Mitchell Laminates Pty Ltd v Mellini Kitchens Pty Ltd &

[2007] VMC 9

IN THE MAGISTRATES COURT OF VICTORIA

AT MELBOURNE

CIVIL

Case No. W01333287

Mitchell Laminates Pty Ltd	Plaintiff
v
Mellini Kitchens Pty Ltd	1st Defendant
Anatoly Brand	2nd Defendant
Irina Kotkova	3rd Defendant

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MAGISTRATE:	S Garnett
WHERE HELD:	Melbourne
DATE OF HEARING:	11 & 12 October 2007
DATE OF DECISION:	8 November 2007
CASE MAY BE CITED AS:	Mitchell Laminates Pty Ltd v Mellini Kitchens Pty Ltd & Anatoly Brand & Irina Kotkova
REASONS FOR DECISION

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Catchwords: breach of contract - whether the guarantee is enforceable.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr Wallace
For the 2nd Defendant	Mr Colman
HIS HONOUR:

1.  Mitchell Laminates Pty Ltd supplied laminate products to Mellini Kitchens Pty Ltd in October and November 2006 valued at $14,245.43c, which are unpaid.

2.  Mellini Kitchens ceased trading in late 2006 and Mitchell Laminates now seeks to enforce a guarantee signed by Anatoly Brand on behalf of Mellini Kitchens. The other guarantor, Irina Kotkova cannot be found.

3.  Mr Brand denies the guarantee is enforceable, or in the alternative, alleges it is only enforceable against him in the sum of $1,500.

4. The relevant facts not in dispute are;

a)	Between April and June 2006 Mitchell Laminates supplied goods to a business operated by Roman Balzcutis on cash on delivery basis.
b)	On 2 June 2006, Roman Balzcutis registered the company Mellini Kitchens P/L with his partner Irina Kotkova as Director.
c)	In order to establish a credit facility with Mitchell Laminates, Mellini Kitchens was required to complete a Commercial Credit Application with an Agreement to Guarantee and Indemnify.
d)	The Application was signed by Irina Kotkova and the Guarantee was signed by her and Mr Brand at the request of Roman Balzcutis.
e)	Full details on the Commercial Credit Application and Guarantee were incomplete including the date and the extent of the credit facility being provided.
f)	After performing the appropriate credit checks, Mitchell Laminates approved a credit facility of $3,000 on 29 June 2006.
g)	Despite exceeding the credit facility within the first 6 weeks, Mitchell Laminates continued to provide the credit facility to Mellini Kitchens without notifying Mr Brand.
h)	Because of the debt approximating $15,000 by 30 October 2006, a failed instalment repayment plan with Roman Balzcutis, Mellini Kitchens ceasing trading and Irina Kotkova’s whereabouts unknown, Mitchell Laminates seeks to recover the money owed to it by Mr Brand as Guarantor.

5.  The disputed evidence centred on the date the Guarantee was signed and the understanding of the extent of the Guarantors’ liability. Mr Brand alleges he signed an incomplete document containing the Guarantee at the end of April and was told by Roman Balzcutis that the extent of his liability was $1,500, being 50% of the credit limit provided by Mitchell Laminates. His evidence was that the $3,000 credit limit was inserted by Roman Balzcutis at his request. He stated that he was not aware until late April 2007 of the extent of the debt when he received a letter of demand from the solicitors acting for Mitchell Laminates. He denied being informed of the amount owing in February 2007 when contacted by Mr Mitchell, the Financial Controller of Mitchell Laminates.

6.  I do not accept his evidence on these issues. I accept and prefer the evidence of Mr Paxton, Sales Representative of Mitchell Laminates, Mr Mitchell and Mr Henderson, General Manager of the company.

7.  Mr Paxton gave evidence that he gave the uncompleted documents to Roman Balzcutis in late May 2006 and did not insert a credit limit as he had no authority to do so. He also gave evidence that he did not witness Mr Brand’s signature on the Guarantee despite signing the document that he did so. His evidence was that it was in June 2006 after obtaining both Guarantors signatures that he presented the documentation to Mr Mitchell and Mr Henderson for their approval and confirmation of the credit limit. This is consistent with the evidence of both Mr Mitchell and Mr Henderson and is consistent with Mellini Kitchens not being registered until 2 June 2006. Mr Mitchell gave evidence that he recommended a $3,000 credit facility on 29 June, after conducting the appropriate credit check based on past trade, and approved by Mr Henderson on that date as confirmed by Mr Henderson in his evidence, the date on the document itself together with the confirming letter to Mellini Kitchens. I accept the evidence of Mr Mitchell that he informed Mr Brand in February 2007 of the extent of the debt owed.

8.   I therefore make the following findings of fact on these issues;

a)	The Guarantee was signed by Mr Brand in early June 2006 without a credit limit being stated;
b)	The credit limit was set at $3,000 on 29 June 2006 by Mitchell Laminates;
c)	Mr Brand became aware of his potential liability pursuant to the Guarantee in February 2007.

9.   The issues for the Court to determine are:

Is the Guarantee enforceable against Mr Brand, and if so, to what extent?

10.Mr Brand claims the Guarantee is unenforceable against him or in the alternative is limited to the sum of $1,500. He contends that:

The Guarantee was incomplete, vague and meaningless because parts of it were uncompleted.

11. In particular, he contends that as the name of the “Customer”, the amount and date of the “Current Debt Acknowledged” was blank together with the Guarantee being undated and improperly witnessed, makes it unenforceable.

