HEARING DATES:  18-20 May, 5 June 1998

JUDGMENT OF:  Wright J

CATCHWORDS:

Contracts - General contractual principles - Parties - General principles - To whom credit given - Whether signatories were contracting for themselves or another - Whether liable as joint borrowers or at all - Interest of the parties - Use of extrinsic evidence.

H O Brandt & Co v H N Morris & Co Limited [1917] 2 KB 784; Universal Steam Navigation Co v James McKelvie & Co [1923] AC 492; Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Isaacs & Sons v Salbstein [1916] 2 KB 139; Bucknell v O‘Donnell (1922) 31 CLR 40; Cain v Eric Mercantile Pty Ltd [1968] 2 NSWR 370, followed.

Aust Dig Contracts [40]

REPRESENTATION:

Counsel:

Plaintiff:  R W Pearce

Defendants:  D G Gray

Solicitors:

Plaintiff:  Douglas & Collins

Defendants:  Zeeman Kable & Page

Judgment category classification:

Court Computer Code:

Judgment ID Number:                  801998

Number of pages:  11

Serial No 80/1998

File No 187/1995

MAUKAD HOLDINGS PTY LIMITED (ACN 009 536 072) v ROBERT GEORGE KIRK and YVONNE MERLE KIRK

REASONS FOR JUDGMENT  WRIGHT J

1 July 1998

This is an action to recover a sum of $26,000 advanced on loan by the plaintiffs in July 1992, together with accrued interest thereon, pursuant to a written agreement allegedly constituted by a photocopy letter dated 21 July 1992, addressed to “Mr B Kirk, Kirk Tractors Pty Limited, 475 Main North Road, ENFIELD, TAS [sic] 5085”. This letter was written by Mr Robert Eastoe, at that time an employee of, and now a member of, Garrotts Pty Limited, Chartered Accountants of 62 Paterson Street, Launceston. Mr Eastoe was and is the secretary of Maukad Holdings Pty Ltd, the plaintiff company. As had previously been discussed by Mr Kirk and Mr Eastoe during a telephone conversation, a faxed copy of the letter was signed by Mr Kirk and his wife, Yvonne Merle Kirk, the two defendants, and was then posted back to Mr Eastoe.

For the purposes of the present trial, a number of facts were agreed between the parties in the following terms:

1       On 29 July 1992, Maukad Holdings Pty Ltd loaned the sum of $26,000.

2       The loan was made by cheque No 373819, drawn on the account of Maukad Holdings Pty Ltd at the Commonwealth Bank at Launceston, such cheque being made payable to Kirk Tractors (SA) Pty Limited.

3       The cheque was presented and paid.

4       Payments of interest on the loan at the rate of $270.83 per month were made for the months August 1992 to May 1993 inclusive, by cheques drawn on the account of Kirk Tractors (SA) Pty Limited at Brighton in South Australia. The cheques were forwarded to Robert Eastoe at Garrotts in Launceston.

5       No payments of interest or capital have been made on the loan since June 1993.

6       There has been no variation of the rate of interest prescribed in the letter from Garrotts Pty Limited, dated 21 July 1992.

The statement of claim originally alleged that there was an agreement, partly oral and partly in writing, between Maukad Holdings Pty Ltd and the two defendants, as a result of which the loan was made. At the trial, this allegation was modified so that it is now alleged that the agreement between the parties was constituted solely by the terms of the copy letter dated 21 July 1992 which was signed by each defendant as I have mentioned above.

The defence has undergone many metamorphoses but, in its final form, it raised two principal issues. In the first place, it is said that although the defendant, Robert Kirk, was instrumental in securing the loan of $26,000, he did so as agent for Kirk Tractors (SA) Pty Limited or, in the alternative, for another company in which he held an interest, Kirk Tractors Pty Limited. A secondary issue which arose during the trial, and which led to a further amendment of the defence by leave, contended that in the event that the loan was found to have been made to either or both of the defendants, the plaintiff was estopped from proceeding against them by reason of having secured a judgment against Kirk Tractors (SA) Pty Limited, or Kirk Tractors Pty Limited, in an action for recovery of the $26,000 in respect of which a default judgment was entered in the plaintiff’s favour on 1 June 1994. The evidence established that the earlier proceedings had been instituted by the

plaintiff company‘s solicitors on Mr Eastoe’s instructions but, by misadventure, although the defendant in those proceedings was named as Kirk Tractors Pty Limited, the company registration number (the ACN number) attributed to Kirk Tractors Pty Limited, was in fact the ACN number of Kirk Tractors (SA) Pty Limited, ie, ACN 008 172 852.

