Millard Shaw Pty Ltd v Byrnes
[2019] SADC 187
•5 December 2019
District Court of South Australia
(Civil)
MILLARD SHAW PTY LTD v BYRNES
[2019] SADC 187
Judgment of His Honour Judge O'Sullivan
5 December 2019
GUARANTEE AND INDEMNITY - ACTIONS AGAINST SURETY
GUARANTEE AND INDEMNITY - THE CONTRACT OF GUARANTEE - CONSIDERATION
DEEDS - FORM AND EXECUTION
EVIDENCE - DOCUMENTARY EVIDENCE - PROOF OF HANDWRITING AND SIGNATURE - OPINION EVIDENCE
The Plaintiff claims $1,181,472.24 from the Defendant pursuant to four Guarantees.
The Plaintiff alleges that it entered into a number of transaction with Adelaide Central Electrical Pty Ltd (‘ACE’). In three of those transactions the Plaintiff agreed to, and did, loan money to ACE. In the fourth transaction, the Plaintiff and ACE entered into what is termed an ‘Invoice Finance Facility Deed’, whereby the Plaintiff advanced funds against invoices that had been rendered by ACE.
In each of the transactions, the Plaintiff alleges Guarantees were given by the Defendant.
On 10 September 2018, ACE was placed into liquidation. The Plaintiff seeks to enforce the Guarantees.
The Defendant denies she signed any of the Guarantees and alleges that the signatures on the Guarantees which purport to be hers were, in each case, not signed by her.
Held:
1. The Defendant signed the April 2016 Loan Agreement as a guarantor and the Invoice Finance Facility Deed as guarantor;
2. The Defendant did not sign either the February 2018 Loan Agreement, or the June 2018 Loan Agreement in any capacity;
3. On the terms of the Guarantees the Defendant is liable for the amounts claimed by the Plaintiff;
4. Judgment for the Plaintiff in the sum of $1,325,366.68;
5. Parties to be heard on question of interest and costs.
MILLARD SHAW PTY LTD v BYRNES
[2019] SADC 187Introduction
The plaintiff claims $1,181,472.24 from the defendant (‘Ms Byrnes’) pursuant to four guarantees.
The plaintiff alleges that it entered into a number of transactions with Adelaide Central Electrical Pty Ltd (‘ACE’), an electrical contracting business. In three of those transactions the plaintiff agreed to, and did, loan money to ACE. In the fourth transaction, the plaintiff and ACE entered into what is termed an ‘Invoice Finance Facility Deed’ which is a factoring agreement, whereby the plaintiff advanced funds against invoices that had been rendered by ACE.
Ms Byrnes’ domestic partner, Scott William Morphett (‘Mr Morphett’), was the sole director and shareholder of ACE at the relevant times, although Mr Morphett’s father, William Robert Bruce Morphett, was also a director at some stage. Nothing turns on that.
The four transactions are alleged to have occurred on:
118 April 2016 (‘April 2016 Loan Agreement’);
218 May 2016 (‘Invoice Finance Facility Deed’);
38 February 2018 (‘February 2018 Loan Agreement’); and
48 June 2018 (‘June 2018 Loan Agreement’).
In each of the transactions, the relevant transaction documents call for security for the money advanced to ACE in the form of a guarantee. In all four cases, the plaintiff alleges guarantees were given by Ms Byrnes and Mr Morphett.
On 10 September 2018, ACE was placed into liquidation with Thomas Stuart Otway appointed as liquidator. As a result, it has committed a “Default Event” within the meaning of each of the three loan transaction documents and the Invoice Finance Facility Deed. The plaintiff seeks to enforce the guarantees.
Ms Byrnes owns four residential properties:
1Somerton Park, South Australia (‘Somerton Park Property’);
2Hallett Cove, South Australia (‘Hallett Cove Property’);
3Warradale, South Australia (‘Warradale Property’); and
4Glenelg North, South Australia (‘Glenelg North Property’).
The plaintiff lodged a Caveat over the Glenelg North Property on 22 April 2016 as security following the April 2016 Loan Agreement.[1] When ACE was placed into liquidation, the plaintiff arranged for caveats to be lodged over the remaining three properties.[2]
[1] Exhibit P10, MJ25, Third affidavit of Margaret Jankowiak sworn 12/3/2019 at [76].
[2] Exhibit P10 [81]; Exhibit MJ26 pp 228-243.
Ms Byrnes denies she signed any of the guarantees and alleges that the signatures on the guarantees which purport to be hers are in each case, not hers.
Issues
The issues are:
1Whether the Ms Byrnes signed her name on any of the four guarantees; and
2If so, the quantum of the plaintiff’s loan.
Procedural History
On 30 November 2018, Ms Byrnes applied for the removal of the caveat over the Glenelg North Property, with the consequence that on 4 December 2018 the Registrar-General warned the caveat.[3] On 19 December 2018, the plaintiff filed a summons seeking the sum of $1,181,472.24 as well as an interlocutory application seeking an order that the time for removal of the caveat over the Glenelg North Property be extended until further order.
[3] Exhibit P10 [88], [89].
On 20 December 2018, the Court ordered the time for removal of the caveat be extended until 6 February 2019. On 6 February 2019, the time for removal of the caveat was extended until further order. On 13 May 2019, the Court ordered that the caveat over the Glenelg North Property be removed to allow the sale of the property.
The matter was initially listed for trial on Friday 22 March 2019 however, due to illness of Ms Byrnes, the trial was adjourned to 22 May 2019 at which time it proceeded.
Witnesses
The plaintiff called two witnesses; Ms Margaret Jankowiak (also known as ‘Gosia’), the sole shareholder and director of the plaintiff, and Ms Melanie Holt (‘Ms Holt’) a handwriting expert. The defendant called three witnesses; Ms Byrnes, Mr Morphett and Mr Michael Allan (‘Mr Allan’), the financial controller of ACE during the relevant times.
Ms Jankowiak’s evidence-in-chief was given by her third affidavit sworn 12 March 2019.[4] She was cross-examined and, generally speaking, gave her evidence in a straightforward manner. I accept her evidence.
[4] Exhibit P10.
I deal with Ms Holt’s evidence later in these reasons.
Ms Byrnes’ evidence-in-chief was given by her affidavit sworn 23 January 2019,[5] supplemented by limited oral evidence. Her affidavit was received save for paragraphs 2, 3, the first sentence of paragraph 22, the second sentence of paragraph 15, paragraph 24, 28, 29 and 30.
[5] Exhibit D14.
Mr Morphett gave his evidence orally as did Mr Allan.
I deal with the evidence of Ms Byrnes later in these Reasons. I approach the evidence of Mr Morphett with caution. In my view, he was acutely aware of the significance of the guarantees and to an extent tailored his evidence to suit Ms Byrnes’ potential liability. I say more about the evidence of Mr Morphett later in these reasons.
I formed the view that Mr Allan was a truthful witness and understandably concerned about exposing himself to any liability arising out of his witnessing of the four guarantees. I accept his evidence.
Background
The background facts may be shortly stated and are largely uncontroversial.
The plaintiff provides finance to small to medium sized businesses either in the form of debt financing or factoring. It operates its business as a franchise from Fifo Capital Australia Pty Ltd and trades under the name Fifo Capital Port Phillip. Fifo Capital Australia Pty Ltd has been operating a franchise business model in Australia since 2008.[6]
[6] Exhibit P10, [4]-[6].
It is not in dispute that the plaintiff and ACE entered into a number of financial transactions apart from the four transactions the subject of this action.
Mr Morphett started ACE in 2012. Prior to that time, he was employed at Watters Electrical Pty Ltd, where he worked for 10 years until it collapsed in 2011.
By 2014 the turnover of ACE was approximately $7-8 million per annum. The company continued to grow until it went into voluntary liquidation on 10 September 2018. As at 2015-2016, it employed 77 staff with a turnover of approximately $13.6-14 million.[7]
[7] Exhibit P1 [16], p 65.
Mr Morphett said that the wages were paid monthly and that he had to borrow to pay his employees. He said that he spoke to Ms Byrnes about transferring money to ACE in or about December 2014 for that purpose, and that the reason he asked for money from her was that the company was desperate and needed it.[8]
[8] T152.20-38.
He was shown a number of Ms Byrnes’ bank statements in cross-examination and confirmed transfers into ACE’s account totalling $389,000 in December 2014.
There was some confusion about the total amount which had been advanced to ACE by Ms Byrnes in or about 2014 however, the figure was in the order of $377,000.[9]
[9] T150.16-152.19; T154.10-19.
Ms Byrnes also confirmed that Mr Morphett was always seeking funds to support ACE.[10]
[10] T.325.14-326.29; T327.7-12.
Mr Morphett gave evidence that in 2016, he told Ms Byrnes that the company needed money. Prior to the plaintiff being approached by Mr Morphett, he approached a company named CEG Finance Pty Ltd (“CEG”) for a loan in early 2016. Mr Morphett said he told Ms Byrnes that ACE could not get money from CEG unless she provided a guarantee. He denied speaking to Ms Byrnes about the plaintiff.[11]
[11] T189.12-26.
ACE was unsuccessful in obtaining a loan from CEG.
April 2016 Loan Agreement
Ms Jankowiak deposed that her first involvement with the plaintiff was when another Fifo Capital Australia Pty Ltd franchisee named “Billy” referred an enquiry by Mr Morphett about business finance. Since she had experience with providing Fifo Capital Business Loans, she telephoned Mr Morphett to explain the features of Fifo Capital Business Loans and to understand more about the business and funding needs for ACE. She explained during that conversation that a condition of the loan was a personal guarantee by all company directors and the registration of a security charge over the assets of the business.
On 17 March 2016 Ms Jankowiak emailed Mr Morphett a copy of the plaintiff’s application form for a business loan. [12] She said in evidence that Billy had met Mr Morphett prior to her sending an application form and reported back to her. She did not say what that report covered other than that Billy told her that, according to Mr Scott, Mr Allan was the person she was to deal with.[13] The application form was returned to her by Mr Allan.[14]
[12] Exhibit P10 [16] pp 49-56.
[13] T126.35-127.24.
[14] Exhibit P10 [10]-[16].
Between on or about 17 March 2016 and 18 April 2016, Ms Jankowiak worked on ACE’s application. She and Mr Allan exchanged correspondence by email in relation to the application.[15]
[15] Exhibit P10 [15]-[30].
On 18 March 2016, Mr Allan returned the application form, signed by Mr Morphett as director and as sole Guarantor.[16] Upon receipt of the application form, Ms Jankowiak raised with Mr Allan a number of queries concerning information in the completed application form.[17]
[16] Exhibit P10, MJ12 p 60.
[17] Exhibit P10, [16]-[18].
She told him that since an ASIC search recorded Mr Morphett’s father as a director, both directors needed to sign the application form. Ms Jankowiak also deposed that during that conversation she told Mr Allan that she needed him to provide the address of a property that Mr Morphett wanted to put up as security and over which a caveat could be registered. Ms Jankowiak also sought confirmation that the property over which the caveat was to be lodged, was in Mr Morphett’s name.[18]
[18] Exhibit P10, [25]-[30].
Mr Allan responded to Ms Jankowiak that the property was in Ms Byrnes’ name, to which she replied in words to the effect that ‘the conditions for the loan are both directors must sign the contract as borrowers and as Guarantors and a caveat must be placed over at least one property so if that is not going to be (the Hallett Cove Property) but one of Bernadette’s properties then Bernadette must also be a Guarantor.’[19] The reference to ‘Bernadette’ is a reference to Ms Byrnes. The reference to a property with an address in Hallett Cove is a reference to a property owned by Mr Morphett’s father.
