ALONSO -v- SRS INVESTMENTS (WA) PTY LTD [2012] WASC 168 | Case summary

Supreme Court of WA|2012-07-31|Before: Edelman J

1 In 1677, in an era when parties to lawsuits could not give evidence themselves, the Cavalier Parliament passed An Act for Prevention of Frauds and Perjuries. That Act became commonly known as the Statute of Frauds. Its purpose was to prevent fraud and perjury in oral testimony. Hundreds of cases were decided upon the meaning of the 11 lines of Caroline draftsmanship. In many cases the provisions of the Statute of Frauds were denied the meaning which the words of the statute had apparently required. The common law developed doctrines which were based upon the asserted general purpose of the statute. Nearly 350 years later, with some deletions,[1] s 4 of the Statute of Frauds remains in force in Western Australia.

2 A central issue in this trial concerned whether a guarantee contained in a lease was 'signed by the party to be charged therewith' within the meaning of s 4 of the Statute of Frauds. The second defendant pleaded that the guarantee was not enforceable against her personally. She said that although she had signed the guarantee she had done so only as a director of the principal debtor; she said she had not signed in her personal capacity. This requires consideration of the meaning and application of s 4 of the Statute of Frauds. The second defendant also pleaded that she had no intention to create any personal legal liability under the guarantee.

3 In these reasons I explain why the historical approach taken in a line of cases concerning the construction of s 4 of the Statute of Frauds means that the requirements of s 4 of the Statute of Frauds are satisfied in this case. Further, the second defendant manifested an objective intention to be legally bound. An important part of my conclusions is the irrelevance of the second defendant's subjective intention to avoid liability under the guarantee, an intention which was not communicated to the plaintiff. As the leading treatise on s 4 explains, in many of the cases in which guarantees are enforced 'it is apparent that the last thing [that defendants who were held to be bound] could have in mind was the production of a writing satisfying the Statute; often this was the very result they intended most to avoid'.[2]

4 The second defendant also attempted to resist liability under the guarantee by arguing that (i) the lease was illegal; and (ii) the lease was unregistered. Neither of these claims was pleaded. The illegality argument fails. The lack of registration of the lease, raised as an issue by the second defendant at the start of trial without objection,[3] means that the second defendant may not be liable for several heads of 'damages' claimed. But it is not necessary to decide this point because those heads of damage are irrecoverable for other reasons of evidence and construction.

The Lease, guarantee and indemnity The Lease and its signing

5 At the heart of this trial was a lease agreement containing guarantee provisions (the Lease). The Lease was over a property at 26 Prindiville Drive, Wangara in Western Australia (the Property). The parties to the Lease were:

(2) The lessee, which was the first defendant, SRS Investments (WA) Pty Ltd (SRS Investments); and

(3) The guarantor, who is the second defendant, Ms Sandford (now Ms Elliott).

6 It appears that Mr Alonso may also have undertaken obligations to account for any benefits from the Lease to the beneficiaries of the Alonso Family Trust.[4]

7 An original of the lease was produced and tendered as an exhibit by Mr Alonso.[5] The Lease provided for a date of commencement of 1 November 2006. The rent was $5,000 per month. The initial term was 60 months.

8 It was admitted that at the relevant times Mr Alonso was the registered owner of the Property[6] which was leased to SRS Investments by a Lease dated 26 July 2007.[7] In oral closing submissions counsel for Mr Alonso, and Ms Elliott, both confirmed that the reference to 26 July 2007 was a typographical error which should have read 27 June 2007. The assumption of the parties at trial was that the Lease was made when it was signed by Mr Alonso, and witnessed, on 27 June 2007.

The Guarantor guarantees unconditionally and irrevocably to the Lessor the due and punctual payment by the Lessee to the Lessor of all Monday and the due observance and performance of the Lessee's Covenants.

(a) indemnifies unconditionally and irrevocably the Lessor against all loss, liability, cost or expense (collectively 'the Lessor's Loss') incurred or suffered by the Lessor arising from or in connection with any Event of Default or as a consequence of a disclaimer of this Lease by a liquidator or trustee of the Lessee; and

(b) as principle debtor agrees to pay to the Lessor on demand a sum equal to the amount of the Lessor's Loss.