12. The Commercial Credit Application identifies the “Customer”. The Credit Application and Guarantee are part of the one document. Mr Brand knew who the parties to the agreement were. As stated in evidence, he knew that his friend, Roman Balzcutis was establishing a new business and that Mitchell Laminates required a Guarantee and Indemnity in order to provide a credit facility. The current debt correctly recorded “nil” as there was no debt at that time. The absence of a recorded date does not affect the validity of the agreement. Mr Brand does not dispute he signed the Guarantee and the fact that his signature was not witnessed at the time he signed it does not affect its validity. Mr Paxton’s insertion of his signature as a witness on a later date does not alter the rights and obligation of the parties under the agreement to render it unenforceable.

13. Mr Brand also takes issue with the validity of the Guarantee on the basis that parts of the Commercial Credit Application were also incomplete. I do not accept these submissions. It is clear on the evidence presented to the court and the document itself as to what was intended by the parties. Mitchell Laminates confirmed the creation of the agreement in writing on 29 June 2006 after approval of the credit facility and trading commenced on those terms. Mr Brand, although stating in evidence that he did not read the Guarantee before signing it, signed it with an express term that his liability was “unlimited” (Term 11). He cannot contend that he was unaware of his liability having signed it without reading it. There is nothing vague or uncertain about the express term concerning his liability. He is a man with business experience and understood the obligations by a Guarantee.

There is an express or implied term limiting Mr Brand’s liability under the
Guarantee.

14.For the reasons expressed above, I do not accept Mr Brand’s evidence concerning the alleged conversation with Roman Balzcutis where he was told the credit limit was $3,000 and his liability was $1,500. In addition, terms 5, 8 and 11 of the Guarantee are clear. Mr Brand’s liability was unlimited. He relied on his friend and therefore Mellini Kitchens to honour its agreement with Mitchell Laminates to pay for goods supplied to it.

15.Mr Brand contends that Mitchell Laminates was under an obligation to notify him if Mellini Kitchens exceeded the credit limit.

16. Term 21 of the Guarantee provided:

Credit Limit: If Mitchell Laminates grants any credit facility or nominates any credit limit, this is an indication only of its intention at the time. Mitchell Laminates can vary or withdraw any credit facility at any time at its discretion and without any liability to the Customer or any other party.

17.It is clear by virtue of Term 21 that the credit limit and terms could be varied at any time at Mitchell Laminates discretion without recourse to Mellini Kitchens or the guarantors. An implied term to notify Mr Brand cannot exist where it is inconsistent with the specific terms of the agreement. The arrangement between Mitchell Laminates and Mellini Kitchens to enter into an instalment plan is not contrary to the terms of the Guarantee or the principal contract resulting in a variation of it and thereby discharging the Guarantors obligations.[1]

[1] As held in Hancock v Williams (1942) 42 S.R (NSW) 252.

18.Mr Brand’s evidence did not support any suggestion that Roman Balzcutis was an agent of Mitchell Laminates. Roman Balzcutis approached Mr Brand to act as one of the guarantors for the business he was establishing in order for Mitchell Laminates to grant the business a credit facility. The facility was for Mellini Kitchen’s benefit, not Mitchell Laminates. When he approached Mr Brand for his signature on the Guarantee, it was not as an agent for Mitchell Laminates.

Mitchell Laminates engaged in deceptive or misleading conduct and/or its conduct was unconscionable and in breach of the Trade Practices Act 1974

19.I have found that Roman Balzcutis was not an agent of Mitchell Laminates and when the Guarantee was signed neither Roman Balzcutis nor Mr Brand was aware of the credit limit, if any. There were no representations made by, or on behalf of, Mitchell Laminates. Although it has been held that representations of an upper limit in a Guarantee can be misleading or deceptive[2], Mr Brand did not sign the Guarantee based on an upper limit, as no limit had been set when he signed it. He cannot allege that he signed the Guarantee because of an upper limit being set. Therefore, he is unable to prove a nexus between the alleged contravention of S 52 of the Trade Practices Act and the signing of the Guarantee as required by law.[3]

[2] Money v Westpac Banking Corp (1988) A.T.P.R. 46-034

[3] Sanrod Pty Ltd v Dainford Ltd (1984) 54 A.L.R. 179 at 187.

20.Mr Brand does not satisfy the requirements as set out in Commercial Bank of Australia Ltd v Amadio[4] to establish that the Guarantee was unconscionable. He was not under a special disability in dealing with Mitchell Laminates with the consequence being that there was inequality between them. He knew he was signing a Guarantee and Indemnity for his friend in order to assist with the establishment of his new business. He knew that Roman Balzcutis wanted a credit facility with Mitchell Laminates to assist the business in trading particularly in its infancy. He had experience in operating his own business. Unlike the circumstances in Amadio’s case, he understands English in spoken and written form and has dealt with legal documentation and credit issues in a business environment. He understood the document he was signing and could have sought legal advice before signing it, something he chose not to do.

[4] (1983) 151 C.L.R. 447.

21.I find that the Guarantee is fair, just and reasonable in all the circumstances, and as such, will not set it aside.

ORDERS:

22.Accordingly, I find that Mr Brand is bound by the Guarantee and is liable to Mitchell Laminates in the sum of $14,245.43c being the value of goods supplied to Mellini Kitchens Pty Ltd by them together with interest pursuant to the agreement.