[19] Exhibit P10, [26]-[28], brackets provided.
Ms Jankowiak deposed that Mr Allan responded in words to the effect that he would speak to Mr Morphett and Ms Byrnes and let them know the plaintiff’s requirements.[20]
[20] Exhibit P10, [27], [28].
On 19 April 2016, Mr Allan emailed Ms Jankowiak the signed application form, dated 18 April 2016. [21] It is that document which is the April 2016 Loan Agreement.
[21] Exhibit P10, [30] MJS12 pp 65-72.
The April 2016 Loan Agreement identifies the loan amount as $150,000 plus a loan fee of $28,500, giving a total loan amount of $178,500. The term of the loan was 6 months. The document is signed by Mr Morphett as a director and Guarantor, and purports to be signed by Ms Byrnes as a Guarantor.[22]
[22] Exhibit P10, MJ12, p 68.
Mr Morphett’s father, Mr William Robert Bruce Morphett has also signed the April 2016 Loan Agreement, but only in his capacity as a director of ACE. It seems that Mr William Morphett was still a director of ACE at the time of this application but he intended to resign.[23] He subsequently did so.
[23] Exhibit P10, MJ12 p 67.
On page 68 of Exhibit P10, Mr Morphett’s signature as Guarantor appears, witnessed by Mr William Morphett.
On the same page there also appears what is alleged to be Ms Byrnes’ signature and printed name, as well as the signature of Mr Allan as the witness to Ms Byrnes’ signature.
The plaintiff advanced the funds to ACE under the April Loan Agreement on 20 April 2016. On 20 April 2016, Ms Jankowiak obtained from Mr Allan the title details for the Glenelg North Property and on 22 April 2016, the plaintiff lodged caveat number X12515321over the Glenelg North Property.[24]
[24] Exhibit P10 [32], [76]; Exhibit MJ25.
On 26 October 2016, ACE repaid all monies owing to the plaintiff under the April 2016 Loan Agreement.[25]
[25] Exhibit P10 [33].
Ms Jankowiak confirmed that prior to advancing the loan to ACE, she had no communication with Ms Byrnes nor did she take any steps to verify that the signature purporting to be that of Ms Byrnes was, in fact, hers.[26]
[26] T110.15-18; T31-35.
ACE was a Customer of the plaintiff from April 2016 until ACE was placed into liquidation on 10 September 2018.[27]
[27] Exhibit P10 [7].
Defendant’s evidence concerning the April 2016 Loan Agreement
Ms Byrnes, Mr Morphett and Mr Allan all gave evidence about this document.
Ms Byrnes
In her oral examination-in-chief, Ms Byrnes was shown Exhibit D6 which is a copy of a document titled ‘Fifo Capital Facility Application Form’ dated 18 April 2016.[28] That document is a copy of the April 2016 Loan Agreement that appears in Exhibit P10, MJ-12 at pages 66-72.
[28] Exhibit D6.
Ms Byrnes was taken to Exhibit D6, and directed to where her name is written and the signature above that name. She said that the signature looked like hers but denied signing the document. She was then taken to the handwritten words ‘Bernadette Byrnes’ below that signature. She said in evidence that it looked like her handwriting but she denied writing those words on the original of the document.[29]
Scott Morphett
[29] T295.6-28.
Mr Morphett attended on subpoena.
His attention was directed to Exhibit P10, MJ-12 34 which is a statement of financial position, and identified his signature at the bottom of the page. Above that signature is a table headed ‘Property, Shares and Investment Details’ next to which is written in handwriting the words ‘all in wife’s name’. He denied the handwriting was his. He also denied writing the name Bernadette Byrnes and the date of birth 27/5/67 in the table in Exhibit P10, MJ-12, page 34.
He was taken to page 68 of Exhibit P10, where he identified his signature at the top of the page and the middle of the page. He was directed to the section on that same page where the defendant’s purported signature appears and gave the following evidence:[30]
[30] T137.19-138.32.
QAnd then the guarantor's signature, the first signature again appears to be yours next to the words 'guarantor's signature'. Did you sign the document there.
AWith my name I did, yes.
QNow the document appears to be then signed by Bernadette Byrnes. Did you witness Bernadette Byrnes sign this document.
ANo, I didn't.
QDid you prior to 18 April 2016 discuss with Bernadette Byrnes her signing this document.
ANo, I didn't.
QPrior to 18 April 2016 did you inform Bernadette Byrnes that your company was borrowing money from Fifo.
ANo, I didn't.
QI'm going to ask a question and I don't want you to answer it until his Honour directs you to answer it. The signature that is next to the name 'guarantor's signature' that appears to be that of Bernadette Byrnes did you sign that.
HIS HONOUR
QDon't answer that. Now I need to what they call warn you. That involves me saying to you well, an answer you may give may incriminate you. You can choose to answer the question or you may choose not to answer the question but you need to be aware that depending on your answer you may expose yourself to a criminal charge. Now having been warned it's a question you can either answer the question or you can say 'I choose not to answer it'.
AI choose not to answer the question. (on the grounds of self-incrimination – brackets added)
XN
QYou then see a signature next to the words 'witness signature'.
AYes.
QThat appears to be that of Mr Allan. Did you see Mr Allan sign this document.
AI handed this document to Michael Allan but I didn't see him sign it. I just said to Michael 'Sign this'.
QAt that time had you signed the document as Scott Morphett.
AYes, I'd signed it as Scott Morphett.
QAt the time did it bear the signature as it purports to be that of Bernadette Byrnes.
AYes, that was on there. They were all on there apart from Michael's.
QSo at the time you handed it to Mr Allan he had not signed it.
ANo.
Michael Allan
Michael Allan qualified as an accountant in or about 2001 having completed a Bachelor of Commerce in 1998.
He commenced working with ACE in 2014 as Financial Controller and was employed by it until it was placed into liquidation.[31] In the course of his employment with ACE, he held discussions with a number of finance companies, including the plaintiff. His dealings with the plaintiff were with Mr Jankowiak.[32]
[31] T247.2-248.5.
[32] T248.13-24.
He was taken to Exhibit P10, MJ-12 page 68 and shown the purported signature of Mr Byrnes. He confirmed that the witness signature on that page next to the purported signature of Ms Byrnes was his. He gave the following evidence:[33]
[33] T255.1-256.27.
QOn 19 April 2016 at 11.18 you've sent through the documents at p.66-71.
AYes.
QDid you scan that document to send it by email.
AI can't remember if I scanned it or Scott scanned it.
QWho did you receive the document from.
AThe original document?
QYes.
AI imagine that would have come from Gosia.
QBut then when the document had the signatures on it that appear on p.68, where did the document come from.
AI'm assuming Scott but I can't recall.
QDo you now recall whether Scott gave you the document.
ANo, that's too long ago to actually remember the specifics, I'm sorry.
QWhen he gave you the document were you present at the North Plympton office.
AI would have been at the office but, like I say, I can't remember if he gave it to me or what happened.
QIn any event, you sent the email -
ACorrect, I would -
Q- at the office at 11.18 a.m.
AYes.
QOn p.68 there is a signature at the bottom of the page above the words 'witness signature'.
AYes.
QIs that your signature.
AIt is, yes.
QAnd then above that is a signature of Bernadette Byrnes. When you saw the document again prior to sending it did it have the signature that purports to be Bernadette Byrnes on it.
AI would rather not answer that question on the grounds I may incriminate myself.
QWhen you saw the document prior to sending it did it have the words 'Bernadette Byrnes' in print underneath the signature.
AI would rather not answer that question on the grounds I may incriminate myself.
QWhen you saw the document again prior to sending it do you now recall what documents (sic signatures) were on the page.
AI would rather not answer that question on the grounds I may incriminate myself.
QWas Ms Byrnes present at the office on 19 April 2016.
AOn 19 April? I would rather not answer that question -
HIS HONOUR
QI think you can answer that.
AI'm not sure if she was from memory.
XN
QWas she present at the office on Monday, 18 April.
AI would rather not answer that question on the grounds it may incriminate me.
HIS HONOUR
QAgain, I think you can answer that.
AOn the 18th?
QYes.
AI can't recall if she was in the office or not on that day.
XN
QDid you witness Ms Byrnes sign this document.
AI would rather not answer on the grounds I may incriminate myself.
QDid you witness anyone else sign the document purporting to place Bernadette Byrnes' signature on the document.
ANo, I didn't.
Invoice Finance Facility Deed
Between 18 May 2016 and 26 October 2016, Ms Jankowiak and Mr Allan corresponded by email in relation to ACE entering into a factoring agreement with the plaintiff.
On 18 May 2016, Ms Jankowiak sent a document titled ‘Fifo Invoice Finance Facility Deed’ by email to Mr Allan, asking the two directors of ACE to execute the document as Guarantors, as well as Mr Morphett as an individual Guarantor and Ms Byrnes as a second Guarantor.
On 19 May 2016, Mr Allan emailed the signed Invoice Finance Facility Deed to Ms Jankowiak.[34]
[34] Exhibit P10 [34]-[38], MJ13 pp 131-140.
Ms Jankowiak said in evidence that between 20 April 2016 and providing the Invoice Finance Facility Deed to Mr Allan, she had no contact with Ms Byrnes, took no steps to verify Ms Byrnes’ signature with her and relied on Mr Allan as the person who witnessed Ms Byrnes’ signature.[35]
[35] T113.13-18; T113.37-14.
Defendant’s evidence re Invoice Finance Facility Deed
Ms Byrnes
Ms Byrnes was taken to Exhibit P2 – the original of the Invoice Finance Facility Deed dated 18 May 2016. A copy of that document is in Exhibit P10, MJ13 at pages 131-140.
Her attention was drawn to page 10 of Exhibit P2[36] and directed to the entry, ‘Guarantor 2’, the printed words ‘Bernadette Byrnes’ and the signature appearing above it. She said in evidence that the signature looked like hers but she denied signing the document, or printing her name.[37]
Mr Morphett
[36] Exhibit P10, MJ13 p 140.
[37] T295.29-296.2.
Mr Morphett confirmed that ACE approached the plaintiff for the Invoice Finance Facility Deed in May 2016.
He was taken to Exhibit P10, MJ13, pages 139 and 140 and identified his signature on those pages.
He was directed to what appeared to be the signature of Ms Byrnes in Exhibit P10 MJ13 at page 140. He said in evidence that he did not discuss with Ms Byrnes at any time prior to 18 May 2016, her signing that document and he did not see her sign it.
He gave similar evidence in relation to Ms Byrnes’ signature as he did for the April 2016 Loan Agreement and claimed privilege against self-incrimination.[38]
Mr Allan
[38] T141.2-36.
Mr Allan was taken to Exhibit P10, MJ-13, page 101 where he identified an email from Ms Jankowiak to him attaching the Invoice Finance Facility Deed.
He said in evidence that ACE entered into the Invoice Finance Facility Deed with the plaintiff and that between 19 April 2016 to 18 May 2016, he had not spoken to Ms Byrnes about the fact the company was borrowing money from the plaintiff, nor had he spoken to her about the fact she was named as a Guarantor for monies being borrowed from the plaintiff.[39]
[39] T256.28-257.24.
His attention was drawn to Exhibit P10 MJ-13 page 140 and directed to the signatures that appeared on that page. He identified his signature as a witness under the names Scott W Morphett and Bernadette Byrnes and confirmed that he signed the document as witness to those two signatures.[40]
[40] T257.25-258.3.
He gave similar evidence in relation to witnessing Ms Byrnes’ signature as he did for April 2016 Loan Agreement and claimed privilege against self-incrimination.[41]
[41] T247.37-259.17.