Before proceeding further, it is appropriate to set out in full Mr Eastoe‘s letter of 21 July 1992, a letter written in response thereto on Kirk Tractors (SA) Pty Limited’s letterhead, signed by Mr R G Kirk and dated 22 July 1992, and a letter, signed by Mr Eastoe nearly a year later on 24 June 1993, when loan payments had become overdue.

A        Letter of 21 July 1992:

“

GARROTTS
  ──────
  Pty Ltd

RJE:PAC:TD

ACN 009 519 993
21st July, 1992  Chartered Accountants
  62 Paterson Street
Mr B Kirk,  PO Box 1000
Kirk Tractors Pty Ltd,  Launceston Tasmania 7250
475 Main North Road,  Telephone [phone]
ENFIELD, TAS 5085  Fax [phone]
  Ausdoc DX 70166

Dear Sir,

Re:         Maukad Holdings Pty Ltd - Finance Offer

On behalf of our abovenamed client we wish to confirm their loan offer of a principal and interest loan for $26,000 (twenty-six thousand dollars), in order to assist you with your working capital requirements. This offer remains open to you for one month from the date of this letter.

The following terms and conditions are to apply:

TERM:              The term of the loan is to be 6 months with loan to be reviewed 20th January 1993 for clearance. Our client may from time to time conduct a review of the loan. If, in the opinion of our client, any such review reveals a significant deterioration in your assets or your financial position, the debt in the loan account, together with interest thereon, shall at the option of our client become immediately repayable.

INTEREST RATE:     The interest rate will be variable at our clients discretion, and will at all times include a margin of 0.5% per annum. The current interest rate will be 12% plus the 0.5% margin; the total rate being 12.5% per annum. Interest will be calculated on the daily balance and charged monthly. The interest rate will be reviewed a minimum of each six months. The first review date to be 6 months after the loan is drawn.

REPAYMENTS:         Your loan repayments will be $270.83 per month to cover interest only (based on current interest rates). Payments are to be made on the 1st of every month. Any excess interest charged to the loan due to late payment,

will be accrued at an additional 4% above the base rate. Repayments will be reviewed in line with charges in the interest rate.

FEES & CHARGES:   A fee of $150 is payable to this office prior to drawing the loan. This amount represents costs incurred in preparing loan documentation.

This loan is offered subject to you accepting the above terms and conditions. Would you kindly sign and return the attacked duplicate in acknowledgement together with your cheque for the fee of $150.

Yours faithfully,

Per: R J Eastoe FCPA
Garrotts Pty Limited

Enc

RG KIRK  YM KIRK
SIGNED: (sgd) R G Kirk…………..                 SIGNED: (sgd) Yvonne Kirk…
WITNESS: (sgd) L Windsor………..                WITNESS: (sgd) L Windsor…..
WITNESS‘ DETAILS:   L Windsor                   WITNESS’ DETAILS: L Windsor
  10 Barkley Crs  10 Barkley Crs
  WILLASTON 5118               WILLASTON 5118”

B         Letter of 22 July 1992:

^“KIRK  

475 MAIN NORTH ROAD

Tractors  

ENFIELD, SA 5085

(sa) Pty Limited  

PHONE; [phone]

  

FAX: (08) 349

  

4781

  

AHOURS: (08) 381

  

9469

  

MOBILE: [phone]

  

AH FAX: [phone]

  

PO BOX 216,

  

BRIGHTON, SA 5048

ACN 008 172 852
22nd July, 1992

Garrotts Pty Limited
PO Box 1000
Launceston Tasmania 7250

Attention:         Mr Robert Eastoe.

Dear Sir,

We acknowledge and accept the terms and conditions outlined in your letter dated the 21st July, 1992 and enclose our cheque for $150-00 as requested.

It would be appreciated if the funds could be deposited directly into our account as follows:-

Westpac Banking Corporation
  Brighton SA
  BSB No          035-040
  Account No     550699
  Account Name: Kirk Tractors (SA) Pty Limited.