10 The Lease was prepared by Mr Dawson, a commercial property manager at David Evans Real Estate, at the request of the previous tenant, Ms Cavill.[8] In preparing the Lease Mr Dawson relied upon information provided by Ms Cavill.[9] Mr Dawson provided the Lease to Ms Cavill.[10] Ms Cavill then provided the Lease to SRS Investments, by its principal the second defendant.[11]

11 Mr Alonso did not sign the Lease until 27 June 2007 when he attended the second defendant's office. Until that date the Lease was kept by the second defendant at her office.[12]

12 The execution page of the lease agreement was as follows:

13 The second defendant admitted that she signed her name above the word 'Director'. She also admitted that she handwrote her name on the line above 'Full Name (Please Print)'.[13] She denied having handwritten her name after the words 'Signed as a deed by'.[14] Although it was put to her in crossexamination that the handwriting appeared to be in the same pen as the second defendant's signature, it was not directly suggested to her that she had written her name in the second handwritten place after the signature.

14 Other than to conclude that the author of the neatly handwritten words 'Sara Sandford' (appearing after the typed words 'Signed as a Deed by') was not Mr Alonso, I do not make any finding as to the author of those words. Mr Alonso's evidence, which I accept, was that he cannot write English[15] although I accept that he was able to write his signature and initials on the Lease. Although the second defendant submitted in closing submissions that Mr Dawson was the author of the handwriting after 'Signed as a Deed by', no evidence was given at trial to support this.

15 The second defendant was the sole director, manager and shareholder of the first defendant, SRS Investments.[16] SRS Investments failed to make numerous payments of rent and other expenses under the lease. Although this action was brought against both SRS Investments and the second defendant, I was informed by counsel that SRS Investments has been deregistered. The trial proceeded only against the second defendant as the purported guarantor. The pleadings were all prepared by lawyers, although following the second defendant's failure to pay legal fees of her lawyers, she subsequently became selfrepresented, including at trial.

16 In her closing submissions, the second defendant made a number of submissions upon which there was no evidence. One of these concerned the lack of any discussion between her and Ms Cavill or Mr Dawson about the requirement of a guarantee. In any event, this matter is irrelevant. The agreement was reduced to a written form. The question is the construction of the written agreement and the circumstances surrounding that agreement. Conversations with people who are not parties to the agreement are irrelevant. A second matter upon which the second defendant relied was an assertion that Ms Cavill declined to sign the Lease as a witness in December 2006. Again, this matter was not the subject of evidence and is, in any event, irrelevant. A third matter on which the second defendant relied was the omission of her middle name on the execution page of the Lease. This matter is again irrelevant. It was accepted that the second defendant is Ms Sandford and that she signed that name on the execution page of the Lease and printed her name below that as I have explained above.

A second original lease agreement and an application by the second defendant to reopen and to issue subpoenas

17 Although the second defendant was unrepresented during trial, she had legal representation until shortly before trial. That representation was withdrawn shortly before trial following her failure to pay legal fees. The second defendant's lawyers also asserted a possessory lien over all the second defendant's documents which they held.

18 In her opening submissions, the second defendant said that there was a second version of the Lease where she had 'printed "director" directly under [her] name when it's first printed'.[17] That second original lease is held by her former solicitors as part of their possessory lien 'for the protection of the solicitor's claim for costs and disbursements'.[18]

19 At a directions hearing in the week prior to trial I told the second defendant that if she needed any documents she would have to subpoena them.[19] At the commencement of the trial I explained this to her again.[20] But no attempt was made to issue a subpoena. Nor was any application made for leave to issue a subpoena.

20 During crossexamination, the second defendant was shown an original version of the Lease. The second defendant said that there were two original versions of the Lease. She said that in the second original of the Lease, under her signature, she had printed the word 'Director'.[21] Documents had been exchanged in discovery and it was not suggested to her in crossexamination that this account was false.