He said that he sent an email to Ms Jankowiak acknowledging receipt of the Invoice Finance Facility Deed at 3.45pm on Wednesday 18 May 2016, and returned the signed Deed to her on Thursday 19 May 2016 at 10.54am.[42] When asked in examination-in-chief if he saw Ms Byrnes between 3.45pm and 18 May 2016 and 19 May 2016 at 10.41am he did not answer and claimed privilege against self-incrimination.[43]
[42] T257.37-58.2; Exhibit P10, MJ13 p 128.
[43] T257.37-258.6.
February 2018 Loan Agreement
Ms Jankowiak deposed that in February 2018, ACE applied by email for a further short-term loan of $200,000 payable over six equal monthly instalments. She provided the Facility Application Form to Mr Allan on 8 February 2018 by email, and received the signed February 2018 Loan Agreement the same day by email from Mr Allan. As a result, $200,000 was advanced by the plaintiff to ACE on 12 February 2018.[44]
[44] Exhibit P10 [39]-[43].
Ms Jankowiak said in cross-examination that she took no steps to verify Ms Byrnes’ signature and that she relied on Mr Allan as the third-party witness. She agreed that notwithstanding the plaintiff having been in a borrowing relationship with ACE for nearly two years, she still had had no communication with Ms Byrnes.[45]
[45] T125.20-31.
Defendant’s evidence re February 2018 Loan Agreement
Ms Byrnes
Ms Byrnes was shown Exhibit P3 – the original of the February 2018 Loan Agreement, a copy of which appears at Exhibit P10, MJ-14 at pages 156-162.
She was taken to the third page of Exhibit P3, and directed to the typed words ‘Bernadette Burnes’ (sic) and a signature above it. She said in evidence that the signature did not look like hers and that she did not sign the document.[46]
Mr Morphett
[46] T297.3-14.
Mr Morphett was taken to Exhibit P10, MJ-14, p 145 and agreed Ms Jankowiak had sent Mr Allan an email in February 2018 in relation to an application for a loan of a further $200,000.
He was taken to Exhibit P10, MJ-14, p 156 which identifies the Guarantors of the loan application as him and Ms Byrnes, albeit Ms Byrnes’ name is misspelt.
He identified his signature on pages 157 and 158 of Exhibit P10 and confirmed he signed the document in both those locations.
He said in evidence that prior to 8 February 2018, he did not speak with Ms Byrnes about providing a guarantee to the plaintiff in respect of borrowing by ACE from the plaintiff.
He said he did not observe Ms Byrnes sign the document at Exhibit P10, MJ-14, page 158, gave similar evidence in relation to Ms Byrnes’ signature as he did for the April 2016 Loan Agreement and claimed privilege against self-incrimination.[47]
Mr Allan
[47] T146.15-147.24.
Mr Allan was taken to Exhibit P10, MJ-14, page 145. He identified an email from Ms Jankowiak to him dated 8 February 2018, at 12.29am and confirmed that ACE had made a further request for a loan from the plaintiff.[48]
[48] T262.34-263.6.
At Exhibit P10, MJ-14 pages 146-152, he identified the loan application sent to him at 12.29am. He said he assumed he received it when he attended work at about 9.00am.[49]
[49] T263.23-36.
He was directed to Exhibit P10, MJ-14 page 153, which he identified as an email from him to Ms Jankowiak on 8 February 2018 at 10.17am returning the signed loan agreement, and to Exhibit P10, MJ-14 page 158 where he identified his signature as a witness on that page. He was directed to the purported signature of the Ms Byrnes and said that he did not recognise it.[50]
[50] T263.37-264.23.
He gave evidence of what occurred in relation to that document between the time he came into work on the morning of Thursday 8 February and 10.17am, the same day. He gave similar evidence in relation to witnessing Ms Byrnes’ signature as he did for the April 2016 Loan Agreement and claimed privilege against self-incrimination.[51]
[51] T264.24-265.2.
He was asked in examination-in-chief if he saw Ms Byrnes between the time he came into work and the morning of 8 February 2018 and 10.17am on the same day. He declined to answer the question and claimed privilege against self-incrimination.
June 2018 Loan Agreement
Ms Jankowiak deposed that in June 2018, ACE applied for a further loan of $200,000. On 7 June 2018, she provided Mr Allan with the Facility Application Form by email and requested the signatures of Mr Morphett and Ms Byrnes. She received the signed document by Mr Allan by email on 8 June 2018, as a result of which the plaintiff advanced $200,000 to ACE on 13 June 2018.[52] That document is the June 2018 Loan Agreement.
[52] Exhibit P10 [44]-[48].
Ms Jankowiak said in evidence that she took no steps to verify that the signature purporting to be Ms Byrnes was in fact that of Ms Byrnes, that she did not check the signature on this document against any others and that she relied on Mr Allan as the witness.[53]
[53] T125.38-126.7.
She also said in evidence that she had met Mr Allan for the first time just prior to the liquidator being appointed to ACE.
Defendant’s evidence regarding June 2018 Loan Agreement
Ms Byrnes
Ms Byrnes was taken to Exhibit P4 – the original of the June 2018 Loan Agreement that appears in copy in Exhibit P10, MJ-15, pages 176-186. She was taken to the third page of Exhibit P4 and directed to the typed words “Burnadette Burnes” (sic) and the signature above it. She said in evidence that the signature did not look like hers and she did not sign the document.[54]
Mr Morphett
[54] T297.15-24.
Mr Morphett was taken to Exhibit P10, MJ-15 and identified his signature on pages 177 and 178. He said that he did not speak to Ms Byrnes about her giving a guarantee in relation to a loan from the plaintiff prior to 8 June 2018. He said he did not observe Ms Byrnes sign the document,[55] gave similar evidence in relation to Ms Byrnes’ signature as he did for the April 2016 Loan Agreement and claimed privilege against self-incrimination.[56]
Mr Allan
[55] T147.25-148.11.
[56] T148.3 -149.3.
Mr Allan was shown Exhibit P10, MJ-15, pp 176–182. He was directed to page 176 and identified an email to him by Ms Jankowiak sent on 7 June 2018 attaching the unsigned June 2018 Loan Agreement. He said in evidence that he returned the signed June 2018 Loan Agreement to the plaintiff on 8 June 2018.[57]
[57] Exhibit P10, p 174.
He identified his signature in Exhibit P10, MJ-15 at page 178. He said he did not recognise the signature above the typed words ‘Burnadette Burnes’. He gave similar evidence in relation to witnessing Ms Byrnes’ signature as he did for the April 2016 Loan Agreement and claimed privilege against self-incrimination.[58]
[58] T265.23-266.3.
He said in evidence that in the period leading up to and including June 2018, he had never had a conversation with Ms Byrnes about ACE borrowing money from the plaintiff, nor with Ms Byrnes about the plaintiff at all. Similarly, he had never had a conversation about the fact she was a Guarantor for loans taken out by ACE from the plaintiff. He did not see anyone purporting to sign the June 2018 Loan Agreement as Ms Byrnes.[59]
[59] T266.4-25.
The claim for privilege against self-incrimination
The evidence of Mr Morphett that he did not see Ms Byrnes sign any of the four documents in question and his claim for privilege against self-incrimination when asked who did sign the documents is not an admission, does not allow me to draw an inference nor does it enable me to conclude who signed Ms Byrnes’ signature on the documents whether that be Ms Byrnes or someone else.[60]
[60] Thompson v Bella-Lewis [1997] 1 Qd R 429, 436 per Davis JA, 454 per McPherson JA.
Mr Allan identified his signature as witness on the four documents in question and also claimed privilege against self-incrimination when asked whether he saw anyone sign what is purported to be Ms Byrnes’ signature. Mr Allan’s claim of privilege against self-incrimination does not enable me to draw an inference as to who signed Mr Byrnes’ signature on the document nor does it enable me to conclude who signed Ms Byrnes’ signature on the documents whether that be Ms Byrnes or someone else.[61]
[61] Ibid.
Other lay evidence
Ms Byrnes gave evidence that at the time she swore her affidavit, Exhibit D14, in January 2019, she was on sick leave.[62] She described herself in evidence as suffering from significant stress and anxiety.[63]
[62] T293.7-28.
[63] Exhibit D14 [16]; T325.1-20.
In her evidence-in-chief Ms Byrnes deposed in paragraph 15 of her affidavit[64] that in or about July 2015 she had gone on sick leave and subsequently left her employment with Macquarie Equities Limited on 4 February 2016, following a dispute regarding entitlements and restraints. She deposed that she had not been employed since that time but corrected that evidence.[65] She was cross-examined on that correction.[66]
[64] Exhibit D14 [14], [15].
[65] T293.4-15.
[66] T299.36-300.26.
Ms Byrnes had failed to say in her affidavit that she worked with Morgans of Adelaide from 22 February 2016 until October 2016 and was then self-employed but affiliated with CottonEscott Future Pty Ltd as an authorised representative. She explained that error as her failure to properly read that sentence in paragraph 15 of her affidavit. She deposed in her affidavit[67] that during the last six months of her employment with Macquarie Equities Limited she experienced significant stress and anxiety.
[67] Exhibit D14 [16].
Exhibits D7, D8 and D9
In the course of giving evidence-in-chief, Ms Byrnes was taken to three bundles of documents; Exhibits D7, D8 and D9.
Exhibit D7 is a bundle of documents, the first of which is an email titled “Fifo Smart Loan Proposed Term Sheet” dated 23 October 2016 sent from Ms Jankowiak to Mr Morphett. Ms Byrnes’ attention was directed to page 14 of the bundle, and specifically to the typed words ‘Burnadette Burnes’ and the signature above it. She said in evidence that it did not look like her signature and she did not sign the original of that document.[68]
[68] T296.3-12.
Exhibit D8 is a bundle of documents, the first of which is an email sent 31 March 2017 from Ms Jankowiak to Mr Allan relating to a loan to ACE made in March 2017. Ms Byrnes was taken to page 17 and her attention drawn to the typed name ‘Burnadette Burnes’ and the signature above it. She said in evidence that it did not look like her signature and that she did not sign the original of that document.[69]
[69] T296.13-23.
Exhibit D9 is a bundle of documents, the first of which is an email from Ms Jankowiak to Mr Allan dated 8 August 2017 concerning a loan to ACE in August 2017. Ms Byrnes was directed to page 15 and her attention directed to a signature above the typed words ‘Burnadette Burnes’ and the signature above it. She said in evidence it did not look like her signature and she did not sign the original of that document.[70]
[70] T296.24-33.
She said that she had never seen the documents, Exhibits D7, D8 and D9, prior to being shown them by her solicitor in this matter.[71]
[71] T296.34-297.2.
Ms Jankowiak was cross-examined on these three exhibits. In each case she said she relied on Mr Allan as the third-party witness and took no steps to verify that Ms Byrnes’ signature was in fact hers.[72]
[72] Exhibit D7 T118.4-119.13; Exhibit D8 T121.23-122.2; Exhibit D9 T124.23-125.3.
Ms Byrnes’ email address
In cross-examination, Mr Morphett was taken to an email chain in Exhibit P1, tab 11, page 54. He identified an email address [email protected]. He said that he set that up for Ms Byrnes in early 2016 because she did not have an email address.[73]
[73] T160.3-36.
He continued that he set the email address up so that he could contact her and that since Ms Byrnes’ email address was on his computer, he could send emails from her email address. He designated her the title “Business Development Officer” because he was trying to obtain funds for ACE and said that he was “begging for her to help me get some funds”. He continued that in January / February 2016 Ms Byrnes tried for a few hours a day but could not continue, leaving him to deal with it, so he sent a couple of emails on her behalf.[74]
[74] T161.8-38.