Yours faithfully,

RG Kirk
Enclosure: Cheque $150-00

USED EARTHMOVING & CONSTRUCTION EQUIPMENT”

C           Letter of 24 June 1993

“

GARROTTS
  ──────
  Pty Ltd

RJE:PAC:TD

ACN 009 519 993
24TH June, 1993  Chartered Accountants
  62 Paterson Street
The Directors,  PO Box 1000
Kirk Tractors Pty Ltd,  Launceston Tasmania 7250
475 Main North Road,  Telephone [phone]

ENFIELD, SA 5048  Fax [phone]
  Ausdoc DX 70166

Attention:  Mr B Kirk

Dear Sir,

Re:         Maukad Holdings Pty Ltd

We refer to our letter dated 21st July, 1992 outlining confirmation of and conditions attaching to the loan advance of $26,000 from Maukad Holdings Pty Ltd to Kirk Tractors Pty Limited.

The loan terms and conditions called for payment of monthly interest payments at the first of every month. The current interest payable each month is calculated as $270.83, based on current interest rate of 12.5% per annum under the terms of the loan. The condition as to payment of interest on the 1st of each month has not been met and accordingly you are in breach of the conditions of the loan. Your payment record has been satisfactory, with exception of the past three months. Furthermore, the payment due on 1st June, 1993 has yet to be received at the date of this letter.

In light of the above, the directors of Maukad Holdings Pty Ltd are to place serious thought to requiring the loan to become immediately repayable in full. Under the terms of the loan, the directors may review the loan and if they feel it necessary require full and immediate repayment of the loan.

We will advise you of our clients decision in due course, however, your position and their attitude would be better served with immediate payment of interest due on 1st June, 1993 together with advance payment of amount due on 1st July, 1993.

Please note that if our client decides not to withdraw the loan, any further breach will not be treated lightly. Therefore, no further tolerance will be given to late payments, regardless of the extent overdue.

Yours faithfully,

R J Eastoe ACA

DIRECTORS
  John P Boer FCA
  Bruce K Carswell FCA
  Rodney J Loone FCA”

Apart from her signature upon the photocopy letter from Mr Eastoe dated 21 July 1992, there is no direct evidence that Mrs Kirk was a joint borrower of the funds in question. Neither Mr Eastoe nor Mr Kirk gave evidence which suggested that Mrs Kirk had been involved in any way whatsoever in negotiations or had benefited directly from the loan payment made. Her signature is certainly on the photocopy letter, but the capacity in which she signed has not been stated in the document and the script of the letter itself does not recite or disclose any agreement to lend monies to her as an individual, either alone or jointly with her husband. Mr Kirk‘s name appears as part of the

address in the document. Mr Eastoe claimed in his evidence that the letter was sent to Mr Kirk at Kirk Tractors Pty Limited, 475 Main North Road, Enfield, because that was the only address which he had for Mr Kirk. It will be noted, however, that the address is not Mr B Kirk “C-” or “care of” Kirk Tractors Pty Limited, but Mr B Kirk, Kirk Tractors Pty Limited.

Mr Eastoe gave evidence that the loan had been negotiated between himself and Mr Kirk following instructions received by him from Mr Peter Hoare, who telephoned him from South Australia. No really detailed evidence was given as to the instructions which Mr Eastoe was given in this way, although he did say that he had been instructed by Mr Hoare “to make sure Bob and his wife signed the documents and they would be personally liable”. There is, of course, some ambiguity in this. If Mr Eastoe has an accurate recall of what Mr Hoare said to him (and, frankly, I doubt that he has) the real significance of Mr Hoare’s words may lie in the fact that they were said at all. If, as Mr Eastoe claims, it was always intended that the loan should be a personal loan to Mr Kirk and his wife, the question arises why was it necessary for Mr Hoare to stress the need to obtain their signatures “and they would be personally liable”? The use of this phrase by Mr Hoare suggests to me that some question of personal liability, as distinct from company liability, must have arisen during his conversation with Mr Eastoe. If not, it is difficult to see why the issue of the Kirks being “personally liable” could have arisen at all. It is the sort of instruction which one could surmise may be given if an intending lender to a company wished to ensure that the directions provided a personal guarantee.

