Quirke v FCL Interstate Transport Services Pty Ltd - [2005] SASC 226

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
QUIRKE v FCL INTERSTATE TRANSPORT SERVICES PTY LTD
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Perry and The Honourable Justice Sulan)
24 June 2005
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
An appeal against the decision of a District Court Judge holding the appellant personally liable for company debts under a contract of guarantee - the appellant, as a company director, entered into a contract of guarantee to personally guarantee payments by the company for debts accruing under a transport contract - the guarantee, as worded, was for debts arising from the sales of goods - the transport contract, and the debt in question, were for the provision of services - on appeal - whether the guarantee was correctly construed by the Judge to include the debt for services provided under the transport contract - appeal allowed.
Codelfa Construction Proprietary Limited v State Rail Authority of NSW (1982) 149 CLR 337; Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 76 ALJR 436, applied.
Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989; Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 79 ALJR 129, discussed.
Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447; Garcia v National Australia Bank Limited (1998) 194 CLR 395, considered.

QUIRKE v FCL INTERSTATE TRANSPORT SERVICES PTY LTD
[2005] SASC 226
Full Court: Doyle CJ, Perry and Sulan JJ

DOYLE CJ: This is an appeal against a decision by a Judge of the District Court.
The main issue on appeal is whether a contract under which Mr Quirke guaranteed “the due payment for all such goods as may be sold to …” Dayrise Produce Pty Ltd (“Dayrise”), entitles FCL Interstate Transport Services Pty Ltd (“FCL”) to judgment for an amount owed by Dayrise to FCL as payment for FCL transporting goods at the request of Dayrise. In the Statement of Claim FCL pleaded that the amount claimed was payment due and payable for “transport services”.
The Judge held that having regard to the circumstances under which Mr Quirke signed the guarantee, the guarantee applied to amounts owing for the provision of services. A claim for rectification of the contract of guarantee was not pursued at trial.
In my opinion the Judge was wrong. The judgment against Mr Quirke must be set aside. My reasons for so concluding are set out below.
Facts
FCL is in the business of transporting goods by rail. It collects goods from its customers, forwards them interstate by rail, and delivers them to the intended receiver. It provides a door to door service.
Dayrise was a packer of citrus fruit. Its packing premises were at Loxton. Mr Quirke is a director. He was involved mainly in the packing of fruit. Mr Lekakis is the other director. He was involved mainly in the administration of the company. Mr Parish provided accounting and administrative services to FCL, from his office in Adelaide.
In early June 2002 FCL gave Mr Parish a quotation for transporting oranges for Dayrise to customers in Perth. The quotation stated that “… a credit application must be completed prior to first consignment”. Mr Parish accepted the quotation. Mr Quirke’s evidence indicates that he knew about this, although he was not directly involved in it.
Within a few days Dayrise despatched a consignment of oranges to FCL for shipment to Perth. Ms Jensen, the relevant employer of FCL, contacted Mr Parish and told him that FCL could not move the freight without a credit application. However, she said that as the oranges were perishable, FCL would send them to Perth but would not deliver them to the intended recipient until the credit application was completed.
Ms Jensen faxed to Mr Parish a one page printed document headed “Credit Application”; a one page printed document headed “Customer Account Information” and a one page printed document which set out the contract of guarantee.
Each of the three pages was headed prominently “F.C.L.”, and below that in smaller print was the name of FCL in full.
Each document contained spaces and lines in which it was clearly intended that Dayrise would enter information such as its name, address and telephone number, bank, names of persons who could be approached to provide a credit reference and other like matters.
The “Credit Application” ended with a line for a signature “on behalf of the Purchaser”. The “Customer Account Information” did not call for any signature. The document containing the guarantee had at the bottom two lines, under each of which appeared the words “Signature of Guarantor” and, to the right of that, the word “Witness”. It also had a space for the insertion of a date between the text of the guarantee and the signatures.
The evidence, accepted by the Judge, is that these documents were not completed by Dayrise by the time the oranges got to Perth. Ms Jensen told Mr Parish that the oranges would not be delivered until the documents were completed.
Details printed by the facsimile machine on the documents indicate that Mr Parish sent the “Credit Application” and the document containing the guarantee by facsimile to the Loxton premises of Dayrise at 3.11 pm on 1 July 2002. The Judge found that Mr Parish had filled in the lines and spaces by hand with the required information, which meant that all that remained was for someone to sign the “Credit Application” and for the guarantee to be signed.