Mr Morphett explained that Ms Byrnes’ inability to continue was a result of her suffering from mental illness, such that he could not talk to her about anything and she was struggling.[75]
[75] T189.26-191.14.
Business Fuel (Cash Advance) Pty Ltd
Under cross-examination, Mr Morphett was shown emails on pages 52, 53 and 54 of Exhibit P1, which are emails apparently sent and received by Ms Byrnes to and from an organisation named Business Fuel (Cash advance) Pty Ltd, (‘Business Fuel’). He confirmed that he had seen the emails before and said the emails were sent in an attempt to obtain money for ACE.
The email on P52 of Exhibit P1 was sent under Ms Byrnes’ name on 20 January 2016 at 4.07pm.[76] That email contains a sentence “Scott is my spouse but for asset protection purposes, everything is in my name. However, it is okay with me for you to use anything of mine to proceed”.
[76] Exhibit P1, Tab 11, p 52.
Mr Morphett gave evidence that Ms Byrnes did not send the email on page 52 of Exhibit P1 dated 20 January 2016 at 4:07pm and that it came from his computer.[77]
[77] T162.10-38.
Ms Byrnes was cross-examined on the same emails at Exhibit P1, pages 52-54. She was asked why she contacted Business Fuel and she responded that she was trying to help Mr Morphett raise some funds for his company because he was desperate at that point in time.[78]
[78] T312.4-13.
She was asked if she sent the email on 20 January 2016 at 4.07pm to which she responded she did not know but observed that Mr Morphett had access to her emails.[79] Although Ms Byrnes initially denied it was the case that her view was that Business Fuel could use her property as security against a loan to ACE, she later agreed it was her view.[80] Ms Byrnes also said that she did not know if she actually sent the email because Mr Morphett sent a lot of emails from her email address. She said she did not think that she sent the email.[81]
[79] T312.17-314.6.
[80] T312.17-314.6.
[81] T312.11-313.35.
CEG Finance Pty Ltd and Turner Securities
Mr Morphett said in evidence that in early February 2016, Ms Byrnes was assisting ACE to apply for finance and that she had sent five or six emails to different companies, after which he and Mr Allan took over conduct of those enquiries.[82]
[82] T166.25-31.
One of those companies was CEG who requested information from ACE in a series of emails between Mr Hickman of CEG, and Mr Morphett, Ms Byrnes and Mr Allan.
Mr Morphett said in cross-examination that he sent emails under Ms Byrnes’ name to CEG because he was responding to an email sent to Ms Byrnes, and he wanted CEG to believe that the emails were being sent by Ms Byrnes. In so doing he accepted that he knew that he was not being truthful with CEG.[83]
[83] T172.25-173.18.
In an email sent 8 February 2016 at 1.19pm[84] to Mr Allan, Mr Morphett and Ms Byrnes as well as another person at CEG, Mr Hickman reported a number of concerns the directors of CEG held (about advancing money to ACE) and requested further information. One of those requests related to Turner Securities.
[84] Exhibit P1, Tab 16, p 66.
Exhibit P1, tab 16, page 65 is an email from Mr Allan to Mr Hickman sent 9 February 2016 and copied both to Mr Morphett and Ms Byrnes. In that email Mr Allan attaches a number of documents including a document from Turner Securities.[85] The document from Turner Securities purports to be a letter on Turner Securities letterhead dated 8 February 2016, signed on behalf of Turner Securities and confirming that Ms Byrnes has a margin loan with Turner Securities. Mr Morphett was cross-examined on that document.[86]
[85] Exhibit P1, Tab 16 p 97.
[86] T169.31-170.16; T173.19-176.2.
His evidence about from whom he received the letter was confused. He was asked where he got the letter from and responded that he did not get the letter from anyone but then said that he received the Turner Securities letter from Ms Byrnes.[87] Later in his evidence he said he sent it to Ms Byrnes.[88] He agreed that Ms Byrnes did not have a facility with Turner Securities by way of a margin loan at that time.[89] Notwithstanding that fact, he was prepared for the Turner Securities letter to be sent to CEG.[90]
[87] T174.6-175.4.
[88] T181.14-18.
[89] T173.36-175.10.
[90] T175.14-176.2.
In her evidence, Ms Byrnes said that the only thing she knew about Turner Securities in 2016, was that ACE borrowed money from it previously but that she had nothing to do with it.[91]
[91] T315.38-316.10.
Subsequently in cross-examination she was taken to the Turner Securities letter[92] at which time she gave the following evidence:[93]
[92] Exhibit P1, Tab 16, p 97.
[93] T319.35-321.7.
QNo. I'll just pause there for a second perhaps you can close that bundle for a minute and go back to the document at tab 16. I asked you a few moments ago about the company's relationship with Turner Securities.
AYes.
QCould you please turn to p.97.
AYes.
QYou see a letter there on Turner Securities head of paper (sic) dated 8 February 2016 addressed to you. Do you see that.
AYes, I do see that.
QHave you seen this letter before.
AI have seen it.
QWhen did you first see that letter.
AIt would have been on that day, around about whenever that date was, when Scott gave it to me.
QWhat discussions did you have with Scott when Scott gave it to you.
AThere was something with CEG that asked about Turner Securities. I remember asking Scott what was going on with Turner Securities. He explained to me again at the time, and this is a little bit vague for me so please - and I said that we have to explain something about the Turner Securities and Scott suggested - well, he just came up with letter and I knew it was incorrect because I never had a margin loan with Turner Securities. I don't even know where he got the margin loan facility from. I can only assume that the letterhead was taken from somewhere. And I saw this letter, it worried me deeply and I did use it and I shouldn't have, and I would like to think that I have some integrity but not in this particular case.
QWhen you received the letter from Scott it wasn't signed, was it.
AHe gave it to me signed. I don't know who signed it.
QIs that your signature. Did you write the signature on the page.
ANo.
QWhat did you do with the letter when Scott gave it to you.
AI emailed it to CEG, and I shouldn't have and I'm - I deeply regretted that because in my role -
QYou knew when you emailed it -
AI knew it was wrong. It was very wrong.
Q- you didn't have a margin loan with Turner Securities.
ANo, I didn't.
QBut you wanted CEG to believe that you did.
AI wasn't quite sure what I was thinking at the time. I just needed to get the funds for Scott.
Ms Byrnes was taken to Exhibit P1, tab 20, page 155, which is an email from her to Mr Morphett dated 22 February 2016 at 3:40pm. In that email, Ms Byrnes identified a number of actions that needed to be taken including telling CEG that:
I can tell them that I will be surrendering my margin loan in the new financial year – July 2016.
She was cross-examined on that email and agreed that she was aware that Turner Securities had a charge over ACE’s assets, that the charge presented a difficulty for CEG in providing finance and that as a result, a possible solution would involve her telling CEG that she would be surrendering her margin loan in the new financial year. She agreed that was the wrong thing to do.[94]
[94] T321.8-322.6.
Expert Evidence
The plaintiff called Ms Holt, a forensic document examiner with over 10 years’ experience, now working in private practice in New South Wales. Her previous employment was with Forensic Document Services Pty Ltd, the New South Wales Police Force and the Commonwealth Bank of Australia in a similar capacity. She has provided evidence in some capacity in over 200 criminal and approximately 40 civil cases.
She prepared a report[95] dated 12 March 2019 in which she considered Ms Byrnes’ alleged signature on each of the four transaction documents the subject of this action. There was no objection to Ms Holt’s expertise although in final written submissions, the defendant raised a challenge to her experience.[96] I do not accept that submission and consider Ms Holt had sufficient expertise and experience to be able to give opinion evidence.
[95] Exhibit P5.
[96] Defendant’s outline of closing submissions 28 May 2019 at [66].
In order to prepare her report, Ms Holt was provided with the following documents each of which contained Ms Byrnes’ signature (“specimen signatures”).
a)The April 2016 loan agreement;
b)The Invoice Finance Facility Deed;
c)The February 2018 loan agreement;
d)The June 2018 loan agreement;
e)Ms Byrnes’ Will dated 6 November 2013;
f)An acceptance of appointment signed and dated 6 November 2013;
g)A letter from the trustees of the Boundary Superannuation Fund dated 5 August 2014;
h)A document with an expiry date of 25 December 2018;
i)A document issued 29 June 2015;
j)A taxation return with electronic lodgement declaration dated 22 July 2016;
k)A taxation return with electronic lodgement declaration dated 19 October 2017;
l)QBE Insurance claim form dated 30 July 2018;
m)A ‘vetting acknowledgement’ dated 7 September 2018; and
n)The back of a card, undated.
Appendix F to Ms Holt’s report, contains the four questioned signatures as well as the 17 specimen signatures that were provided to her. Since it will be necessary to refer to some features of the questioned signatures and the specimen signatures in these Reasons I attach a copy of them at Appendix A.
Ms Holt conducted a microscopic and macroscopic examination of the questioned and specimen signatures. She acknowledged that Item I1-3 – the alleged signature on the April 2016 Loan Agreement, was a reproduction, as were the specimen signatures obtained from Items I8, I9 and I14. Ms Holt explained that examinations of reproductions can have a limiting effect on the strength of the conclusions reached because the reproduction process often does not reproduce the finer details of letter construction, nor does it allow a proper assessment of the line quality and speed or fluency of the writing.[97]
[97] Exhibit P5 [8].
Ms Holt carried out her analysis and formed her conclusions against two hypotheses:[98]
H1:The writer of the B Byrnes specimen signatures (Items 5-14) wrote the questioned B Byrnes signatures on Items 1-4;
a. naturally in her normal manner;
b. in such a way as to disguise her signature;
c. or it was an accidental occurrence; or
H2: someone else, other than the writer of the B Byrnes specimen signatures, signed Items 1-4 attempting to copy the form of the genuine signature of B Byrnes either freehand or by some form of tracing process.
[98] Exhibit P5 [15].
Ms Holt referred in her report to the “indicia of forgery” and “pictorial similarity”. [99] She described the indicia of forgery as usually being associated with the following features in a questioned signature:
a)Slowness and deliberation in the writing;
b)Pen-lifts in places where pen-lifts would not be expected to occur;
c)Blunt line endings or beginnings;
d)Lack of fluency in the writing;
e)Subtle patching or retouching of strokes.
[99] Exhibit P5 [15], [17].
She explained pictorial similarity as meaning that the questioned and specimen signatures have some level of pictorial resemblance that is observable and cannot be attributed to chance or coincidence. This observation allows the document examiner to formulate hypotheses on how the signatures may have come into existence.
April 2016 Loan Agreement and Invoice Finance Facility Deed
Ms Holt concluded that in relation to the April 2016 Loan Agreement and the Invoice Finance Facility Deed:[100]
There is no evidence of the indicia of forgery observable on the questioned signature of B Byrnes contained on Items 1 and 2. The signatures are written in a free and fluent manner and fall well within the range of variation exhibited by the specimen signatures. Note, the questioned signatures are also semi-legible, written in a similar manner to the specimen signatures. This finding lends very little support for the alternative proposition, H2.
The questioned signatures on Items 1 and 2 displayed a very high degree of pictorial similarity to the provided specimen signatures. In fact, a number of fundamental similarities were observed in terms of letter design, construction, slope, shape spatial relationships, speed, fluency and baseline habits between the questioned and specimen signatures.
[100] Exhibit P5 [17], [18].