If the loan was, as claimed, to Mr and Mrs Kirk as individuals, no question of “personal” liability would need to be mentioned; it would go without saying. I must say that as to this, as well as other matters, I did not find Mr Eastoe a particularly convincing witness. If Mr Hoare did give the instructions claimed, it may have resulted from his belief that the signature of Mrs Kirk to the document would ipso facto make her liable, whether or not she was a borrower in the true sense of the word. In the absence of clear evidence that Mrs Kirk signed as a borrower, unless it must be inferred from the mere fact of signature that she was a borrower, it seems to me that it is difficult to maintain this action against her. On the face of it, it appears quite possible that she may have intended to sign, or believed that she was signing, simply as a co-director or other officer of either Kirk Tractors Pty Limited or Kirk Tractors (SA) Pty Limited. Her subjective belief is, of course, irrelevant if the meaning of the document is clear from its own terms, but, in my opinion, it is not.

What I see to be an ambiguity in respect of Mrs Kirk‘s signature also carries over into the signature of the male defendant, except that in his case the letter is addressed to him by name. It will be noted, however, that quite apart from the way in which the letter has been addressed, it refers to the loan being made “in order to assist you with your working capital requirements”. This could, of course, refer either to Mr Kirk’s working capital or that of Kirk Tractors Pty Limited, but it is very much the kind of reference which one might expect if, as the name suggests, Kirk Tractors Pty Limited was a company dealing in the acquisition and sale of tractors and the like equipment. In considering the above matters I have not overlooked the following passage of evidence which occurred in Mr Kirk‘s cross-examination:

“Now you’ve been in business quite a while Mr Kirk? ... Correct.

And you know how companies execute documents, don‘t you? ... I’m not an expert in that area, no.

Well you know that formal company documents are executed by putting on the company seal. Do you know that much? ... I do know that.

Or sometimes people can sign the name of the company or as a director of the company perhaps. The way of the company signing the document perhaps as far as you know? ... Perhaps.

And in those circumstances it would be appropriate one would think that the company‘s name appear on the document where it was going to be signed, you agree with that proposition? ... As I said I’m not an expert in that area.

You didn‘t say to Mr Eastoe did you, look make sure you put my companies name on this so the company can sign? ... No I didn’t.

Far from it he asked you the names of you and your wife as you‘ve already said. That’s so isn‘t it? ... Yes.

And when the letter appeared on the fax machine on 21 July 1992 it did not bear a company’s name at the end where it was to be signed, did it? ... No, it didn‘t.

In fact, to the contrary, it had two spaces where you and your wife signed; that’s so, isn‘t it? ... Yes.

Just as you discussed with Mr Eastoe? ... Yes.

That’s so.

HIS HONOUR: I‘m sorry, what had you discussed with Mr Eastoe that causes you to say that? ... Well, he said he would do the terms and conditions and send us a letter for signatures.

HIS HONOUR: I see, right.

MR PEARCE: (Resuming) Was it a discussion that you and your wife would sign and send it back? ... I can’t recall.

That may be so? ... It‘s possible.

And that’s, in fact, what happened, isn‘t it? ... We, in turn, signed the letter, yes.

Because you had a considerable personal interest, didn’t you, Mr Kirk, in obtaining these funds and you‘d signed guarantees to the bank for your company debts? ... Yes.

And, in fact, in the letter that you wrote to Mr Hoare on 18 May 1992 which is an exhibit, your Honour, D6, you’d expressed your concern to Mr Hoare, hadn‘t you, that, ’Yvonne and I have not drawn any wages and the house was on the market.‘ All of that’s correct, isn‘t it? ... It is.

You were at risk of losing your house this time, weren’t you? ... If it was possible, yes.”

Mr Pearce agrees that in the event of ambiguity being found in the loan document, recourse may be had to the dealings between Mr Eastoe and Mr Kirk before the loan took place and also to any dealings which occurred thereafter which may tend to show how the parties understood the agreement and how they perceived the identity of the contracting parties. Such material as I have suggests that Mr Eastoe regarded either Kirk Tractors Pty Limited or Kirk Tractors (SA) Pty Limited as the borrowing party, at least up until judgment was entered in the earlier proceedings and proved fruitless. Mr Eastoe claimed that those proceedings had been taken by mistake against the wrong defendant and he also claimed that the letter of 24 June 1993, addressed to the Directors, Kirk Tractors Pty Limited, in which the first paragraph clearly appears to acknowledge that the loan had been made to Kirk Tractors Pty Limited, had been prepared by a member of his staff who had misconstrued the true situation, although he acknowledged that he, himself, had signed the letter.

