Varney v Wiebell

[2010] VCC 587

IN THE COUNTY COURT OF VICTORIA Revised

(Not) Restricted

AT MELBOURNE

CIVIL DIVISION

Case No. CI-09-03633

MICHELLE VARNEY	Plaintiff
v
THOMAS MICHAEL WIEBELL & ORS	Defendants

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JUDGE:	His Honour Judge Ginnane
WHERE HELD:	Melbourne
DATE OF HEARING:	2 June 2010
DATE OF JUDGMENT:	2 June 2010 Revised 15 June 2010
CASE MAY BE CITED AS:	Varney v Wiebell
MEDIUM NEUTRAL CITATION:	[2010] VCC 0587

REASONS FOR JUDGMENT

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Catchwords: CONTRACT – guarantee- guarantor unaware that personal obligation being accepted – liability of guarantor.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R.A. Heath	Meerkin & Apel
For the First Defendant	In person
For the Second Defendant	Mr S. Tatarka	Salinger Brown Pty
For the Third Defendant	In person
HIS HONOUR:

1          In this proceeding the plaintiff sues three defendants to recover money alleged to be due and payable under a guarantee.

2          When the matter was called on this morning the first and second defendants Thomas Mitchell Wiebell and Djurna Grjna appeared, in the case of the second defendant by counsel, but decided not to participate in the hearing. The third defendant, Mr Joseph Forai, remained and he presented his defence to the proceeding in a clear and succinct manner.

3          Each of the defendants was a director of Fitzin Building Services Pty Ltd (the company). In the case of Mr Forai he ceased to be such on 8 May 2008. The company was placed into liquidation on 25 November 2009.

4          The plaintiff has established by her oral evidence and the documents relied on that she loaned to the company the sum of $500,000 to assist it in a building development which was to occur, or was occurring, at Carrum Downs.

5          The plaintiff gave evidence that prior to lending money to the company she told the first defendant Mr Wiebell, that she would require security for the loan. He told her that it was land, a “piece of dirt”, but that he would obtain guarantees. The plaintiff accepted that assurance.

6          Having heard the plaintiff and also having heard sworn evidence from Mr Forai, I am satisfied that the plaintiff played no other part in the obtaining of the guarantees.

7          The sum of $100,000 was advanced before the agreement was signed and a further $400,000 provided thereafter. Those sums were due for repayment on 6 June 2009 with interest payable at 20 per cent.

8          I accept that there was consideration for the loan agreement and guarantee and that the $100,000 formed part of that consideration. This was a point to which I was directed by counsel for the plaintiff, who displayed appropriate candour in raising the issue. In my opinion, it is appropriate to consider the transaction as a whole and once this is done consideration can be identified: see Breusch v Watts Development Divison (1987) 10 NSWLR 311 to which counsel for the plaintiff referred me.

9          The agreement upon which the plaintiff sues is titled “Loan Agreement”. In Clause 6 it states: "The Guarantors hereby guarantee jointly and severally to the Lender the due and punctual payment of the Principal Sum and interest by the Borrower”.

10        The guarantors are the defendants. Other than three repayments of interest, no part of the principal sum has been repaid.

11        I am satisfied that the sum of $500,000 together with the balance of interest is due under the loan agreement. I have recited Clause 6 of the guarantee which imposes an obligation on the defendants in respect of the due and punctual payment of the principal sum and interest.

12        The first and second defendants have presented no defence to the plaintiff's claim that they were obliged to make those payments under Clause 6. Judgment should be entered against them and the counterclaim of the first defendant dismissed.

13        Mr Forai, the third defendant, has raised an issue as a defence. The substance of this defence, as pleaded, is that when the first defendant, Mr Wiebell, procured his signature to the loan agreement, Mr Forai executed the same in the belief, as he had been told by the first defendant, that he was executing the loan agreement as an officer or representative of Fitzsin Building Services Pty Ltd.

14        Mr Forai conducted that defence with candour in that he concentrated on the one point that he has raised in the proceeding, namely, that he did not realize that the agreement contained a personal guarantee. His evidence in the witness box supported this contention. He asked the Court rhetorically, to consider why he would have resigned as a director, if he thought that he had previously given a personal guarantee of the company’s loan. He did not seek legal advice before signing the agreement.

15        Normally adults are bound by the legal documents they sign. There are limited exceptions to that principle and they are generally concerned with matters such as fraud, mistake or misrepresentation. I have considered whether the defence raised by Mr Forai fits within any of those exceptions.

16        I do not consider that this is a case of unilateral mistake because, as the plaintiff submitted, it has not been established that the plaintiff had knowledge of the mistake that Mr Forai made.

17        I do not consider that this is a case of non est factum, because that defence does not apply where what is referred to as carelessness, or a failure to consider the document applies. By that is meant that if the person who signed the document could have ascertained the meaning of it but did not, the defence is not available.

18        I also do not consider that this is a case which fits within the principles discussed in Garcia v. National Australia Bank Ltd (1995) 194 C.L.R. 395.

19        Therefore, although I accept that Mr Forai did not appreciate that this was a personal guarantee, I consider that the effect of the law is that he is bound by the guarantee. Accordingly, the plaintiff is entitled to judgment against each of the defendants on a joint and several basis.

20        Mr Forai claimed contribution or indemnity against Mr Wiebell by a notice dated 31 March 2010, on the basis that Mr Wiebell owed him a duty of care in making recommendations to Mr Forai at the time he signed the loan agreement and guarantee. Mr Forai's case is that Mr Wiebell asked him to sign the document and indicated that the document related to moneys loaned by the plaintiff or that were to be loaned by the plaintiff. Mr Forai also relied on the submission that that representation was made at a time when the plaintiff and Mr Wiebell were in a relationship.

21        Mr Forai's evidence, which I accept, is that he acted on the faith of Mr Weibell’s recommendations. The notice seeking contribution or indemnity alleges that Mr Wiebell was guilty of negligence in failing to inform Mr Forai that the document contained a personal guarantee. Mr Forai states that he would not have signed it if he had known that it did contain a personal guarantee.

22        To uphold this claim, I would have to be satisfied that Mr Wiebell owed a duty of care to Mr Forai recognised by law in respect of advice given on his entry into the personal guarantee or advice given about that guarantee.

23        I accept that Mr Forai relied on Mr Wiebell. However, in law to establish a duty of care in a case like the present, speaking generally, it must be shown that either there was an express or implied retainer to give particular advice or recommendation, or that the circumstances disclosed by the evidence dictate that a duty be held to exist to give accurate advice, or to take reasonable care in giving advice.

24        I am not satisfied on the evidence that there was either an express retainer or implied retainer or, that there existed circumstances dictating the imposition of a duty.

25        Mr Forai, as he acknowledged, could have read the document and could have sought legal advice about it. I accept that the circumstances that existed between him and Mr Wiebell, and the role that Mr Wiebell had in the development, meant that Mr Forai chose not to do that, but that is a step short of establishing circumstances where the law would create a duty of care on the part of Mr Wiebell.

26        I therefore dismiss the notice by the third defendant claiming indemnity or contribution against the first defendant, which is dated 31 March 2010.

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