Todaytech Distribution Pty Ltd v Yang
[2005] VSC 147
•16 May 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 2094 of 2002
| TODAYTECH DISTRIBUTION PTY. LTD. ACN 059 027 520 | Plaintiff |
| and | |
| MYUNG HWAN YANG | Defendant |
AND BETWEEN
| MYUNG HWAN YANG | Plaintiff By Counterclaim |
| and | |
| TODAYTECH DISTRIBUTION PTY. LTD. ACN 059 027 520 | Defendant By Counterclaim |
---
JUDGE: | WILLIAMS J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 3 NOVEMBER 2004 | |
DATE OF JUDGMENT: | 16 MAY 2005 | |
CASE MAY BE CITED AS: | TODAYTECH DISTRIBUTION PTY. LTD. v YANG | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 147 | |
---
GUARANTEE – Whether guarantor aware of nature of the guarantee - Whether representations as to nature of guarantee made by creditor – Construction of guarantee – Whether liability of guarantor limited.
ESTOPPEL – Estoppel by convention - Effect of misdescription of creditor – Transaction conducted on basis of assumed facts.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W. Gillies | R B Legal Pty Ltd |
| For the Defendant | The Defendant appeared in person |
HER HONOUR:
The claim
The plaintiff (“Todaytech”) seeks payment of the sum of $828,358.41, alleged to be owing by the defendant (“Mr Yang”) under a written guarantee dated 23 April 2001 (“the guarantee”). Todaytech obtained the Court’s leave to reduce the amount claimed from the sum of $878,957.42 sought by its amended statement of claim filed on 11 August 2003.
Mr Yang seeks declaratory and other relief in relation to the guarantee by his counterclaim filed, with an amended defence, on 12 September 2003.
I note at the outset that Mr Yang was unrepresented at the trial. His solicitors had given notice that they had ceased to act for him on 13 October 2004. He was offered the opportunity by the Court to seek time to obtain legal advice, but he declined to avail himself of it.
Electec and the application for credit
It is common ground that Mr Yang was at relevant times the sole director and the secretary of Electec Australia Pty Ltd (“Electec”), a company which had been registered on 25 February 2000. Administrators were appointed to the company on 14 July 2003, under a deed of company arrangement. Todaytech was the petitioning creditor.
According to Michael Chong, a director of Todaytech, he was introduced to Mr Yang, as the owner of Electec, before any dealings commenced between the two companies. Todaytech supplied Electec with micro processing chips (“CPUs”) which Electec then traded. Todaytech required Electec to apply for credit in relation to the supply of the CPUs. An application for credit had been made on or about 30 March 2001 but, on 23 April 2001, in the course of negotiations between the two companies in relation to a particular transaction, Todaytech required Electec to make a further written application for an increased amount of credit. Mr Yang explained in his oral evidence that the existing credit limit was “not enough to close the deal” concerned.
On 23 April 2001, Anthony Yap, Electec’s national sales manager in Australia, signed an application by Electec for a credit limit of $200,000. The application form had been faxed to him by Todaytech and the signed document was returned to Todaytech in the same way. The application for credit form incorrectly referred to Todaytech as “Todaytech Distribution Australia Pty Ltd”, although Todaytech’s Australian Business Number, 56 059 027 520, appeared with the incorrect name. Under cross-examination by Mr Yang, Mark Knox, Todaytech’s credit manager, stated that Todaytech had been misdescribed, by the erroneous addition of the word “Australia” to its name.
Mr Knox also gave evidence that the application for credit document was in a loose-leaf form. He said that the terms and conditions of the sale and delivery of stock by Todaytech were set out in two pages of the document which was provided to its potential customers. A sample form of application containing the two pages setting out the terms and conditions was tendered by Todaytech. Mr Yang did not challenge the evidence that Todaytech provided its potential customers with the pages in question, concentrating his cross-examination on the misdescription of the company.
The guarantee
The documents supplied by Todaytech included a form of guarantee which was apparently subsequently signed by Mr Yang. It appears from the exhibited copy of the guarantee that Mr Yap signed the guarantee as the witness to Mr Yang’s signature.