Mr Eastoe‘s belief is not, of course, determinative of the issues before me, but the material just referred to, as well as the circumstances in which the loan was negotiated in the first place, leave me with the clear conviction that despite his disavowals in the witness box, Mr Eastoe, at all material times, regarded Kirk Tractors Pty Limited as the borrowing party. The question may arise, of course, why did he not regard Kirk Tractors (SA) Pty Limited as the borrowing party in light of the fact that Mr Kirk’s letter of 22 July 1992 was written on Kirk Tractors (SA) Pty Limited‘s letterhead, that the loan was paid directly into Kirk Tractors (SA) Pty Limited’s account at Brighton

in South Australia, and that such payments of capital and interest as were made, were all made by Kirk Tractors (SA) Pty Limited.

In my opinion, the explanation for this is simply that Mr Eastoe failed to recognise, at any time, that there were two different companies with similar names. A surprising oversight, perhaps, on the part of a trained accountant, but one which Mr Eastoe, himself, clearly acknowledged. If he had been more attentive to information provided to him by Mr Kirk in telephone conversations before the loan was made (during which, I find, Mr Kirk referred to Kirk Tractors (SA) Pty Limited, a fact which was acknowledged by Mr Eastoe in his answers to interrogatories, but which he subsequently repudiated) Mr Eastoe would have written his first letter, dated 21 July 1992, to Mr B Kirk, Kirk Tractors (SA) Pty Limited, his letter of 24 June 1993 would have been directed to the Directors, Kirk Tractors (SA) Pty Limited, and the first action which he gave instruction to his solicitors to institute, would have been taken against Kirk Tractors (SA) Pty Limited, instead of Kirk Tractors Pty Limited. These compounding errors by Mr Eastoe cannot be allowed to obscure the fact that the extrinsic evidence of dealings between Mr Eastoe, as agent for the lenders, tends to show that he intended to lend to a company rather than two individuals, even though he may have had it in mind that they should sign either as directors of the borrowing company or as guarantors.

This conclusion is strengthened by the evidence which Mr Kirk gave at the trial. He told me that he and his wife were the Directors of and shareholders in a company known as Kirk Tractors Pty Limited which had been formed in 1985. Its principal business was that of buying and selling earth moving equipment. He first met Mr Peter Hoare in the 1970s and they became firm friends. Mr Hoare was an employee of Hoare Bros Pty Limited, a major earth moving and contracting company in South Australia. In 1988 or 1989, a new company, Kirk Tractors (SA) Pty Limited, was incorporated. The Directors were Mr Kirk, his wife and Warwick Mowbray, an associate of Mr Peter Hoare. The shareholders were Mr Kirk and Mr Hoare, each of whom hold fifty per cent of the shares. The capital of the company was provided by Mr Hoare to the tune of about $230,000. I infer, although this was not stated, that this sum of money was probably subscribed by way of unsecured loan. Kirk Tractors (SA) Pty Limited occupied premises at Enfield, South Australia, owned by Ozenka Pty Limited, a company in which Mr Kirk and Mr Hoare were both Directors and shareholders. Mr Kirk said that when Kirk Tractors (SA) Pty Limited commenced trading from these premises, Kirk Tractors Pty Limited still operated “but in a very minor way and was basically absorbed into Kirk Tractors (SA)”. The salaries of employees were paid by Kirk Tractors Pty Limited and Kirk Tractors (SA) Pty Limited continued in the same line of business as Kirk Tractors Pty Limited had previously. Over time, Kirk Tractors (SA) Pty Limited bought and sold a considerable volume of equipment for Hoare Bros Pty Limited in respect of which Mr Kirk claimed commissions of $75,000 or so was due from that company to Kirk Tractors (SA) Pty Limited, but was never paid. Mr Kirk said that as a result of this situation, Kirk Tractors Pty Limited‘s debts increased and it was obliged to renegotiate its accommodation from the Westpac Bank which was converted into a term loan of $117,000. According to Mr Kirk’s evidence[i], Mr Wilson, the company secretary of Hoare Bros Pty Limited, was involved with Mr Kirk in arranging this loan from the Westpac Bank. Mr Wilson agreed with Mr Kirk and the bank that thereafter Hoare Bros Pty Limited would employ Mr Kirk at a salary of $110,000 per annum. His role would be to buy and sell Hoare Bros Pty Limited‘s equipment on a consignment basis.