21 The second defendant did not ask Mr Alonso whether he had seen the printed words 'Director' which she said she had written underneath her signature on the second original of the lease. Nor did she give any evidence concerning when she wrote the word 'Director' under her printed name or whether it was written before or after Mr Alonso signed the second original version of the Lease. She did say that she had never met Mr Alonso before signing the Lease.[22]

22 After the second defendant had given her evidence, the court adjourned for the filing of written closing submissions. Before the second defendant filed her written closing submissions, the second defendant applied for leave to issue a subpoena against her former lawyers for the production of the other original copy of the Lease. In order to do so, the second defendant required leave to reopen her case. If the Lease were tendered then the plaintiff may also have needed an opportunity to crossexamine the second defendant about it.

23 Although the second defendant had been reminded several times of the need to issue a subpoena, I accepted that the second defendant did not make a deliberate decision not to issue a subpoena against her former lawyers; I proceeded on the basis that her decision not to seek leave to issue a subpoena prior to the trial, or to seek leave to issue it during the trial, was an error. Nevertheless, I refused her application for leave to issue the subpoena. I said that I would give my reasons as part of my judgment.

24 In Osborne v Landpower Developments Pty Ltd (in liq)[23] McLure J (as her Honour was then) observed that '[t]here is some uncertainty as to the test to be applied to the exercise of the Court's discretion to permit the reopening of a matter before orders are made'.

25 The leading decision is Smith v New South Wales Bar Association.[24] In that case, a joint judgment of Brennan, Dawson, Toohey and Gaudron JJ suggested a liberal test that where the decision not to call new or additional evidence was made in error then if an application is made for leave to reopen prior to delivery of reasons and orders, it is 'difficult to see why ... the primary consideration should not be that of embarrassment and prejudice to the other side'.[25] The considerations of embarrassment and prejudice include the general principles of case management.

26 However, one case, cited with approval by their Honours,[26] posed a more restrictive test for the circumstances in which leave would be given to reopen a case prior to delivery of reasons. In that case, Wolff CJ held the following in relation to the test to be applied to reopening:[27]

[A] court should be cautious in [reopening the evidence after the trial has concluded] and should admit fresh evidence of this nature only when it is so material that the interests of justice require it, and the evidence if believed would most probably affect the result, and further that the evidence could not by reasonable diligence have been discovered before.

27 During oral submissions on the second defendant's application to reopen I explained that I would proceed on the basis that the more liberal test of 'embarrassment and prejudice' applies because no reasons for judgment had been delivered and because no closing submissions had been made.[28] Further, there are broadly three, overlapping classes of case in which leave to reopen can be granted. These are (i) fresh evidence; (ii) inadvertent error; (iii) mistaken apprehension of the facts or the law.[29] It may be that the more restrictive test, which focuses upon fresh evidence considerations, is confined only to the category of case which involves fresh evidence.

Leave to reopen and to issue subpoenas was refused for two reasons

28 The embarrassment and prejudice to the plaintiff from additional evidence involves delay and additional cost. That delay and additional cost arises in circumstances in which the evidence of the second original of the Lease which the second defendant sought to produce and to tender was of little, if any, relevance to the case and could have little or no effect on my reasoning.

29 The reopening which the second defendant sought was for the production and the tender of the second version of the Lease to show that it contained her handwritten annotation 'Director' under her handwritten, printed name. This annotation was not contained on the tendered original version. The point is a short one and it relates to an issue raised at the outset of these proceedings. But delay would ensue. Further crossexamination might be sought in relation to the document and judgment would be further delayed. More importantly, two additional considerations are the lack of relevance of the documents which the second defendant proposed to subpoena as well as concerns that the evidence may not be admitted.[30]

30 As to relevance, the evidence would have little relevance to the matters in issue in the trial for two reasons. First, the second defendant gave evidence at trial concerning the difference in content of what she said was contained in the second original lease which is in the possession of her former lawyers. I accept that evidence. The second original lease need not be tendered to prove this.