I note, at this point, that an issue arose in relation to the original of the guarantee form signed by Mr Yang. The trial had proceeded on the basis of the copy documents in the court book, which were tendered in evidence without objection from Mr Yang. In his Notice of Dispute, which responded to the Todaytech Notice to Admit, Mr Yang had admitted that the copy of the guarantee was “a photocopy of a document bearing a facsimile of [his] signature”. Mr Yang had made submissions and admissions in relation to the copy documents during the trial. He had eventually agreed that he signed the guarantee. He subsequently called for the original faxed copy of the signed guarantee document, which counsel for Todaytech produced in the Court. He then, however, asked to see the original of the document signed by him. Counsel for Todaytech sensibly pointed out that the original of the document sent by facsimile transmission to Todaytech from Mr Yang or Electec would be with him or Electec, rather than with Todaytech. Indeed, he told the Court that his instructors had sought production of the original of the guarantee signed by Mr Yang, but that it had not come to light and the matter had not been pursued. In my opinion, in all the circumstances, nothing turns on the absence of the original document which Mr Yang admitted he had signed.
The guarantee relevantly provided:
“ FORM OF GUARANTEE
1.I/We guarantee jointly and severally the due amount to TODAYTECH Distribution Australia Pty Ltd of all monies now or hereafter to be owing by the applicant mentioned above for all such goods and/ or services as TODAYTECH Distribution Pty Ltd may from time to time supply to me/us under its standards [sic] terms and conditions of supply as shown below or varied from time to time in writing.
2.This agreement shall be a continuing guarantee for all debts whatsoever and wheresoever incurred by the applicant with TODAYTECH Distribution Australia Pty Ltd, provided however that if I/we shall give TODAYTECH Distribution not less than (14) fourteen days notice of my/our desire to be released from this guarantee and if at the expiration of such period of notice all liabilities of the applicant to TODAYTECH Distribution have been discharged then this agreement shall cease to be of effect.
3.Before taking action against me/us arising from this guarantee, TODAYTECH Distribution shall give me/us not less than (14) fourteen days notice of TODAYTECH Distribution’s intention to proceed against me/us. …”
As can be seen, Todaytech’s correct name, Todaytech Distribution Pty. Ltd., was used once in the guarantee and it was once described as “Todaytech Australia Pty Ltd”. It was otherwise referred to as “Todaytech Distribution”.
After some equivocation, as I have already said, Mr Yang acknowledged that he signed the guarantee. However, he claimed to have been unaware of the nature of the document which, he said, had been forwarded to him by Mr Yap, for signing. Mr Yang said that he believed that the document he signed was just an application to increase the credit limit. He maintained that he had not read the document and had simply signed it in his capacity as a director of Electec. He also said that he did not know which page of the credit application he signed. He explained that the business of trading in CPUs required fast decision making and quick action and that time had been running out in relation to a particular shipment on the day in question. He said that he had been given “no warning, …no notice or …no advice saying that there is a form of guarantee in the credit application”.
Mr Yang seeks to rely upon a number of different dates and times relating to the transmission of the relevant pages from Todaytech. He also refers to what he said were the contents of a previous credit application document which he had signed on 30 March 2001 and which, according to him, had not contained a form of guarantee. He tendered a page of a document dated 30 March 2001, signed by him, headed “Todaytech Distribution Australia Pty. Ltd.” and bearing Todaytech’s ABN, in which he had agreed that information might be sought or provided in relation to his creditworthiness. He relies upon a description of the tendered page as “Page 4/4” recorded by a fax machine, arguing, (somewhat illogically, in my opinion,) that this description proved that the document he had signed on 30 March 2001 had not included a form of guarantee. He also argues that he was given no warning that the 23 April 2001 document would differ from the 30 March 2001 application for credit, which he had also signed, and which, he alleges, did not contain any form of guarantee.
Under cross-examination, Mr Yang admitted that he knew what a guarantee was and that he did not conduct his business by signing documents which he had not read. He acknowledged having signed “a few” guarantees in the past, but immediately went on to say that he had never before signed a guarantee.
Mr Yang did not call Mr Yap, the apparent witness to his signature on the guarantee, to give evidence. When Mr Yang was cross-examined as to the reason for his failure to call Mr Yap, he simply said that he did not consider it necessary to do so. As it might reasonably have been expected that Mr Yang would call Mr Yap, if the latter’s evidence had been favourable to him, and as no convincing explanation for his failure to call Mr Yap has been given, I conclude that Mr Yap’s evidence would not have assisted Mr Yang’s case.[1]
[1]See: Jones v Dunkel (1959) 101 C.L.R. 298; O’Donnell v Reichard [1975] V.R. 916.