Accordingly, Ms Holt concluded that there was very strong support for the occurrence of the hypothesis H1, i.e.: that the writer of the specimen signatures wrote the questioned signatures on the April 2016 Loan Agreement and the Invoice Finance Facility Deed, writing naturally in her normal manner and little or no support for H2. She described her conclusion as a level 2 conclusion meaning very strongly supported.[101]
[101] Exhibit P5[32], [33], [34], Appendix G.
February 2018 Loan Agreement and June 2018 Loan Agreement
As to the February 2018 Loan Agreement and the June 2018 Loan Agreement, Ms Holt concluded that there was no evidence of the indicia of forgery on these items, however, the questioned signatures displayed a very limited pictorial similarity to the specimen signatures with limited similarities and some inconsistencies.
She continued that although there was no support for the hypothesis H1, she considered that in terms of a potential disguise i.e. that Ms Byrnes signed her name in an attempt to disguise her signature, there was limited support for this sub-proposition albeit very weak.[102]
[102] Exhibit P5 [26].
Ms Holt explained in her report that the differences observed between the questioned and specimen signatures for these two documents were quite overt and fitted within the general expectations of disguise. Some of those expectations of disguise were identified as including changes in slant, letter formation, speed, size, height and length ratios. She also found some aspects of the questioned signatures consistent with expectations for disguised writing, namely the relative fluency and appearance of good writing speed.[103] Nevertheless, Ms Holt considered there was more support for hypothesis H1 over H2, with the degree of that support being weak or limited on the basis that there was an attempt to disguise the signature. She described her conclusion as a level 4 conclusion, which is highly qualified.[104]
[103] Exhibit P5 [22]-[31].
[104] Exhibit P5, Appendix G.
Consideration
In these reasons, when I say I am satisfied about a matter or that I find something, I do so on the balance of probabilities. In some instances, however I approach a matter on the basis set out in Briginshaw v Briginshaw:[105]
But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony, or indirect inferences … This does not mean that some standard of persuasion is fixed intermediate between the satisfaction beyond reasonable doubt required upon a criminal inquest and the reasonable satisfaction which in a civil issue may, not must, be based on a preponderance of probability. It means that the nature of the issue necessarily affects the process by which reasonable satisfaction is attained.
[105] [1938] 60 CLR 33, 362-3 per Dixon J (as he then was).
When that occurs I refer to being satisfied on the basis set out in Briginshaw.
The first issue in this case is whether the defendant signed her name on any of the four guarantees.
Principles concerning handwriting evidence
Section 30 of the Evidence Act provides as follows:
30—As to comparison of disputed writing
Comparison of a disputed writing with any writing proved to the satisfaction of the judge to be genuine shall be permitted to be made by witnesses; and such writings, and the evidence of witnesses respecting the same, may be submitted to the court as evidence of the genuineness or otherwise of the writing in dispute.
In Adami v The Queen[106] the High Court considered the operation of s 30 of the Evidence Act. It observed that the effect of the section is such that comparison of a disputed writing with any writing proved to the satisfaction of the judge to be genuine, is permitted to be made by witnesses and that it is not necessary for the provision to be used with the assistance of witnesses, whether expert or otherwise.
[106] (1959) 108 CLR 605, 616.
The High Court accepted the propriety of a jury comparing the signatures for itself and drawing inferences as to the identity of the make of the document from that comparison.[107]
[107] Ibid, 616-618.
The defendant submitted that the Court should not act on Ms Holt’s opinion as distinct from her observations.[108] In making that submission, the defendant relied on the following passage from Cross on Evidence: [109]
Strictly speaking, an expert in handwriting should not be asked to say definitely that a particular writing is to be assigned to a particular person. The expert’s function is to point out similarities between two specimens of handwriting or differences, and leave the court to draw its own conclusion.
[108] Defendant’s written closing submissions at [41].
[109] 11th Australian Edition, 2017 [39105].
The same paragraph appears in the loose-leaf edition of Cross at the same paragraph number.[110]
[110] J D Heydon, Cross on Evidence , vol 1 (Australian Edition, loose-leaf service) [39105].
In making that statement Cross cites Wakefield v Bishop of Lincoln.[111] Mr Thomas, counsel for the plaintiff, submitted that to the contrary, in R v Mazzone the Full Court of the Supreme Court of South Australia said:[112]
… the view expressed in Cross is overly strict … If Wakefield v Bishop of Lincoln … is authority for the proposition in Cross then I say that the view expressed in Cross is overly strict, may have been a view correct in 1921 but should be declared wrong in 1985. I can see no reason why an expert in handwriting should not, as may other experts, state his ultimate opinion.
[111] (1921) 90 LJPC 174.
[112] (1984) 43 SASR 330, 339 per Bollen J.
In the same paragraph of Cross, it is noted that:[113]
Expert evidence of handwriting does not play a conclusive or dominant role. It must be weighed with the non-expert evidence. It can be put aside if there is a strong circumstantial case against it. And the opinion an expert arrives at by examining a signature alleged to be authentic and comparing it with known and accepted signatures of the alleged writer need not be accepted by a trier of fact unconvinced by the reasons advanced.
[113] J D Heydon, Cross on Evidence , vol 1 (Australian Edition, loose-leaf service) [39105].
Accordingly, the Court is entitled to form its own conclusion about comparisons of disputed handwriting without any further evidence and may put aside the expert opinion if there is a strong circumstantial case against it.
Credit and Findings
I find that ACE was continually in need of funds and was actively seeking loans from various lenders. I find that in early to mid-2016 Mr Morphett was desperate to obtain finance for ACE.
I find that in or about January 2016, Mr Morphett set up an email account in Ms Byrnes’ name on his computer. He described Ms Byrnes as “Business Development Officer” for ACE, but in fact Ms Byrnes only did a small number of hours in that role in February 2016. Mr Morphett said in evidence he set up an email account for Ms Byrnes on his computer so she could have an email address and so he could contact her. Whereas I accept setting up an email address for Ms Byrnes as “Business Development Office” so she could send emails on behalf of ACE is a reasonable course to take, setting it up on Mr Morphett’s computer is unusual although it may be because of Ms Byrnes’ mental health at the time. However, Mr Morphett’s stated reason of being “…so I could contact her” stretches the bounds of credibility. Mr Morphett and Ms Byrnes were in a domestic relationship and I find that setting up Ms Byrnes’ email address on his computer was so he could monitor emails sent to Ms Byrnes’ address and respond to those emails if necessary.
Credit
As to Ms Byrnes’ credit and Mr Morphett’s credit, a number of matters were put to them. The most serious of which were the allegations relating to the Turner Securities letter.
Ms Byrnes conceded in cross-examination that contrary to paragraphs 16 and 17 in her affidavit, Exhibit D14, where she deposed that she used the ACE email address for a limited period and only for her own purposes, she had used it in relation to CEG and I so find.[114]
[114] T324.12-.21.
Ms Byrnes said that she could not remember what was happening in the first part of 2016 and said that during the first six months of 2016, she was suffering from severe depression such that she did not remember everything that occurred.
Ms Byrnes called no medical evidence about her mental health. Nonetheless, I am prepared to accept that she suffered from what I would describe in broad terms as mental health issues in the latter part of 2015 and the early part of 2016, and that it may be that she has forgotten some matters.
Ms Byrnes also gave evidence in cross-examination that sometimes Mr Morphett would give her documents and she would sign them without asking, that sometimes she did not read them and that she trusted him.[115]
[115] T328.21-23.
It was suggested to Ms Byrnes in cross-examination that she knew she had been involved in trying to raise finance for ACE when she swore her affidavit, Exhibit D14 to which she replied she had completely forgotten. That evidence is inconsistent with her subsequent evidence that in February 2016 she “… just needed to get the funds for Scott”[116] and I do not accept her evidence that she had forgotten she had been involved in trying to raise finance for ACE.
Turner Securities
[116] T321.6-7.
The email sent by Mr Allan on 9 February 2016 to CEG enclosed, amongst other things, the Turner Securities letter.[117] Ms Byrnes said that when she received the Turner Securities letter, she did not have a margin loan with Turner Securities.[118] I find the Turner Securities letter was a fabrication and I infer to the Briginshaw standard that it was Mr Morphett who fabricated it. Mr Morphett ultimately said that he had sent the Turner Securities letter to Ms Byrnes[119] and that he had received the Turner Securities letter from Ms Byrnes but his evidence on that topic was evasive.[120] It may be that he was trying to protect Ms Byrnes in some way but that does not justify him being evasive. I find that Mr Morphett sent the Turner Securities letter to Ms Byrnes.
[117] Exhibit P1, p 97.
[118] T323.1-29.
[119] T181.14-18.
[120] T173.36-175.4.
Ms Byrnes said in her evidence that the Turner Securities letter was signed when she received it and that it is not her signature on page 97 of Exhibit P1. I have examined that signature carefully and I accept it was not Ms Byrnes’ normal signature. I entertain some doubt as to Ms Byrnes’ claim she did not write the signature, in part because of the letter “y” in that signature on the Turner Securities letter but also because there is no explanation as to why Mr Morphett sent the Turner Securities letter to Ms Byrnes already signed just for her to return it. Nevertheless, applying the approach in Briginshaw I am not satisfied Ms Byrnes wrote that signature and I accept the signature was already on the Turner Securities letter when it was sent to Ms Byrnes by Mr Morphett. Irrespective, Ms Byrnes readily conceded that her actions in relation to the Turner Securities letter was wrong.
In cross-examination, Ms Byrnes said she emailed the Turner Securities letter to CEG,[121] however I find she is mistaken and it was sent by Mr Allan to CEG although there is no doubt Ms Byrnes knew it would be sent to CEG.[122]
[121] T319.35-321.7.
[122] Exhibit P1, p 65.
Ms Byrnes said that the Turner Securities letter was sent to CEG because “I just needed to get the funds for Scott”.[123]
[123] T321.6-7.
The events described in relation to CEG Finance and Turner Securities, show a clarity of thinking albeit a gross lack of judgement on the part of both Ms Byrnes and Mr Morphett.
In his written closing submissions, the defendant’s Counsel characterised Ms Byrnes’ conduct in relation to sending the Turner Securities letter to CEG as a dishonest and fraudulent act.[124] Quite independently of that characterisation, I apply the approach in Briginshaw to that conduct and I find Ms Byrnes’ actions in relation to the Turner Securities letter to be at least dishonest and misleading. However, to be clear, I am not satisfied it was fraudulent. I find that Ms Byrnes went along with Mr Morphett in relation to the Turner Securities letter so as to assist him in obtaining finance for ACE.
[124] Defendant’s written submissions, 28 May 2019 at [24].
I have found that Mr Morphett was desperate to obtain finance for ACE. Applying the approach in Briginshaw, I find that Mr Morphett was prepared to act in a dishonest and misleading manner to achieve that result.
Business Fuel
Ms Byrnes was cross-examined about an email under her name sent on 20 January 2016 at 4.07pm to the company Business Fuel.[125] She was asked if a statement in that email that ‘Scott is my spouse but for … protection purposes everything is in my name’ was true. She said yes.
[125] T312.1-314.6.
She was then asked about the next sentence ‘however it is ok with me for you to use anything of mine to proceed’. She initially denied that was her view but was evasive in her evidence before finally conceding the statement did reflect her view.
Mr Morphett’s evidence on that topic was that he sent that email.[126] As I have noted above, Ms Byrnes said in evidence in relation to the Turner Securities letter that as at February 2016 she ‘…wasn’t quite sure what she was thinking at that time. I just needed to get funds for Scott.’
[126] T162.3-163.4; T163.36-164.14.
I find that as at early to mid-2016, Ms Byrnes was prepared to put up her property as security for any loan to ACE if that was what was required to obtain the finance ACE needed.