31 As I have explained, the second defendant gave evidence that she had handwritten the word 'Director' on the second original of the Lease under her printed name.[31] Her evidence was not directly challenged. There was no suggestion by counsel for Mr Alonso that she had failed to discover the second original of the Lease. The production of the second original lease would simply confirm evidence which was not directly challenged and which I accept. For that reason, I accept the submission of counsel for Mr Alonso that it was not sufficiently relevant to justify reopening.[32]

32 Secondly, without further oral evidence (which the second defendant did not seek to give) it would not be possible for me to conclude that the words that the second defendant says are written on that lease were seen by Mr Alonso. No evidence was given about when the second defendant printed the word 'Director'. Nor was Mr Alonso asked whether he had seen that printed word. As I have explained, the printed word 'director' does not appear on his original of the Lease.

33 In these circumstances, an application to reopen to produce the second original lease would not have added anything of legal significance to the evidence at trial.

34 At the oral hearing of the application to reopen, the second defendant also sought to reopen her case and sought leave to subpoena two further documents from her former lawyers. The first was handwritten notes from Ms Cavill for the preparation of the Lease. The second was a fee note from Mr Dawson for his fees in preparing the Lease. The second defendant had mentioned these documents during her evidence in the trial.[33]

35 These documents would also add nothing of significance to the trial. As to handwritten notes by Ms Cavill, instructions provided for the preparation of a written agreement cannot be used to contradict the express, plain terms of the agreement. It is irrelevant whether or not Mrs Cavill asked Mr Dawson to include a guarantee provision in the Lease (to which neither of them was a party). There was no dispute that a guarantee provision was included in the lease agreement. The question was whether it is binding. In any event, during crossexamination by the second defendant, Mr Dawson said that he had been asked by Ms Cavill to prepare the Lease. He could not recall seeing written instructions[34] but he recalled 'verbal' (sic: oral) instructions from Ms Cavill and recalled that Ms Cavill 'asked me about a guarantor and I advised her that it was normal practice where the lease is to be in a name of a corporate body that a guarantor was desirable'.[35] I accept Mr Dawson's evidence.

36 As to the fee note from Mr Dawson, this is also irrelevant. Whether a fee note was issued for his preparation of the Lease, and the amount of that fee note, is not relevant.

37 For these reasons, any handwritten instructions from Ms Cavill to Mr Dawson, and any fee note from Mr Dawson, for preparation of the lease would also have had no legal significance to the trial.

Potential difficulty with the sub poena duces tecem (bring with you under penalty)

38 Apart from the lack of relevance of the documents which the second defendant sought to subpoena, there is a further reason why I refused the application to reopen and leave to issue the subpoena. This is because the evidence may not have been able to be led in any event.

39 The documents which the second defendant wanted to subpoena were all the subject of a possessory lien exercised by her former solicitors for unpaid legal fees.

40 In Hall v Donlon,[36] Brereton J explained that a solicitor who has a possessory lien cannot refuse to answer the subpoena. However, the solicitor can apply to set it aside and can oppose inspection. Alternatively, the inspection of the documents produced can be made subject to conditions.

41 The former solicitor who terminates the retainer for a client's failure to pay legal fees will usually be required to produce the documents for inspection if it is 'in the interests of justice and to avoid catastrophe for the client's litigation'.[37] However, a balance must be struck between the interests of the client in obtaining the documents and the interests of the former solicitor in preserving the value of the lien. Two factors are relevant in striking this balance.

42 First, the lien is 'interfered with only so far as necessary for the progress of the litigation'.[38]

43 Secondly, the usual order is that the production of the documents will be subject to terms which preserve the value of the lien, including satisfactory security for unpaid costs.[39] The provision of satisfactory security has been described as 'the provision, in lieu of payment, of something of monetary value which would ensure the satisfaction of the possessory lien. Like should be replaced with like'.[40]

44 It may be that a circumstance in which departure from this usual order might be expected is where the former client demonstrates that his or her financial position is such that he or she is unable to make the payment required, or to provide the necessary security and where the documents sought had a significant prospect of affecting the result in the case. Even if the documents which the second defendant sought to subpoena were relevant, their relevance was very limited. If reopening had been allowed and the subpoena issued, the appropriate order on the return of the subpoena would have been for the second defendant to pay the outstanding costs of her former solicitors or to provide security for those costs. The second defendant said that she could not provide this from her own funds. She was unsure if she would be able to obtain the funds or the security for those costs. There is a real possibility that the documents could not then have been tendered.