The alleged representations
Mr Yang also alleges that a representative or representatives of Todaytech made oral representations to Mr Yap, including one to the effect that the application for credit form did not “contain or comprise any guarantee”. The same representation is said to have been made to Mr Yang, in writing and by implication from the appearance of the words “Application for Credit-TT0058”, at the foot of the form of the guarantee. It is further alleged that the representation was to be implied from Todaytech’s failure to inform Mr Yang or Electec that it required a director to provide a guarantee or that the document constituted a guarantee.
I am not satisfied that any oral, written or implied representation to the alleged effect was made. Mr Yang did not call Mr Yap. Nor, as was pointed out by counsel for Todaytech, did he give evidence of any representation being made to him, directly, or through Mr Yap. Any argument based on the reference to the application for credit at the foot of the guarantee is unconvincing, because it would appear inconsistent with Mr Yang’s evidence that he did not read the document he signed. The arguments based on the 30 March 2001 document lack force, in the absence of evidence as to all the contents of that document.
The other alleged representations were to the effect that an application for credit would need to be made before trade between Todaytech and Electec could start, that the faxed document was an application for credit form and that, because trade was to start on 23 April 2001, the application would need to be completed and retuned as a matter of urgency. Todaytech did not dispute that such matters were communicated to Electec, except in so far as it is alleged that the form of the guarantee was only a form of application for credit. Further, it did not dispute the truth of the other representations, other than in that regard.
I did not find Mr Yang’s evidence to be convincing or persuasive. I am satisfied that he signed the guarantee on 23 April 2001. I am not persuaded that he was unaware of or mistaken as to the nature or contents of the document or that he believed that he was merely signing a written application for an increased credit limit, as he alleges. I am satisfied that he knew that the document he signed was a guarantee.
The alleged uncertainty of the guarantee
Paragraph 9 of the amended defence alleges that the guarantee is “vague and uncertain and .. void and of no effect”. The particulars refer to the absence of any statement of the standard terms and conditions of the supply of goods by Todaytech to Electec.
I am satisfied that Todaytech had supplied Electec with the statement of its terms referred to in the guarantee, at some time before the guarantee was signed on 23 April 2001. Mr Knox gave evidence that it was the company’s usual practice to supply the terms and Mr Yang failed to contest that proposition when cross-examining Mr Knox. Mr Yang’s own evidence as to what had been supplied to him or Electec, either on 30 March 2001 or on 23 April 2001, was most unconvincing. He appeared to be trying to construct a case based upon the “fax headers” or imprints as to date made on the relevant documents by the various facsimile machines.
Mr Yang made no other submissions in relation to the certainty of the guarantee. However, the particulars subjoined to paragraph 9 also refer to the absence of consideration “given or specified in the alleged or purported guarantee.” The absence of any reference to the consideration for the guarantee does not affect its validity; see: s 129 of the Instruments Act 1958. As far as the consideration for the guarantee is concerned: it was Mr Knox’s evidence that the form of the guarantee was one of the documents sent to anyone making an application to Todaytech for credit. It would seem, therefore, that the consideration for the guarantee would have been the provision of credit to the applicant, Electec.
The uncertainty argument should fail.
The Electec debt
Mr Knox gave evidence that, as at 20 June 2003, Electec was indebted to Todaytech in the total sum of $828,358.41. The outstanding amount was said to be made up of separate amounts totalling $767,541.45, together with interest of $60,816.96, calculated, under the Supreme Court Act 1986, to that date from the dates upon which individual amounts had become due. The calculations in relation to the interest claimed were based upon each debt having become due within seven days of the date of the invoice raised in relation to the amount owing. In the course of discussion in opening, Mr Yang said that he understood the issue in the case to be as to his personal liability under the guarantee. However he did not admit the amount of the debt, saying that he would have to make the necessary calculations.