An initial payment of $6,000 was made to Mr Kirk, pursuant to this arrangement, but thereafter the arrangement appears to have ceased. Apparently it had not been sanctioned by Mr Peter Hoare. On 18 March 1992, Mr Kirk wrote to Mr Hoare. The following is a copy of his letter:

“18th March, 1992
Mr Peter Hoare
Hoare Bros Pty Limited
PO Box 830
Geelong, SA 3220

Peter,

I refer to our recent conversation in regard to the operation in Adelaide, and our thoughts on what we should be aiming at in the future.

The financial situation here can only be described as critical and likely to get worse.

A brief rundown is as follows:-

KIRK TRACTORS (SA) PTY LIMITED

Balance at bank as at 05-03-92  $ 3,406-87

Monthly committments [sic]:
Term Loan due 03-04-92  $   2,000-00
Insurance  $     126-72
AGC - Ute  $     262-55
Esanda - Car  $     819-85
Flexible Finance - Phone systems             $     106-93
  Per month  $   3,316-05

Outstanding Accounts:
Allan Green    120 days                       $    1,295-00
January, 1992  $      641-90
February, 1992  $    3,468-79
Current  $    2,138-71

Quarry Industries  $  20,100-00
Len Wood (Summons issued)                  $    1,116-50
Low & Partners (Legal fees)  $    1,221-00
MGA Insurance (Building, Stock in yard,
TransitMarine Ins, Vehicles  $    5,957-30
Life Insurance (RGK) due November      $    2,874-64
1991                  
  Total  $38,812-15

Stock in yard at cost approx  $100,000-00

KIRK TRACTORS PTY LIMITED:

Balance at bank as at 05-03-92  OD $117,181-43

Converted to a Term Loan over 10 years paid by KIRK TRACTORS (SA) PTY LIMITED at $2,000 per month.

Interest is $1,509-71 per month. This was arranged by RWW.

Outstanding Accounts:

Alan Green        120 days  $ 1,835-00

ARID PLANT HIRE PTY LIMITED:

Balance at bank as at 03-03-92  $ 3,043-51

Committments: [sic]

HFC Finance for 120G  $ 2,014-19

Outstanding accounts:  NIL

Both Yvonne and I have not drawn any wages since September, 1991. This would amount to approximately $25,000. We have eroded our savings and now have an overdrawn situation at the bank of approximately $2,000.

As discussed with you we have put our house on the market at $380,000 we have a mortgage payout of about $85,000 and we would payout the Term Loan of

$117,181-43 when sold. We do not want to get off-side with the bank as they could walk in and sell it up cheaply as they are only interested in getting their $202,000.

When RWW, Alan Green and I visited the bank in November 1991 to convert the KIRK TRACTORS debt of $117,000 to a Term Loan RWW told me and the Bank Manager that Hoare Bros Pty Limited would employ me as a consultant to buy, sell and generate work at $110,000 per annum. I have had one payment of $6,000 I now believe that you had no knowledge of this arrangement.

We also have an uncertain situation with the $50,000 trade-in to KOMATSU on the Old Terex Trucks.

I am asking for your thoughts and guidance through this dilemma, my thoughts for your consideration is that could Hoare Bros inject into KIRK TRACTORS (SA) PTY LIMITED a further $50,000 until we sell some stock and then work out what to do in the future.

It is difficult for me to write this letter however the gravity of the situation is self event. I trust we can talk about this at your earliest convenience.