I have already accepted that in early 2016 Ms Byrnes may have forgotten some matters by reason of her mental health issues. It is for that reason that I find Ms Byrnes was mistaken when she said that the statement in the email under her name to Business Fuel sent on 20 January 2016 at 4:07pm that “Scott is my spouse but for asset protection purposes, everything is in my name. However, it is okay with me for you to use anything of mine to proceed” was not true.
I find that statement reflected her attitude at the time and I further find that it was she who sent the email and not Mr Morphett.
The result of my findings on credit is that I treat the evidence of both Ms Byrnes and Mr Morphett with a great deal of caution.
Mr Allan’s evidence
Mr Allan’s evidence is that his signature appears as a witness to each of Ms Byrnes’ four signatures. The effect of his claim to privilege against self-incrimination is that there is no evidence that he actually witnessed Ms Byrnes apply her signature to any of the four documents and I proceed on that basis.
The four documents
Prior to considering each of the four signatures I deal with the defendant’s more general submissions.
Defendant’s Submissions – Generally
Turner Securities apart, I accept the gravamen of the defendant’s submissions that other matters that were put to Ms Byrnes concerning her credit were not of the same order of seriousness as the Turner Securities issue. That is not in any way to belittle them.
The defendant submitted that there was no documentary evidence to support the conclusion that Ms Byrnes signed the guarantees or knew about them or the plaintiff. I accept that submission but the lack of documentary material that might refer incidentally to the question of whether or not Ms Byrnes signed the guarantee to support a loan to ACE is, in my view, only a factor to be taken into consideration, which I do, but it is not determinative.
The defendant also points to the evidence of Mr Morphett[127] that:
a) He did not inform Ms Byrnes that ACE was borrowing from the plaintiff and did not discuss the plaintiff with her;
b) He did not witness Ms Byrnes sign the documents;
c) He knew for a fact she did not sign the second guarantee (the Invoice Finance Facility Deed);
d) When he handed each of the documents to Mr Allan, they bore the apparent signature of Ms Byrnes.
[127] Defendant’s written submissions at [32].
I have already found that Mr Morphett has demonstrated, in relation to the Turner Securities letter a willingness to act dishonestly and in a misleading fashion. Given my finding that Mr Morphett is prepared to act in such a fashion, I do not consider his tendency to act in such a manner to be limited to his efforts to obtain finance. Mr Morphett is Ms Byrnes’ domestic partner. He has an interest (in the non-proprietary sense) in Ms Byrnes not having signed the signatures because it closes an opportunity for the plaintiff to proceed against assets in Ms Byrnes’ name consequent upon the guarantees.
Accordingly, I do not accept Mr Morphett’s evidence that he did not inform Ms Byrnes that ACE was borrowing from the plaintiff, did not discuss that with her, did not witness Ms Byrnes sign at least the April 2016 Loan Agreement and the Invoice Finance Facility Deed, nor that Ms Byrnes did not sign the Invoice Finance Facility Deed.
I accept his evidence that when he handed each of the documents to Mr Allan they bore the apparent signature of Ms Byrnes. In my view that flowed logically from Mr Morphett being an intermediary between Mr Allan and Ms Byrnes.
I also observe that the process embarked upon by the plaintiff in accepting Ms Byrnes’ purported signatures as Guarantor on each of the four documents was less than satisfactory. Ms Jankowiak took no steps to communicate with Ms Byrnes and relied on Ms Byrnes’ signature being witnessed by Mr Allan, a person who had an interest in the outcome, in the sense he was the financial controller of ACE which needed money, as opposed to an independent third party.
The fact the lender was based in Victoria and the borrower and Guarantor in South Australia provides no basis for a failure to take the basic, indeed rudimentary steps of verifying a signature by the use of an independent third party and / or communicating with Ms Byrnes directly to confirm her willingness to be a Guarantor. Had those simple steps been undertaken, it is not putting it too highly that this dispute would not have occurred.
Against that background, I deal with each of the documents.
April 2016 Loan Agreement[128]
[128] Exhibit P10, MJ12, p 68; Exhibit D6.
Mr Morphett said in evidence that he did not witness Ms Byrnes sign the April 2016 Loan Agreement, nor prior to 18 April 2016 did he discuss with Ms Byrnes her signing the document. He also said that prior to 18 April 2016 he did not inform Ms Byrnes that ACE was borrowing money from the plaintiff.
I have already found I do not accept his evidence in relation to him not discussing ACE’s finance application to the plaintiff nor that he did not witness Ms Byrnes sign the April 2016 Loan Agreement.
To the extent the defendant submits I should infer that the words and signature on the April 2016 Loan Agreement in Exhibit P10, MJ-12, p 68, were produced by Mr Morphett using the handwriting in question from another document written by Ms Byrnes,[129] with respect, that invites me to speculate. I am not prepared to draw that inference.
[129] Defendant’s written submissions at [37].
There was an issue about the lightness of the pen stroke on the initial ‘B’ on both the first and second questioned signatures.
Ms Holt did not consider the lightness of the pen stroke to be indicative of hesitancy on the part of the writer and expressed the view that both signatures were written fluently.[130]
[130] T76.12-77.17; T82.34-83.14; T87.28-88.18.
The defendant submitted in respect of the first and second signatures the lightness of the initial “B” was consistent with hesitancy of pen stroke. The defendant was critical of Ms Holt’s refusal to accept this possibility and submitted she was content to “invent theories such as a failure of the pen”.[131] I do not accept that submission. Ms Holt gave evidence in relation to the lightness of the initial “B” on the signatures on both the April 2016 Loan Agreement and the Invoice Finance Facility Deed during her evidence. She considered there was likely a pen failure and that the signatures were written fluently. I accept that evidence.[132]
[131] Defendant’s written submissions at [60].
[132] T87.28-34.
In her report,[133] Ms Holt is of the opinion that the signature is consistent with her hypothesis H1. She said that there was no evidence of the indicia of forgery to which she referred in her report, and that the signature on Item I1-1 displayed a very high degree of pictorial similarity to the provided specimen signatures.
[133] Exhibit P5.
In relation to pictorial similarity, the defendant submits that the signature on the April 2016 Loan Agreement looks somewhat similar to the specimen signatures and that the signature raised an arguable case that it was signed by Ms Byrnes.[134]
[134] Defendant’s written submissions at [16].
I have examined the signature on the April 2016 Loan Agreement carefully and compared it with the specimen signatures. I note there is a tremor on the curve of the ‘S’ in the first signature. Ms Holt observed that tremor and expressed her opinion that it was highly unlikely that the tremor would be caused by someone attempting to simulate the signature.[135] I accept that evidence.
[135] T80.1-82.6.
During the course of Ms Holt’s cross-examination, it was suggested to Ms Holt that there was a third hypothesis, namely, that someone wrote Ms Byrnes’ signature using a “made up signature”.[136] Ms Holt did not accept that hypothesis.[137] In the defendant’s written submissions, it was submitted that the existence of Ms Holt’s failure to accept this third hypothesis, which counsel described as “simple forgery” (a label Ms Holt did not accept[138]), was such as to severely weaken the reliability of Ms Holt’s opinion and was suggestive of an inflexibility of view. I reject that submission and I do not consider that Ms Holt had an inflexibility of view such as to severely weaken the reliability of her opinion.
[136] T57.18-20.
[137] T57.21-58.22.
[138] T53.24-54.10, T57.18-58.22.
Ms Byrnes agreed in evidence that the signature appearing on p 68 of Exhibit P10 looked like her signature, but she denied signing the document.
Although Ms Byrnes denied signing the document, I find that she did so and either had forgotten she did or she simply signed the document without paying any attention to what she was signing and now has no recollection of signing the document. I accept Ms Holt’s evidence and I find that at that time Ms Byrnes was prepared to provide security for finance to assist Mr Morphett and ACE. I find that the signature “B Byrnes” on the April 2016 Loan Agreement was written by Ms Byrnes.
Invoice Finance Facility Deed[139]
[139] Exhibit P2; Exhibit P10, MJ12, pp 131-140.
Mr Morphett’s evidence in relation to the Invoice Finance Facility Deed was that he did not discuss with Ms Byrnes at any time prior to 18 May 2016 signing the Invoice Finance Facility Deed, did not see her sign it and that he knew ‘…for a fact she didn’t sign it’.[140] He also said that when he took the document to Mr Allan, all of the signatures, apart from Mr Allan’s, were on the page.[141] I have no hesitation in not accepting his evidence in relation to him not discussing the application to the plaintiff with Ms Byrnes, nor the application of Ms Byrnes’ signature on the Invoice Finance Facility Deed for the reasons I have set out above.
[140] T215.22-23.
[141] T141.2-36.
The defendant submits that the final ‘S’ of the signature of Ms Byrnes’ purported signature is different from the specimen signatures. Specifically, it was put to Ms Holt in Cross-examination that the tail of the ‘S’ did not intersect with the stem of the ‘S’. Mr Holt’s evidence was that the ‘S’ on the second signature fell within the range of specimen signatures and did not accept it fell outside the range.[142]
[142] T82.34-86.38.
The defendant submitted that none of the specimen signatures contained an “S” like the signature on the Invoice Finance Facility Deed and submitted that the only explanation given by Ms Holt in this respect was a highly subjective one.[143] I do not accept that submission. In particular as I have noted, Ms Holt said in her evidence that she considered the tail of the final “S” for this signature to be within the parameters of the specimen signatures.[144]
[143] Defendant’s written submissions at [59].
[144] T83.20-84.22.
The defendant also made the same submissions in relation to the Invoice Finance Facility Deed as in relation to the April 2016 Loan Agreement. I reject those submissions for the same reasons set out above.
In her report, Ms Holt concluded that the signature on that page satisfied hypothesis H1, and found very little support for the alternative hypothesis H2.
Ms Byrnes agreed in evidence that the signature appearing on page 140 of Exhibit P10, looked like her signature but she denied signing it.
I have examined the signature carefully. For the same reasons I have set out in relation to the April 2016 Loan Agreement I do not accept Ms Byrnes evidence that she did not sign the guarantee forming part of the Invoice Finance Facility Deed and I find that she has forgotten she did so. I find that as at May 2016 Ms Byrnes was prepared to provide security for finance to assist Mr Morphett and ACE.
I accept Ms Holt’s evidence and I find that the signature “B Byrnes” on the Invoice Finance Facility Deed, was written by Ms Byrnes.
February 2018 Loan Agreement[145]
[145] Exhibit P3; Exhibit P10, MJ 4, pp 156-162.
In Mr Morphett’s evidence-in-chief, he said that he did not speak with Ms Byrnes at all about providing a guarantee to the plaintiff in respect of borrowing, nor did he observe Ms Byrnes sign the February 2018 Loan Agreement. Further, at the time he provided the document to Mr Allan for witnessing, his signature and that of Ms Byrnes were on the document.
There had been a number of loan agreements entered into between the plaintiff and ACE, between the Invoice Finance Facility Deed and February 2018.[146] I find that it is more likely than not that after a number of loan agreements had been entered into, Mr Morphett did not speak with Ms Byrnes about providing a guarantee and did not observe her signing the February 2018 Loan Agreement.
[146] T147.3-25.
Ms Holt’s opinion is that the signature showed no evidence of the indicia of forgery and very limited pictorial similarity. She formed the view that the signature provided more support for hypothesis H1, set out above, over hypothesis H2, but that the degree of that support was weak or limited.[147]
[147] Exhibit P5 [22]-[30], [32(b)]-[34].