45 This was a further, separate, reason why I refused the second defendant's application to reopen.

46 One defence pleaded by the second defendant was that she had no intention to be legally bound by the Lease in her capacity as guarantor.[41] The question of her intention to be legally bound is not answered by reference to her subjective thoughts or intentions. The relevant intention is an intention objectively manifested.[42]

47 As the plurality of the High Court of Australia explained in Ermogenous v Greek Orthodox Community of SA Inc,[43] the intention is manifested in light of 'the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances'. The High Court in Ermogenous did not suggest that there was any requirement of ambiguity in the words of an agreement before resort could be had to surrounding circumstances to determine whether there is a manifest intention to be legally bound. The issue of manifest intention in entering an agreement may be different from the construction of words in an agreement. But, for reasons set out below at [58] [65], even if there were a requirement of ambiguity, it is present in this case.

48 Uncommunicated subjective beliefs and intentions of the parties are not relevant to the issue of intention to create legal relations. Therefore, the second defendant's professed subjective belief that she did not want to sign as guarantor[44] is irrelevant. Neither the second defendant nor Mr Alonso suggested that she had communicated this belief to Mr Alonso. I find that she did not do so.

49 In contrast, the presence of a signature is a relevant circumstance in ascertaining whether there is an objective or manifest intention to be legally bound. The act of signing is a formal 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'.[45]

50 But the presence or absence of a signature is only one circumstance to be considered in determining whether there is an objective intention to be legally bound. The absence of signature does not preclude a finding that there is a manifest intention to be legally bound by the instrument. Indeed, most contracts are binding without signature. And even if a signature is omitted from a place where it might have otherwise appeared an intention to create legal relations can nevertheless be manifest.

51 In Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd[46] McHugh JA (who was later a party to the plurality decision of the High Court in Ermogenous) explained that 'the contents of a document may indicate that a signatory is bound even though a qualification attaches to his signature'. In Scottish Amicable, McHugh JA rejected an earlier English approach of Atkin LJ that '[i]f the assent to the contract clearly appears from the form of the signature to be qualified, it appears to me to be impossible to charge the signer on the footing that there is an unqualified assent by him'.[47] Even in England, this approach of Atkin LJ was probably not then, or subsequently, the law.[48]

52 The approach of McHugh JA has been applied or approved on numerous occasions by Australian courts.[49] It has been iterated, and reiterated, that in considering whether there is an intention to be legally bound, qualification attached to a signature is only one relevant factor: 'intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible'.[50]

53 For these reasons, the omission of a signature next to the words 'Signed as a deed by Sara Sandford' is not conclusive. Nor is the signature of Ms Sandford, with the qualification 'Director' attached to it, conclusive of an intention to be legally bound only in that capacity. The question is ultimately whether 'the parties' conduct, viewed objectively, reveals a tacit understanding or agreement, or a manifestation of mutual assent, which evinces an intention to create legal relations'.[51]

54 Although each case depends on its own circumstances, two examples can be given where this broad approach has led to guarantors being held to have manifested an intention to be legally bound despite having signed only in a qualified manner as directors.

55 In Scottish Amicable itself, the majority of the New South Wales Court of Appeal (which included McHugh JA) held that Mr and Mrs Austin were bound to indemnify Scottish Amicable against default by their company even though the indemnity provision in the agreement appointing their company as agent had been signed by them on behalf of their company and not signed by them personally.

56 Again, in Padstow Corporation Pty Ltd v Fleming (No 2)[52] a lease included provision for a guarantor of the obligations of the tenant. Mr Fleming Junior submitted that he was not bound by the guarantee provisions of the lease because he had signed the lease only in his capacity as director of the lessee company. His signature was made in a place prefaced by the words '[s]ignature of authorised person' as an execution 'on behalf of the corporation named below by the authorised person(s) whose signature(s) appear(s) below pursuant to the authority specified'. The trial judge held that notwithstanding the form of the execution provision, Mr Fleming Junior had manifested an intention to be legally bound by signing the lease.