The first part of the guarantee contained handwritten details relating to Dayrise, and the names of the references that Dayrise provided. Then, under the word “Guarantors” Mr Parish wrote on one line “Bill Lekakis” and on the line below it “Thomas Wilfred Quirke”. Below that were printed the terms of the guarantee which reads as follows:
To:
In consideration of you My/Our request agreeing from time to time to sell to the abovenamed Purchaser (hereinafter called the “Purchaser”) such goods in the way of its business as the Purchaser may require upon such terms and considerations as to payment of otherwise as may at any time or from time to time be agreed between the Purchaser and you I/We the above mentioned guarantors hereby irrevocably and unconditionally guarantee to you, both jointly with the Purchaser and severally, the due payment for all such goods as may be sold to the Purchaser as aforesaid and for the due performance and observance of any such terms and conditions as may be agreed in respect of any such sale and I/We expressly acknowledge and agree that this guarantee is unlimited and that I/We require no notice of the amount of credit from time to time extended to the Purchaser or the conditions whether as to interest, time for payment or otherwise whatsoever attaching to the sale of any such goods and further that this is a continuing guarantee and that I/We shall not be released from this guarantee by any arrangement with the Purchaser with or without My/Our consent as guarantor or by any alteration in the obligations undertaken by the Purchaser or by any forbearance whether as to payment, time, performance or otherwise and further that this guarantee will not be revoked except after the expiration of three (3) months notice in writing to you.
Below this was the line for the date to be inserted. Below that line were two lines for the “Signature of Guarantor”. On the upper line Mr Parish had written “B. Lekakis” and on the lower line “T.W. Quirke”.
The guarantee is printed in quite small type but is not difficult to read.
It was not disputed at trial that Mr Lekakis signed the Credit Application, or that Mr Lekakis and Mr Quirke signed the page that contained the guarantee, on the line designated as “Signature of Guarantor”.
This must have been done between 3.11 pm and 3.19 pm, because at that time the documents were sent by facsimile to Mr Parish at his North Adelaide office. Mr Parish then sent them and the “Customer Account Information” to FCL.
The Judge accepted evidence from Mr Quirke that the only document that he saw was the document containing the guarantee. I think the Judge must have accepted evidence from Mr Quirke that he was working in the packing shed, and was called in to the office and asked to sign what Mr Quirke thought was a credit application to FCL. Mr Quirke said he was told the oranges were in Perth and could not be unloaded until the form was signed. He did so and went back to work.
The Judge made the following finding at [43]:
I find that the defendant signed the purported guarantee document that had been filled out by Mr Parish, and which he had been told or understood, was a credit application; that he did not seek or obtain any advice on, the contents of this document that he saw for the first time and signed on 1 July 2002.
In cross-examination Mr Quirke agreed that he had signed guarantees on other occasions in connection with the business of Dayrise. He added that some time later he read the document, and realised that it contained a guarantee. He noted that the guarantee was in respect of moneys owing for the provision of goods only. His evidence indicates that at this time Dayrise was still dealing with FCL, and continued to deal with it.
Later Dayrise went into liquidation. FCL sued Mr Lekakis and Mr Quirke, relying on the guarantee. Mr Lekakis was declared bankrupt on 19 May 2004. Leave to proceed against him had not been obtained. The matter proceeded against the appellant alone.
The Judge’s reasons
Mr Quirke argued that the guarantee was in respect of payments due from Dayrise to FCL for goods sold by FCL to Dayrise, whereas the moneys claimed by FCL were for payment for services provided, namely the transporting of goods.
As part of the transporting of goods, FCL would shrink-wrap goods, would provide some packing material and would also store goods. However, there is no suggestion that the moneys claimed were for anything other than the provision of services.
The Judge referred to certain decisions relating to the use of surrounding circumstances as an aid to the construction of a written agreement. She then said:
[48]A court will look at evidence extrinsic to the contract document, including surrounding circumstances to clarify any ambiguous terms therein. Given that the plaintiff provided no goods, the term as it appears in the guarantee, is ambiguous. It is clear here that the intention of the parties was in relation to the services to be provided by the plaintiff. Indeed, the evidence shows that the services had begun to be provided, in that a consignment of fruit had been transported part way to its destination by the plaintiff at the request of Dayrise Produce, and the very reason why the guarantee was needed was that the directors of Dayrise Produce wanted the fruit to be delivered to Bullfrog.