Best regards,

BOB”

Mr Kirk said that the debts mentioned therein of $20,100 owing to Quarry Industries and $5,957.30 owing to MGA Insurance for building, stock in yard, transitmarine insurance and vehicles, were “critical” accounts which had to be paid. It will be noted that these two debts, combined, amount to a little over $26,000, the loan sum in respect of which the present action has been commenced. Invoices for both of these accounts were taken into evidence (Exhibits D7 and D8). As Mr Pearce, counsel for the plaintiff, pointed out, these invoices are in fact both addressed to Kirk Tractors Pty Limited and not Kirk Tractors (SA) Pty Limited, but I regard this as being of little significance, particularly bearing in mind the confusion that these two very similar names have obviously caused from time to time. At all events, both accounts were paid by cheques drawn upon Kirk Tractors (SA) Pty Limited’s banking account. On 24 July 1992, cheque No 212724 was drawn in favour of Quarry Industries and on 31 July 1992, cheque No 212727 was drawn in favour of MGA Insurance. The cheque butts in respect of these two payments became exhibits. These dates are both significant as this was just after the time at which the loan from Maukad Holdings Pty Ltd had been negotiated between Mr Eastoe and Mr Kirk, who was anxiously awaiting payment thereof. As Mr Eastoe explained, the payment had been held up for several days because the co-signatory to the Maukad Holdings Pty Ltd cheque was unavailable at that time. It is plain from Mr Eastoe‘s evidence that Mr Kirk was very anxious to secure payment of funds as soon as possible and rang him almost every day between Friday 17 July 1992 and 29 July 1992 when the cheque for $26,000 was finally deposited to the credit of Kirk Tractors (SA) Pty Limited’s account at Westpac, Brighton, South Australia in accordance with Mr Kirk‘s instructions. It is also worth noting that the fee of $150 due to Garrotts Pty Ltd in accordance with the final paragraph of their letter dated 21 July 1992, and paid by cheque which accompanied Mr Kirk’s letter of 22 July 1992, was actually drawn upon Kirk Tractors (SA) Pty Limited‘s account as well. It is completely obvious to me that the sum of $26,000 was borrowed from Maukad Pty Ltd to pay the debts due to Quarry Industries and MGA Insurance.

Mr Eastoe’s evidence established that whilst Mr Hoare had no direct legal interest in Maukad Holdings Pty Ltd, either as a Director or shareholder, he had considerable influence regarding the company‘s affairs. Mr Eastoe agreed with Mr Gray’s proposition in cross-examination “albeit Mr Webber is a director it is Mr Hoare that calls the shots in relation to Maukad Holdings together with Mr Shaw.” This was amply confirmed by the circumstances which Mr Eastoe described in which he, as Maukad Holdings Pty Ltd‘s company secretary, received instructions from Mr Hoare alone to make the loan now in question, without any resolution of the company and, indeed, without requiring any security whatsoever from the borrower.

Mr Eastoe acknowledged that he was unaware of the difference between Kirk Tractors Pty Limited and Kirk Tractors (SA) Pty Limited and, indeed, he did not realise that there were two different companies until some years after the loan had been made. Although I have already adverted to this in passing, it should be recorded that Mr Eastoe was recalled late in the trial, after the defence case had been re-opened following Mr Gray’s application, so that Mr Gray could tender interrogatories which Mr Eastoe had sworn on oath on behalf of the plaintiff. The answer to interrogatory 1(c)(vii) stated (inter alia) that Mr Kirk had advised Mr Eastoe during their telephone conversations that he wished the loan monies to be placed “in the Westpac account of Kirk Tractors (SA) Pty Limited at Brighton in South Australia and gave Mr Eastoe an account number”. In his oral evidence, Mr Eastoe said that Mr Kirk had only mentioned placing funds in his “business account” and “Kirk Tractors” and that he had prepared the answer to the relevant interrogatory by referring to the letter of 22 July 1992 (Exhibit P3) rather than from his actual memory of events. Thus, he said, the answer to the interrogatory was incorrect. I have difficulty in accepting this. Like much of Mr Eastoe‘s evidence, I think that what he said was unreliable and, if not consciously untrue, was the product of ex post facto rationalisation to fit in with the plaintiff’s present claim.

Mr Pearce referred me to many cases which established the clear principle that when a person signs a contract in his own name, he is prima facie liable as the contracting party and that there must be something very strong on the face of the instrument to show that he is not so liable (H O Brandt & Co v H N Morris & Co Limited[1917] 2 KB 784 per Viscount Reading CJ at 793 and Universal Steam Navigation Co v James McKelvie & Co [1923] AC 492 at 495). However, where the terms of the contract are inconclusive, it may be necessary to consider extrinsic evidence to assist in determining the true intent of the parties. Normally, extrinsic evidence is inadmissible when the contract is wholly in writing if the effect of that evidence would be to contradict or vary the language of the relevant document. But if the effect of the evidence is to resolve ambiguities, including uncertainty as to the true identity of the contracting parties, the evidence may be received (see Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 347 et seq, per Mason J (as he then was). At 352 his Honour said:

“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.”