Mr Yang did not challenge the evidence from Mr Knox in relation to the quantum of the debt during cross-examination. Further, there was no evidence of any dispute as to the amount outstanding or to the effect that any different amount was owed by Electec to Todaytech. There was no evidence to dispute Mr Knox’s evidence that the terms of trade between Todaytech and Electec required payment within seven days. Although it was alleged in the amended defence that “the trading terms offered to [Electec] were thirty days”, and a conversation between Mr Yap and a representative or representatives of the Todaytech group to that effect was referred to in the particulars, Mr Yap was not called by Mr Yang and there was no other evidence relied upon to prove the allegation.
Further, neither the indebtedness nor the amount claimed to be owing was challenged in email correspondence, in the first half of October 2002, between Mr Yang and a Todaytech director, Mr Michael Chong, and Mr Knox. Mr Yang’s tone was apologetic throughout. In an email sent to Mr Chong on Thursday, 3 October 2002, at 4.31 p.m., Mr Yang acknowledged the Electec debt, saying:
“Dear Michael,
I have come back from my trip to Korea last night. I deeply apologize the delay of our payment. There was a terrible happening in Korean banks early of September. Many of Korean importer, including two of my major customers are suffering serious shortages of ‘foreign currency credit’ due to the happening. I have been to Korea two times last month to discuss with my customers. When it happened, it was not so critical- still I supposed to be able to pay Today Tech before due date as I gave the schedule to Anthony before my second trip. During my second trip to Korea, I found the situation of the ‘foreign currency credit shortage’ was getting worse every day. And it forces me not to pay you in time. …[sic]”
Mr Chong replied at 6.00 p.m. on the same day, explaining that Todaytech had been relying upon payment to meet its own commitments to vendors and asking for at least some part payment. At 7.49 p.m. Mr Yang responded:
“Hi Michael,
I, personally, feel really sorry to you for delay of our payment. Specially I feel sorry to Today Tech rather than others because it unluckily happened just after Today Tech and Electec started to boost up our cooperation. I fully understand your difficult position in your company- to your boss and to your financial dept.. I have put first priority of our payment to Today Tech as I gave schedule to Anthony before my trip. Because of current situation from Korean bank, I cannot commit you my schedule today. However, for your answer to persons in your company, I can give rough idea at this time. I may be able to start to arrange payment from early of 14th week and clean up full payment in October (Based on situation in Korea which I have found during my last trip, I can get gradual payment from Korean customers by end of this year)…
I deeply apologize this happening again. Please trust me. I will definitely pay my outstanding to you with the first priority. I want to explain you the Korean situation in detail on next Monday at Sydney. Can you share some time on Monday? [sic]
Regards
Mike Yang.”
On 8 October 2002, Mr Yang met Mr Chong and Mr Knox in Sydney. The minutes of the meeting record a promise to pay by 31 October 2002 the outstanding amounts of AUD$516,484.10 and USD$253,569.00, said to have been owed by Electec to 21 October 2002. A payment of AUD$100,000 was made on 8 October 2002 and acknowledged in an email from Mr Knox to Mr Yang on the following day. Mr Yang repeated his apology in a 10 October 2002 email to Mr Knox, expressing the hope that the “Korean situation” would improve and that “we continue cooperation in business for our future.”
A reconciliation statement tendered in evidence by Todaytech showed a further subsequent reduction of the debt by AUD$110,000 on 22 November 2002, leaving the sum of AUD$305,065.10 outstanding. When the applicable conversion rate of 0.54828533 is used, the sum of USD$253,569.50 amounts to AUD$462,476.35. The addition of that converted amount to $305,065.10 results in the claimed amount of $767,541.45. I am satisfied that that sum was due and owing on 20 June 2003 and remains unpaid by Electec.
I note however that the terms and conditions of trade referred to in the guarantee do not specify the applicable rate of interest in relation to the debt.
The claimed limitation of liability
I was not persuaded by Mr Yang’s alternative submission to the effect that, if he were liable to Todaytech under the guarantee in relation to any indebtedness on the part of Electec, his liability was limited to the sum of $200,000, being the amount of the credit for which Electec had applied. There was nothing in the guarantee to indicate that the guarantor’s liability was to be limited to any such sum, or at all. Indeed, it provides, initially, that the guarantor guarantees any amount due by the applicant for credit in relation to the supply of goods by Todaytech and then extends the ambit of the guarantee to encompass all debts whatsoever owed to Todaytech by the applicant. Mr Yang maintained that he did not read the guarantee and, as a result, there was no evidence that he understood that its terms were to any different effect.