[49]I must conclude that the evidence, considered objectively in its commercial context, reveals that the guarantee, although it appeared by its words to be in respect of goods, was actually in respect of the services provided to Dayrise Produce by the plaintiff.
The Judge rejected an argument that the guarantee was unenforceable. That argument seems to have been based on a submission that Mr Parish misrepresented the nature of the document that Mr Quirke signed, or subjected him to undue influence. That decision was not challenged on appeal. That is not surprising. There is no indication that Mr Parish did anything to mislead Mr Quirke. Any urgency in the signing of the documents was attributable to the decision by Dayrise to despatch goods before the paperwork was complete. In any event, it would have taken only a few minutes to read all three pages.
The Judge entered judgment for FCL against Mr Quirke.
Issues on appeal
Mr Stathopoulos appeared as counsel for Mr Quirke on appeal. At trial Mr Quirke appeared for himself.
Mr Stathopoulos applied to amend the Notice of Appeal to add a ground complaining that the contract was unenforceable because it was unconscionable for FCL to enforce it.
He relied on findings made by the Judge. They are that Mr Parish did not explain the document to Mr Quirke; that Mr Quirke thought the document was a credit application; that Mr Quirke had little time to read the document, and was under pressure to deal with it promptly, and the fact that the guarantee itself was in small print. Mr Stathopoulos submitted that Mr Quirke was placed at a special disadvantage in relation to FCL, and that FCL has taken unfair advantage of the opportunity that that created: see Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 and Garcia v National Australia Bank Limited (1998) 194 CLR 395.
The Court refused to allow the amendment. Although this proposed ground overlaps to some extent with the claim of misrepresentation and undue influence advanced at trial, it raises issues that were not raised by those grounds. Had this claim been advanced at trial it would have been relevant for counsel for FCL to explore matters in evidence that were not explored, and to cross-examine Mr Quirke on matters on which he was not cross-examined, or in greater detail in some matters.
By way of example, counsel for FCL might have led more evidence from Ms Jensen about what passed between her and Mr Parish. Counsel might have called Mr Parish, or relied on the failure of Mr Quirke to call him. Although Mr Quirke admitted signing guarantees on other occasions, he might have been cross-examined in greater detail about his experience in this respect. It would have been relevant to cross-examine Mr Quirke quite closely about what passed between him and Mr Lekakis when the documents were signed.
For those reasons, to allow Mr Quirke to raise the proposed new ground of appeal would be productive of unfairness to FCL that could not be remedied other than by remitting the matter for rehearing.
Quite apart from that, the proposed new ground appears to have no prospect of success at all. Mr Quirke was in no position of disadvantage compared with FCL. He had some experience in business, understood what a guarantee was, and chose not to read the document before signing it. There is no basis to suggest that he was in any sense misled. The document was part of an application for credit facilities. It was also a guarantee. Mr Quirke knew that he was signing a document at the request of FCL and in connection with the transport of oranges. There is nothing in the material before the Judge to suggest that a claim of unconscionable conduct could succeed.
Mr Stathopoulos argued that the guarantee could not be enforced because the printed page did not identify the person in whose favour it was given. The name of FCL had not been written into the document after the word “To” immediately above the terms of the guarantee. But the document itself was headed prominently with the name of FCL. Mr Quirke knew that the document was being signed at the request of FCL in connection with the carriage of goods by FCL. This evidence was admissible to identify the other party to the guarantee. There is nothing in the point.
That leaves the question of the meaning to be given to the guarantee. Was the Judge right in deciding that it extended to money owing by Dayrise to FCL as payment for services, namely, the transportation of oranges?
There can be no doubt that Mr Quirke is bound by the contract of guarantee.
When he signed the document containing the contract of guarantee, he knew that the document would affect the legal relationship between FCL and Dayrise. Mr Quirke was not tricked into signing the document. He chose not to read it. At best, from his point of view, it might be said that it was necessary to sign the document then and there. But he could have read it before any further consignments of fruit were dispatched through FCL. There is no claim now that the contract is vitiated by misrepresentation or mistake, there is no claim for rectification.
The intention to create a legal relationship is to be assessed objectively, meaning, as the majority said in Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 at [25]:
Although the word “intention” is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties. (Footnote omitted)
As the High Court said in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 79 ALJR 129 at [45]:
It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.