I find that the evidence extrinsic to the letter of 21 July 1992 provides considerable assistance in resolving the ambiguity presented by that letter as to the identity of the contracting parties. My conclusion is that, properly construed, the loan was from Maukad Holdings Pty Ltd to Kirk Tractors (SA) Pty Limited. An alternative, but less likely, conclusion is that the loan was intended for Kirk Tractors Pty Limited, but I think the name of that company has intruded into the correspondence and the earlier proceedings simply as a result of carelessness on the part of Mr Eastoe. In a sense, a positive finding as to the identity of the borrower is unnecessary. The onus of proof is upon the plaintiff to satisfy me that Mr and Mrs Kirk should be held personally liable. On the balance of probabilities, I am not so satisfied.

These conclusions make it strictly unnecessary to deal with the secondary ground of defence based upon estoppel which I mentioned above. All I need say about that issue is that the cases cited by Mr Gray clearly established that if a plaintiff chooses to sue one of a number of debtors who are jointly liable and recovers judgment against that debtor, even if the judgment is not satisfied, the plaintiff is not free to then pursue the remaining joint debtors. In such circumstances, the debt has merged in the judgment and is recoverable pursuant thereto or not at all. There is an

equally strong line of cases, however, which establishes that if the plaintiff has two separate causes of action against distinct individuals, even if the subject matter is, in a sense, the same, or if the plaintiff mistakenly sues a defendant to judgment in respect of a debt for which that defendant is not liable, but some other person is, the plaintiff can institute fresh proceedings against the true debtor and is not estopped by the earlier judgment from doing so.

This principle was established by Isaacs & Sons v Salbstein [1916] 2 KB 139. At 143, Lush J, sitting as a member of the Divisional Court, said this:

“The doctrine of transit in rem judicatam is that if judgment has been recovered upon a cause of any action, then any right in respect of that same cause of action merges in the judgment already recovered; but it must be the same cause of action. It does not mean that if a judgment is recovered in respect of the same goods against somebody the cause of action against some other person really liable is gone. The principle in the decisions in King v Hoare 13 M & W 494 and Kendall v Hamilton 4 AC 504 is that if a party to a contract sues one individual upon a contract and recovers judgment against him, then if it turns out that the contract was a joint contract to which other persons than the defendant in the first action were parties, the judgment recovered against one party bars the right of action on that same contract against the other parties to it. The contract being one contract made with several persons, judgment against one of them operates to extinguish the cause of action on that contract against all the parties to it because it was one contract and one contract only. There is however, no foundation whatever for the contention that because A recovers a judgment against B, who in truth was never a party to the contract at all, he cannot afterwards recover judgment on that contract against C, who was the real contracting party. Where judgment is recovered on a simple contract, that contract no doubt merges in the contract of higher degree which is evidenced by the judgment and which is a contract of record. But there is no ground for saying that a contract between A and B although it is a contract of record, merges a contract between A and Z. They are two different contracts and therefore give rise to two different causes of action.”

The judgment of the Divisional Court in that case was upheld by the Court of Appeal and the concluding words of Lush J from the passage quoted above, were cited with approval by the High Court of Australia in Bucknell v O‘Donnell (1922) 31 CLR 40 at 45. Isaacs’ case was also applied by the New South Wales Court of Appeal in Cain v Eric Mercantile Pty Ltd [1968] 2 NSWR 370.

There was no authority cited which bears directly upon the rather unique circumstances of the present case where, in the first action, Maukad Holdings Pty Ltd purported to sue Kirk Tractors Pty Limited even though it appears from the ACN number quoted as part of the description or name of the defendant, they probably intended to sue Kirk Tractors (SA) Pty Limited. Fortunately, perhaps, the res judicata or estoppel point does not require final determination in view of the findings which I have already made in these proceedings. On the basis of those findings, the defendants are entitled to judgment and in consequence, the plaintiffs will recover nothing from the defendants. I will hear the parties as to costs.

tasInLaw edit: The paper copy has “evdience”.

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