In cross-examination, Ms Holt did not accept that it was equally open that this signature was consistent with what counsel described as the third hypothesis, namely that someone wrote the signature using a made-up signature.[148] It was submitted by the defendant that Ms Holt was not able to articulate any particular indicia that would distinguish between a “simple forgery” and a disguised signature. Having said that, the defendant’s written submissions continued by observing that Ms Holt could identify three indicia, albeit the defendant submitted it was capable of answering both.[149]
[148] T58.15-52.
[149] T90.18-29; Defendant’s written submissions at [54].
The defendant also submitted that Ms Holt appeared not to understand that her duty was not to prosecute Ms Byrnes but to assist the court.[150] I do not accept that characterisation of Ms Holt’s evidence. She is entitled to express her opinion and to maintain that opinion on readily defensible bases. In my view she did that and contrary to the written submissions, I do not accept that Ms Holt’s view in relation to her readily conceded weak support for H1 over H2 calls into question the reliability of her opinion as to the first and second signatures i.e. the April 2016 Loan Agreement and the Invoice Finance Facility Deed.[151]
[150] Defendant’s written submissions at [57].
[151] Defendant’s written submissions at [58].
Ms Byrnes denied the signature appearing in the guarantee section of the February 2018 Loan Agreement looked like hers and she denied signing the document.
I have considered the signature carefully.
This signature was applied some two years after the previous two documents. Exhibit D7, D8 and D9 are all loan documents between the plaintiff and ACE during the period October 2016 to August 2017. In each case there is a signature in the guarantee section purporting to be that of Ms Byrnes, none of which bear any similarity to the signature on the April 2016 Loan Agreement, the Invoice Finance Facility Deed or the specimen signatures.
Albeit seeing them for the first time in the witness box, Ms Holt agreed that each of those three signatures in Exhibits D7, D8 and D9 would cause her to question their authenticity and that she would seek an assurance that they were authentic.
I consider that on balance, after Ms Byrnes signed the first two documents being the April 2016 Loan Agreement and the Invoice Finance Facility Deed, she did not sign the subsequent documents. I am unable to determine by whom the signature purporting to have been hers was signed.
Accordingly, I accept Ms Byrnes’ evidence that it is not her signature and she did not sign it. I do not accept Ms Holt’s conclusion that the signature in question was written by Ms Byrnes in an attempt to disguise her signature rather than the alternative hypothesis, H2, that is: someone other than the writer of the B Byrnes specimen signatures wrote the questioned B Byrnes signature.
I find that the signature of “B Byrnes” on this document was not written by Ms Byrnes.
June 2018 Loan Agreement[152]
[152] Exhibit P10, MJ16, pp 167-184.
Mr Morphett said in evidence that he did not speak to Ms Byrnes about the provision of a guarantee in relation to a loan from the plaintiff prior to 8 February to June 2018, did not observe Ms Byrnes sign the document and when he provided it to Mr Allan for witnessing, his and Ms Byrnes’ signature were on the document. For the same reasons I have set out in relation to the February 2018 Loan Agreement, I accept that evidence.
Ms Holt’s opinion is that there was weak support for hypothesis H1 over H2 in relation to the signature.
Ms Byrnes denied that the signature appearing in the guarantee section of the June 2018 Loan Agreement looked like her signature and denied signing the document.
I have considered the signature carefully.
I accept Ms Byrnes’ evidence that it is not her signature and that she did not sign it. I do not accept Ms Holt’s evidence in her support for hypothesis H1 over H2.
For the same reasons I have set out above for the February 2018 Loan Agreement, I find the signature “B Byrnes” on the June 2018 Loan Agreement was not written by Ms Byrnes.
Conclusion as to signatures
I find that Ms Byrnes signed the April 2016 Loan Agreement as a Guarantor and the Invoice Finance Facility Deed as Guarantor.
I find that Ms Byrnes did not sign either the February 2018 Loan Agreement, or the June 2018 Loan Agreement in any capacity.
Quantum
A preliminary issue is that there is no evidence Mr Allan actually witnessed Ms Byrnes sign either the April 2016 Loan Agreement or the Invoice Finance Facility Deed.
Deed or Simple Contract of Guarantee?
Counsel for the plaintiff cited McKay v National Australia Bank Ltd[153] in support of the proposition that the fact that the April 2016 Loan Agreement and the Invoice Finance Facility Deed documents were not witnessed does not affect their binding nature.
[153] [1998] 1 VR 173, 177.
The signature panel for the Guarantors in the April 2016 Loan Agreement provides that the document is executed as a Deed. In the case of the Invoice Finance Facility Deed, the signatures panel for Guarantors records that the signature is “signed, sealed and delivered”.
Pursuant to sections 41(1) and (5) of the Law of Property Act 1936 (the ‘Act’), subject to the issue of witnessing, both documents are capable of being Deeds.
Section 41(2) of the Act provides that the execution of a Deed must be attested by at least one witness who is not a party to the Deed where the Deed is executed by a natural person.
Section 41(4) of the Act provides:
Notwithstanding the defective execution of a deed by or on behalf of a party to the deed, the execution will be taken to be valid if it appears from evidence external to the deed that the party intended to be bound by it.
On a proper reading of the section, it does not apply to the witness but to the person executing the Deed as a party or on behalf of a party to the Deed.
Since there is no evidence that the Deed was actually witnessed, then the guarantee, in both cases, does not have the status of a Deed, but is a simple contract.
That being the case, the contract of guarantee must be supported by consideration.[154] Counsel for the defendant accepted in the course of his oral closing submissions that it was arguable that consideration flowed between the plaintiff and Ms Byrnes.[155] I consider the issue of consideration below.
Guarantee Terms and Conditions – April 2016 Loan Agreement
[154] McKay v National Australia Bank Ltd [1998] 1 VR 173,177; James O’Donovan and John Phillips, The Modern Contract of Guarantee (Lawbook Co, 4th ed, 2004) p 5058 at [2.1000].
[155] T462.35-427.1.
The preamble to the April 2016 Loan Agreement reads:[156]
[156] Exhibit P10, MJ12, p 66.
ALL INFORMATION IS HELD IN ACCORDANCE WITH LENDER’S PRIVACY POLICY. BORROWER AND GUARANTOR CAN ASK LENDER FOR A COPY.
This Facility Application form is submitted by the person named in Part A Below (the “Borrower”) to Millard Shaw Pty Ltd t/a Fifo Capital Port Phillip (ABN 51 090 126 248) (the “Lender”). The Lender’s Head Office is at Level 16, 390 St Kilda Road, Melbourne, VIC, 3004, PO Box 1272 St Kilda South VIC 3182. If the Lender accepts the Borrower’s application a binding agreement is created between the Lender, the Borrower and the person named in Part B (the “Guarantor”) and the Lender will make an advance to the Borrower.
The terms and conditions of that agreement (including the terms and conditions of the advance) are set out below. Amounts due to the Lender will be paid by the Borrower under the direct debit authority in Part E.
Acknowledgment
By executing below, the Borrower and the Guarantor each acknowledge receipt of a copy of this document, certify that the advance will be for business purposes and agree that they will be bound by the terms and conditions set out below. Those terms and conditions include a guarantee and indemnity from the Guarantor and the provision of security by both the Borrower and the Guarantor. The Guarantor acknowledges that it has requested that the Lender advance the Total Loan Amount specified in Part C. Both the Borrower and the Guarantor acknowledge that the terms and conditions set out below may apply to other advances and those other advances will be covered by the guarantee and indemnity provided by the Guarantor without any further acknowledgment. Similarly, those other advances will be secured by the security provided by the Borrower and the Guarantor without any further acknowledgment. (Underlining provided)
There is no equivalent preamble in the Invoice Finance Facility Deed.
The terms and conditions which apply to the April 2016 Loan follow the execution page.[157]
[157] Exhibit P10, MJ12, pp 69-72.
Clause 11 provides:
GUARANTEE AND INDEMNITY
11.1In return for the Lender (at the request of each Guarantor) advancing the Total Loan Amount to the Borrower each Guarantor; (underlining provided)
(a) guarantees that the Borrower will pay the Money Owed to the Lender in accordance with this document;
(b) guarantees that the Borrower will observe and perform each of its obligations under this document; and
(c) as a separate and principal obligation to the Lender, must indemnify the Lender against all actions, claims, liabilities, costs, expenses and losses of any kind which the Lender may sustain, suffer, incur or become liable for in respect of something done, not done or arising in any way out of, or in relation to, this document. This includes loss suffered because a Borrower does not perform any of its obligations under this document, because the Lender cannot enforce this document (either partly or completely) or because the Borrower does not pay, is unable to pay or is not obliged to pay the Money Owed (whether in whole or in part) to the Lender.
11.2Each Guarantor’s liability is absolute, irrevocable and unconditional. The liability is not affected by anything at all which, but for this provision, might operate to relive the Guarantor of its obligations, including:
(a) any event, transaction or arrangement, including one which increases the Money Owed. This would include the delivery of a Further Application (with or without the knowledge or approval of the Guarantor), the acceptance of that application and the Lender advancing the Total Loan Amount pursuant to it;
(b) the assignment, novation, change or extension of this document or any other document or agreement;
(c) the Borrower or any other Guarantor not being bound by any document for any reason or being discharged or released (including by operation of law) from any obligation;
(d) this document or any other document being partly or completely unenforceable or being terminated;
(e) the Lender not obtaining any Security Interest or a Security Interest with any particular value or priority; the Lender releasing, waiving or changing any Security Interest; or the Lender not reserving, perfecting or registering a Security Interest;
(f) time, credit or any indulgence or concession being granted or a compromise or arrangement being made;
(g) an Insolvency Event occurring in relation to the Borrower, any other Guarantor or any other person;
(h) the fact any other person fails to become bound or cease to be bound by any obligation; and
(i) any failure by the Lender to give notice, any neglect or forbearance by the Lender in enforcing its rights or any other omission, delay or mistake by the Lender.
11.3Each Guarantor’s obligations continue until the Money Owed has been irrevocably paid and the Lender has told the Guarantor in writing that is (sic) obligations have ceased. Despite that payment and advice, if for any reason the Lender hands over a payment which it has received the Lender may treat the payment as if it had not been made and the Lender is entitled to its rights under this document as if the payment had never been made.[158]
11.4Until the Money Owed has been irrevocably paid and the Lender has given the advice mentioned in paragraph 11.3 a Guarantor must not exercise any right of subrogation and must not exercise any rights (including rights of contribution) which it may have a surety.
[158] There appears to be a typographical error in the second sentence of clause 11.3 where the first reference to “Lender” is wrong. Nothing turns on that.
The general rule is that the recitals to an agreement do not form part of the operative part of the agreement however the position will vary in each case.[159] In this case, I consider the preamble does form part of the agreement.
[159] Lewison, The Interpretation of Contracts (4th ed) pp 395-398.
The consequence of the underlined portions of the preamble and of clause 11 taken either together or independently of each other is that the guarantee given by Ms Byrnes with the April 2016 Loan Agreement is supported by consideration.
Guarantee Terms and Conditions – Invoice Finance Facility Deed
In the Invoice Finance Facility Deed, Clause 11.1 provides:[160]
11.1In return for Fifo (at the request of each Guarantor) entering into this deed each Guarantor; (underlining provided)
(a) guarantees that the Client will pay the Money Owed to Fifo in accordance with this deed;
(b) guarantees that the Client will observe and perform each of its obligations under this deed; and
(c) as a separate and principal obligation to Fifo, must indemnify Fifo against all actions, claims, liabilities, costs, expenses and losses of any kind which the Fifo may sustain, suffer, incur or become liable for in respect of something done, not done or arising in any way out of, or in relation to, this deed. This includes loss suffered because the Client does not perform any of its obligations under this deed, because Fifo cannot enforce this document (either partly or completely) or because the Client does not pay, is unable to pay or is not obliged to pay the Money Owed (whether in whole or in part) to Fifo.