57 There are four cumulative reasons why the Lease in this case, construed in its surrounding circumstances, manifested an (objective) intention for the second defendant to be legally bound as guarantor.

58 First, the second defendant was specifically identified in Item 3 of the Particulars of Lease as the guarantor. Apart from the absence of any signature, the guarantee and indemnity provisions in cl 24 applied to her directly and in plain terms. Other clauses were amended and initialled by the second defendant but this was one was not.

59 Secondly, although the second defendant did not sign in the pencil marked place on the execution section opposite the words 'signed as a Deed by Sara Sandford', there is a peculiarity about the execution page which contradicts the suggestion that there is a clear absence of any signature by the second defendant in her personal capacity.

60 I have already observed that (i) the handwritten words 'Sara Sandford' after the typed words 'Signed as a deed by' were not written by Mr Alonso, and (ii) there is no signature by the second defendant (then named Ms Sandford) in the blank space opposite where the pencilled cross appears. However, the handwritten words 'Sara Sandford', which are inserted after the words 'Signed as a deed by', appear to be witnessed. The witness has signed his signature and printed his name and address below the handwritten words 'Signed as a Deed by Sara Sandford'. It appears from the execution page, and the second defendant admitted,[53] that the witness, Mr Screaigh, signed in the presence of the second defendant. If Ms Sandford's signature as a director were not evidence of an intention to be bound personally, or if the handwriting of her name were not evidence of that fact, then there would have been no purpose for Mr Screaigh to have signed as a witness, in Ms Sandford's presence, under the words 'Signed as a Deed by Sara Sandford'.

61 A reasonable person in Mr Alonso's position who saw the following would therefore have inferred either that the signature 'Sara Sandford', as Director, served also to be a signature in her personal capacity, or that the handwritten name of 'Sara Sandford' served as Ms Sandford's signature:

(i) the handwritten name 'Sara Sandford' in the section which provided for Ms Sandford's unqualified signature to the Lease;

(ii) Mr Screaigh's name and signature attesting to his presence at the signing of the Deed by (handwritten) 'Sara Sandford'; and

(iii) the words 'delete if inapplicable' which preceded the words 'Signed as a deed by Sara Sandford'. No deletion is made.

62 Thirdly, at various points in the Lease the second defendant made handwritten changes, and inserted her initials to signify that she had made the changes.[54] The preface page to the Lease contained instructions headed 'IMPORTANT - read the following before using this document'. One of those seven instructions was that '[a]ny deletions or omissions should be struck through and initialled by all parties'. With these instructions communicated to both parties the fact that the second defendant made alterations to some provisions of the Lease but left the guarantee and indemnity provision unaffected demonstrates an objectively manifested intention to be bound by those provisions.

63 Fourthly, on 30 October 2006, two days before the date at which the Lease was expressed to commence, the second defendant wrote to Mr Alonso and said that the Lease[55]

has been signed conditional on the completion of the purchase of the business known as Cavill Business Solutions. Should the purchase of the business not proceed then the signing of this lease is null and void.

64 The address of the sender of the letter was the same address as the address provided in the Particulars of the Lease for both SRS Investments (as Lessee) and the second defendant (as guarantor). This was the second defendant's address at that time.[56] The second defendant signed the letter with her unqualified signature. She explained that she required Mr Alonso also to sign an acknowledgement of the letter, which he did. There was no suggestion that she did not agree to the term of the Lease that she be guarantor.

65 The consequence of this letter was that when Mr Alonso attended the second defendant's office to sign the Lease on 27 June 2007,[57] it would have been reasonable to expect the second defendant had undertaken to be bound personally. The lack of her signature in a place in the Lease which made no reference to the guarantee provisions is not sufficient to overcome the objective effect of the 30 October 2006 letter, still less to overcome the other three matters I have mentioned.