The notice under the guarantee
By a letter dated 23 October 2002, Todaytech’s solicitors, Chris Lai & Associates, gave notice to Mr Yang that, 14 days after 23 October 2002, “legal action” would be commenced against him under the guarantee, unless payment of the sum of $878,957.42 was made by 25 October 2002. There is no evidence of any response to the letter. This proceeding was commenced by a writ filed on 27 November 2002.
Mr Yang alleges that he did not receive the notice required under the guarantee. I am satisfied that he did. The notice advises of Todaytech’s intention to commence legal proceedings against him under the guarantee. Mr Knox gave evidence that he had instructed the solicitors to give the notice to Mr Yang and the letter was tendered by Todaytech. Mr Yang did not challenge the evidence of Mr Knox as to the giving of notice under cross-examination, nor did he give evidence that he had not received the letter.
In my view, the reduction of the amount claimed in this proceeding does not affect the adequacy of the notice.
The description of Todaytech in the guarantee
Mr Yang told the Court that his previous lawyer had “found one technical issue” arising out of the misdescription of Todaytech as “Todaytech Distribution Australia Pty Ltd” in the Application for Credit document and the form of guarantee. This misdescription, Mr Yang argued, had the effect that he was not responsible under the guarantee for any obligation of Electec to Todaytech.
There was no evidence that Mr Yang did not know that the company with which Electec was dealing was Todaytech. The correct ABN was used in the application for credit document and both the correct and the incorrect names were used in the guarantee itself. The guarantee is to be construed in the general context of the parties’ transactions[2] in which it was quite clear, in my view, that Todaytech was the creditor intended to have the benefit of the guarantee. There was no evidence that a company named “Todaytech Distribution Australia Pty. Ltd.” ever existed. There was no evidence of Mr Yang dealing with anyone other than Mr Chong and Mr Knox of Todaytech. Mr Yang is estopped from denying the truth of that assumed state of facts adopted by the parties as the conventional basis of the guarantee transaction. [3]
[2]Amalgamated Investment& Property Co Ltd (in liquidation) v Texas Commerce International Bank Ltd [1982] Q.B. 84.
[3]See: Con-Stan Industries of Australia Pty. Ltd. v Norwich Winterthur Insurance (Australia) Ltd. (1985-6)160 C.L.R.226 at 244-5; Coghlan & Anor v S.H. Lock (Australia) Ltd (1985) 4 N.S.W.L.R. 158 at 171 per Samuels, J.A.; Eslea Holdings Ltd. (formerly IPEC Holdings Ltd.) v Butts & Ors (1986) 6 N.S.W.L.R. 175 at 188-9 per Samuels, J.A..
The counterclaim
By the counterclaim, Mr Yang first seeks declarations that no guarantee was entered into between him and Todaytech, that the guarantee was void ab initio or that he was discharged from liability from some date to be determined by the Court or that he was not liable under the guarantee. He then seeks declaratory and other relief under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1985 in relation to the alleged misleading and deceptive conduct or false and misleading representations made by Todaytech.
Mr Yang’s entitlement to the claimed relief under the counterclaim is premised upon him making out his defence and, in particular, upon the Court being satisfied that Todaytech made the alleged representations relating to the nature of the guarantee.
As I am not persuaded that the defence is made out, or that those representations were made, the counterclaim must fail.
Conclusion
The sum of $767,541.45 was due and owing by Electec to Todaytech as at 20 June 2003. Electec was in default in relation to its obligation to pay the outstanding amount. The debt remains unpaid. In the absence of any wording in the guarantee making his liability dependent upon the fulfilment of any condition, Mr Yang was liable to Todaytech under the guarantee from the date of Electec’s default and, in any event, from 20 June 2003.[4] Todaytech gave the requisite notice of its intention to commence legal proceedings.
[4]See the consideration of the nature of a guarantor’s liability by Mason, C.J. in Sunbird Plaza Pty. Ltd. v Maloney (1987) 166 C.L.R. 245 at 256-7.
There should be judgment for Todaytech for that amount and the counterclaim should be dismissed. I will hear the parties in relation to the form of orders, interest and costs.
0