[160] Exhibit P10, MJ13, p 134.
The consequence of the underlined portion of this clause is that the guarantee given by Ms Byrnes in the Invoice Finance Facility Deed is supported by consideration.
Conclusion on consideration
In both cases, there is consideration for the guarantee expressed in terms of the Lender making an advance to the Borrower at the request of the Guarantor. Although there is no evidence Ms Byrnes made any such request directly, I find that by signing the guarantees, Ms Byrnes, in effect, makes such a request.
I find that Ms Byrnes received consideration for entering into each contract of guarantee.
The Quantum claimed
The plaintiff claims the sum of $1,325,366.68.
Ms Jankowiak deposes that at 22 March 2019 the total amount due to the plaintiff in relation to the Invoice Finance Facility Deed, the February 2018 Loan Agreement, and the June 2018 Loan Agreement, plus interest to 22 March 2019 totalled $1,276,249.51.[161]
[161] Exhibit P10 [85]-[86].
The trial did not proceed on 22 March 2019. As at the date of trial, 22 May 2019, the plaintiff alleges the total amount due to it was $1,325,366.68, such sum made up as follows:[162]
Invoice Finance Facility
[162] Plaintiff's written submissions on Quantum.
Debtor
Purchase Date
Invoice #
Initial Purchase Price
Total Owed
Built Environs Pty Ltd
14/08/2018
2788
$216,000.00
$255,757.32
Synergy Construct Australia Pty Ltd
06/08/2018
2791
$234,154.80
$280,189.34
Built Pty Ltd
06/08/2018
2790
$95,335.21
$113,988.25
Built Pty Ltd
06/08/2018
2796
$134,249.07
$160,515.90
Total owed as at 22/05/2019
$810,450.80
Business Loans
Contract Date
Loan Amount
Total Amount Owed on 10/09/2018
Arears Interest as at 22/05/2019
Total Owed
12/02/2018
$259,000.00
$129,499.99
$35,145.94
$164,645.93
13/06/2018
$275,500.00
$275,500.00
$74,769.95
$350,269.95
$404,999.99
$109,915.89
$514,915.88
Total owed as at 22/05/2019
$514,915.88
Grand Total
$1,325,366.68
There was no challenge by the defendant to this calculation, and no submissions made by the defendant on quantum. Nevertheless, I need to be satisfied as to liability of the defendant for the plaintiff’s loss in circumstances where I have found that Ms Byrnes did not sign a guarantee for either the February 2018 or June 2018 Loan Agreements.
The Terms of the Agreements
I have set out the relevant parts of Clause 11 of both the April 2016 Loan Agreement and the Invoice Finance Facility Deed above.
April 2016 Loan Agreement
In accordance with Clause 11.1 of the April 2016 Loan Agreement, Ms Byrnes guarantees that the Borrower (i.e. ACE) will pay the ‘Money Owed’ to the ‘Lender’ in accordance with the document.
‘Lender’ is defined in the preamble as the plaintiff.
Clause 2.1 contains a number of definitions:
a) ‘Money Owed’ is defined as:
‘Money Owed’ means all money of whatever nature owed or payable by the Borrower to the Lender at any time. It includes money owed as a consequence of the Lender accepting a Further Application.
b) ‘Collateral’ is defined as:
‘Collateral’ means all of the Grantor’s present and after-acquired property, assets and undertaking wherever it is situated; all rights and interest conferred by the PPSA; and all property over which the Grantor can give a Security Interest.
c) ‘Security Interest’ is defined as:
‘Security Interest’ means any: (a) security interest (as defined in the PPSA); (b) security for payment of money, performance of obligations or protection against default (including mortgage, bill of sale, lien, pledge, trust, power, right of set-off, assignment of income and garnishee order); and (c) right, preferential interest or arrangement of any kind giving a person priority or preference over claims of other persons with respect to any property, asset or right. It includes any agreement to create any of them or allow any of them to exist.
d) ‘Further application’ is defined as:
‘Further Application’ means an application for an advance to which the Borrower makes in accordance with paragraph 13.
e) ‘Grantor’ is defined as meaning all and any one or more of the Borrower and the Guarantor.
f) ‘Total Loan Amount’ is defined as the Total Loan Amount specified in part C to the Agreement.
Pursuant to Clause 11.1(c), Ms Byrnes agreed to indemnify the plaintiff amongst other things against:
… losses of any kind which the Lender may sustain… in respect of something done, not done or arising in any way out of, or in relation to, this document. This includes a loss suffered because the Borrower does not perform any of its obligations under this document, because the Lender cannot enforce this document (either partly or completely) or because the Borrower does not pay, is unable to pay or is not obliged to pay the Money Owed (whether in whole or in part) to the Lender.
Clause 11.2 provides:
Each Guarantor’s liability is absolute, irrevocable and unconditional. The liability is not affected by anything at all which, but for this provision, might operate to relieve the Guarantor of its obligations, including:
(a) any event, transaction or arrangement, including one which increases the Money Owed. This would include the delivery of a Further Application (with or without the knowledge or approval of the Guarantor), the acceptance of that application and the Lender advancing the Total Loan Amount pursuant to it;
(b) …
(c) the Borrower or any other Guarantor not being bound by any document for any reason or being discharged or released (including by operation of law) from any obligation;
(d) this document or any other document being partly or completely unenforceable or being terminated;
(e) …
(f) …
(g) an Insolvency Event occurring in relation to the Borrower, any other Guarantor or any other person;
(h) the fact any other person fails to become bound or cease to be bound by any obligation; and
(i) …
Under clause 11.3, the Guarantor’s obligations continue until Money Owed has been irrevocably paid and the Lender has told the Guarantor in writing that its obligations have ceased.
It is common ground that the April 2016 Loan was repaid by ACE on 26 October 2016. On the same day, the plaintiff sent a letter to Mr Morphett informing him that the April 2016 Loan had been fully repaid but advising that ‘All Present After-Acquired Property interests over your business remains in place and will be removed upon the discharge of the current loan.’[163]
[163] Exhibit P10 [33], MJ12, p 144.
It is an Agreed Fact that:[164]
The plaintiff has had no direct meetings, conversations or correspondence with the Defendant in relation to the facilities which are the subject of the proceedings.
[164] Plaintiff’s submissions on Quantum and Security [30].
The significance of that letter and the agreed fact is that there has been no notification in accordance with clause 11.3 by the plaintiff to Ms Byrnes that her obligations as Guarantor have ceased.
The plaintiff submits that clause 11.2(a) means Ms Byrnes remains liable as Guarantor notwithstanding that there is a further transaction which increases the Money Owed. That includes the delivery of a ‘Further Application’ (with or without the knowledge and approval of Ms Byrnes), the acceptance of that application and the plaintiff advancing the Total Loan Amount pursuant to it. There is no dispute there were further transactions between the plaintiff and ACE which came within the definition of ‘Further Application’.
Clause 11.2(c) provides that Ms Byrnes’ liability as Guarantor is not affected by the Borrower or any other Guarantor not being bound by any document for any reason or being discharged or released (including by operation of law) from any obligation. On this basis, the fact I have found Ms Byrnes did not sign the February 2018 or the June 2018 Loan Agreements does not relieve Ms Byrnes from liability under the guarantee signed in the April 2016 Loan Agreement.
Clause 7 provides:
7.1As security for payment of the Money Owed and all of the Borrower’s and the Guarantor’s obligations to the Lender at any time each Grantor unconditionally gives the Lender a security interest in the Collateral which is personal property covered by the PPSA and a fixed charge over all other Collateral such as all estates and interests in land and all interest in fixtures. Accordingly, the Lender has a Security Interest in all of the Grantor’s present and after-acquired property.
The effect of clause 7.1 is that a Security Interest is raised against all of Ms Byrnes present and after-acquired property.
Clause 7.4[165] provides that the plaintiff may lodge and maintain a caveat to give notice of its interest over any land. It is on the basis of this Clause that the plaintiff lodged caveats over Ms Byrnes’ four properties.
[165] Exhibit P10, MJ12, p 71.
Clause 7.5 provides, in part, that immediately upon a Default Event occurring, the Security Interest will become enforceable without further demand or notice.
‘Default Event’ is defined in Clause 8.1 and includes at Clause 8.1(c) an insolvency event in relation to the Borrower (i.e. ACE). An insolvency event includes becoming the subject of a liquidation.
There is no doubt in my view that Ms Byrnes’ obligations as Guarantor continued after October 2016 and that when ACE was placed into liquidation on 10 September 2018, a “Default event” occurred within the meaning of the April 2016 Loan Agreement, such that Ms Byrnes’ obligations as a Guarantor were triggered
Invoice Finance Facility Deed
Under the terms of the Invoice Finance Facility Deed, in broad terms, ACE would offer to sell accounts receivable to the plaintiff who was able to accept ACE’s offer. Upon that occurring the purchased receivable was to be transferred to the plaintiff who paid the initial purchase price to ACE. Upon ACE’s customer making full payment of the purchased receivable to the plaintiff, the plaintiff was required to pay any residual payment to ACE. The residual payment was equal to the ‘face value’ of the invoice, which was not the amount shown on the invoice but the amount of the invoice ACE offered to sell to the plaintiff, less the plaintiff’s fees and costs.
In most, but not all, cases, the ‘face value’ was the same value as the total amount on the invoice.[166] If ACE’s customer failed to pay a purchase receivable to the plaintiff by the “Payment Date”, ACE is required to repay immediately the monies it had received from the plaintiff.[167]
[166] Invoice Finance Facility Deed clauses 3.1, 3.3, 3.5, 5.1, 5.2.
[167] Clause 5.4.
The definition of ‘Default Event’ means any event or circumstance listed in clause 16.1 of the Invoice Finance Facility Deed. Clause 16.1 in turn identifies in clause 16.1(d) an ‘Insolvency Event’ which is defined as including becoming the subject of a winding up.
On the occurrence of a ‘Default Event’,[168] ACE was required to repay immediately to the plaintiff the money it had advanced together with any fees or costs which would have been payable.[169] Clauses 11.1-11.3, whilst different on their terms were nonetheless very similar to clauses 11.1-11.3 in the April 2016 Loan Agreement and are to the same effect.
[168] Clause 16.1.
[169] Clause 5.5.
The definition of ‘Collateral’ in clause 2.1 of the Invoice Finance Facility Deed is broader than that in the April 2016 Loan Agreement and includes “… all states and interests in land (whether freehold, leasehold or chattel), interests in fixtures and interests in crops.”
‘Money Owed’ was in different terms but to the same effect.
The definition of ‘Security Interest’ is in identical terms to the April 2016 Loan Agreement.
Clause 12.2 of the Invoice Finance Facility Deed, although in slightly different terms is to the same effect as clause 7.1 of the April 2016 Loan Agreement.
On the basis of the clauses set out above, upon ACE being placed into liquidation, it committed a ‘Default Event’ which triggered the guarantee obligations of Ms Byrnes under the Invoice Finance Facility Deed.
Conclusion
The terms of each of the guarantees in the April 2016 Loan Agreement and Invoice Finance Facility Deed are unambiguous. On the terms of the guarantees, the defendant is liable for the amounts claimed by the plaintiff.
There will be judgment for the plaintiff in the sum of $1,325,366.68 plus interest.
I will hear the parties on the question of interest and costs.
Appendix A
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