66 For these reasons I conclude that there was an objectively manifested intention to be legally bound by the second defendant. For completeness, I note that it was not submitted that in construing whether there is an objectively manifested intention to be legally bound, the reasonable person should include any attributes of either or both of the parties, including attributes known to each other such as Mr Alonso's limited ability to speak English and inability to write English (other than to sign his name). It is not necessary to consider these matters, although if these characteristics were relevant they would have further supported an objectively manifested intention to be legally bound.

67 Another defence pleaded, perhaps the primary defence, was s 4 of the Statute of Frauds. That section provides as follows (expressed in modern English):

No action shall be brought ... whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person; ... unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised.

68 One condition of s 4 is that there must be three parties involved: the debtor, the creditor and the 'guarantor' who is answerable for the debt or default of the debtor. It was not suggested that cl 24 of the Lease fell outside the terms of s 4 because the second defendant, as 'guarantor', could be liable to Mr Alonso irrespective of whether SRS Investments were liable or had made default.[58]

69 My conclusion is that the second defendant is liable to Mr Alonso and s 4 is no bar to the action. This is for two separate reasons. The first is that the capacity in which the second defendant signed the lease is not relevant to the meaning of s 4 of the Statute of Frauds. The second reason is that the second defendant signed a letter, with an unqualified signature. That letter clearly referred to the Lease.

The second defendant's signature in the Lease charged her with personal liability

70 The short issue raised by s 4 of the Statute of Frauds is whether the Lease was 'signed by the party to be charged therewith'. The Statute of Frauds presupposes three parties: creditor, debtor, and guarantor.[59] The question might be thought to be whether the second defendant signed in her personal capacity as guarantor.

71 The second defendant's uncontradicted evidence was that the handwriting which she inserted in the Lease was as follows:

(1) her signature as the director of SRS Investments in whose presence the company seal was described as being affixed;

(2) her full handwritten name below that signature. Her handwritten name was a clarification of the signature as director;

(3) her initials beside her handwritten alterations to some of the terms of the lease.[60]

72 In Mr Alonso's submissions he relied upon all three of these writings by the second defendant as satisfying the requirement of signature in s 4 of the Statute of Frauds.

73 If this question were free from authority then, at first glance, there might be an understandable reluctance to accept this argument. The affixing of a company's signature with a signed attestation by directors of the company is not 'a signature of the document by the directors themselves. What the directors do represents merely part of the signing of the signature of the company', acting through its directors.[61]

74 However, the meaning of the requirement of signature in s 4 must be understood in the context of the particular manner in which the Statute of Frauds was historically interpreted. Many of the cases which followed the enactment of the Statute of Frauds developed a contorted interpretation of its words. Doctrines, such as part performance, were developed to avoid the literal application of the statute where the case did not fall within the mischief which the statute aimed to prevent. That mischief, embodied in the title 'An Act for the prevention of frauds and perjuries', was to avoid the need to decide which person was telling the truth about whether an oral promise had been made.[62]

75 An example is the decision in Simon v Motivos,[63] where Lord Mansfield suggested that the provisions of the Statute of Frauds might not apply to a sale by auction. Lord Mansfield said that whether the case is brought at common law or in equity the 'key' to construction of the Statute of Frauds is 'the intent of the Legislature; and therefore many cases, though seemingly within the letter, have been let out of it'.[64] In the same case Wilmot J remarked that '[h]ad the Statute of Frauds always been carried into effect according to the letter, it would have done ten times more mischief than it has done good, by protecting rather than preventing, frauds'.[65]

76 In this manner, the voices of great judges such as Lord Chancellors Cowper,[66] Hardwicke and Macclesfield[67] became minority expressions for the lament that, in the words of Lord Kenyon CJ, 'if courts had at first abided by the strict letter of the Act, it would have prevented a multitude of suits that have since been brought'.[68]

77 The formal requirement in s 4 of the Statute of Frauds that a written memorandum or note be 'signed by the party to be charged therewith' has been interpreted in a line of cases consistent with the approach of letting out of the statute cases which might have fallen within its terms. Those cases gave the word 'signed' a meaning 'very different from its normal meaning',[69] sometimes recognising as a signature 'nothing which could ordinarily be called a signature'.[70] The same broad approach was taken where qualifications were imposed upon a signature.