The conduct of Mr Quirke, in the circumstances, would have led a reasonable person in the position of FCL to conclude that he was intending to be bound. In the absence of a claim that that apparent intention should not be enforced, Mr Quirke is bound by the contract of guarantee.
The meaning of the contract of guarantee is also to be decided objectively. The position was summarised by the High Court in Alphapharm at [40]:
This Court, in Pacific Carriers Ltd v BNP Paribas (2004) 78 ALJR 1045, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. (footnote omitted)
In the final sentence of that paragraph the Court referred to the use that may be made, in certain circumstances, of evidence of surrounding circumstances and of the purpose and object of a transaction. On that point, the reasons of Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995-996 have been influential. His Lordship said:
In a commercial contract it is certainly right that the Court should know the commercial purposes of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
That observation, and others to a similar effect by Lord Wilberforce, were referred to with approval by Mason J in his reasons in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 350. This passage makes the same point as is made by the High Court in Alphapharm.

In Codelfa Mason J reviewed a number of decisions by Australian courts and courts in other countries dealing with the admissibility and use of evidence when the issue is the construction of a written agreement: at 347-353. The whole passage is significant, but the effect of what His Honour said is conveniently summarised as follows at 352:
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
The reasons of Mason J in Codelfa have been treated as stating the law of Australia in many decisions of State courts. In any event, the majority decision of the High Court in Royal Botanic Gardens & Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 76 ALJR 436 at [39] states that these reasons should be treated as authoritative.
It was appropriate for the Judge to have regard to the fact that the contract of guarantee was signed in the course of, and in connection with, FCL arranging to extend credit to Dayrise in respect of charges for the carriage of goods by FCL on behalf of Dayrise. The evidence establishes that the guarantee was related to the proposed provision of services by FCL to Dayrise. There was no proposal for the sale of goods by FCL to Dayrise, although FCL would, as an incident of its transport services, provide shrink-wrapping and some packing materials.
However, the guarantee is in respect of payment for goods to be sold by FCL to Dayrise.
On its face, the guarantee does not apply to the debt incurred by Dayrise to FCL. The surrounding circumstances establish that FCL intended that the guarantee would apply to moneys owing for the carriage of goods. I accept that FCL has not expressed the guarantee as it should have or as it probably intended to.
But the meaning of the words used is plain. There is no ambiguity or uncertainty about the meaning of “goods”, or at least no reason to think that “goods” includes services. The surrounding circumstances do not give rise to an uncertainty as to the meaning of “goods”. They do not enable one to resolve an uncertainty as to the scope of the meaning of the words used. The surrounding circumstances, in truth, do no more than reflect and emphasise the fact that FCL has failed to prepare an appropriate form of guarantee.
None of the cases referred to by Mason J in Codelfa go as far as did the Judge in the present case. Nor have I been able to find any case that does. The cases in which surrounding circumstances have been used as an aid to interpretation are cases in which the contractual terms are either capable of a range of meanings standing alone, or once the surrounding circumstances are known. In such cases, the surrounding circumstances have then been used, sometimes, to enable the Court to determine the true meaning of the words used.
In my opinion in the present case FCL asks the Court, in the words of Mason J, to use the surrounding circumstances “… to contradict the language of the contract when it has a plain meaning”: Codelfa at 352. The submission for FCL passes beyond the limits of the process of construing the words used by the parties, or deciding the meaning of those words, and invites the Court to rectify or to correct the agreement, to reflect what FCL intended. I accept that what FCL asks the Court to do may be reasonable or fair in the circumstances, but the process of construction is not one which entitles the court to substitute a reasonable or fair meaning for the meaning of the words used. Nor is the power of a court to construe a written agreement a power to correct mistakes. Sometimes a decision to give a meaning to an expression other than its strict legal meaning, or to identify the true meaning of words of uncertain meaning, might look as if it is a power to do what is fair or reasonable, or a power to correct mistakes. But that is not what the Court is doing.
In my opinion the Judge erred. It was not open to the Judge, in the process of construing the words used by the parties, to give to those words a meaning that departed from the meaning of the words used.
Conclusion
For those reasons I would allow the appeal. I would set aside the judgment of the District Court in favour of FCL. I would order that there be substituted a judgment in the District Court for Mr Quirke dismissing the claim against him by FCL.
PERRY J: In my view, the appeal should be allowed. I agree with the reasons published by the Chief Justice and with the order proposed by him.
SULAN J: I agree that the appeal should be allowed, for the reasons given by the Chief Justice and that the order proposed by him should be made.