78 The issue directly arose in Delaney v Purves.[71] In that case, the plaintiff's theatre was leased to Greater Brisbane Amusements Ltd. The lease included a guarantee by Purves and two other defendants. One of the defences was that they had signed the lease solely as directors of Greater Brisbane Amusements Ltd. Their signatures were alongside the clause which attested to their presence at the fixing of the company seal for Greater Brisbane Amusements Ltd. The clause which provided for them to sign as 'being the sureties mentioned in the within lease' was left blank. The directors argued that the guarantee provisions in the lease could not be enforced against them personally because there was no writing signed by them personally as required by the Statute of Frauds and Limitations 1867 (Qld).

79 Macrossan SPJ rejected this argument. His Honour held that[72]

I am of the opinion that the document is one single and indivisible whole, and that the signatures of the defendants, even as directors merely, would be sufficient to bind them as sureties ... The question is not one of intention, but simply one of evidence against them. The Court is in quest of evidence, under the hands of the defendants, that they in fact entered into the contract of suretyship. The document signed by them and containing the contract is sufficient for the purpose.

80 The decision in Delaney was approved by Mahoney JA in the majority of the New South Wales Court of Appeal in Scottish Amicable.[73] It was approved again by Giles J in Clark Equipment v Kiyose Holdings.[74] Although those cases generally relied upon the reasoning of Macrossan SPJ in the context of whether there was an intention to be legally bound, English authority has forcefully reached the same conclusion as Macrossan SPJ in the context of s 4.

81 In Elpis Maritime Co Ltd v Marti Chartering Co Inc[75] one issue was whether shipowners could enforce a guarantee against the brokers for the charterer, Marti Chartering Co Inc. Marti relied on s 4 and argued that its signature on the guarantee was not in its personal capacity. Marti argued that it signed only as brokers, on behalf of the charterers, and relied upon s 4 of the Statute of Frauds. The House of Lords overturned the decision of the Court of Appeal and upheld summary judgment, holding that s 4 was not even an arguable defence. Their Lordships considered that the capacity in which the signature was made was irrelevant to the question of enforceability with which s 4 is concerned. Lord Brandon of Oakbrook said that

with great respect to the Court of Appeal ... they were in error in treating the issue of the intention with which, or the capacity in which, Marti signed the page of the charterparty concerned as relevant to, let alone decisive of, the question whether that page contained a sufficient memorandum or note.

82 These authorities, particularly the decision in Delaney, concerned a similar issue to this case. In each case, the signature of a person, although qualified on the basis that the signature was as director or broker, was held also to be sufficient to satisfy s 4 of the Statute of Frauds.

83 Following these authorities, which I do, would be sufficient to dispose of this case. However, the letter of 30 October 2006, which the second defendant signed, is a separate and independent reason why s 4 of the Statute of Frauds is satisfied. I turn now to that reason.

An unqualified signature in the second defendant's personal capacity

84 A separate, and independent, reason why the second defendant has satisfied the requirement of s 4 is that the 30 October 2006 letter which she signed in her personal capacity is a written memorandum or note which satisfies s 4.

85 The 30 October 2006 letter to Mr Alonso was signed and dated two days before the date when the Lease was expressed to commence. As I have explained, the second defendant wrote to Mr Alonso and said that the Lease had been signed conditional upon the completion of the purchase of the business known as Cavill Business Solutions. She signed that letter without qualification.[76] Cavill Business Solutions Pty Ltd was sold to SRS Investments around October 2006[77] and funds due under the settlement statement were paid.[78] Although the second defendant alleged that there remains 'an amount outstanding of $106,000 and those monies are outstanding because of the procuring of clients by Mrs Cavill',[79] this did not preclude the Lease taking effect. Indeed, as I have explained above, it was an admitted fact that the Lease took effect from 27 June 2007. In any event, I do not accept the second respondent's oral evidence on this point that money remains outstanding. It was not a matter which her lawyers had pleaded as relevant; it was not a matter which she had raised in her witness statement; it was not put to Ms Cavill in crossexamination; and nothing was produced in support of this allegation in evidence.

86 In crossexamination the second defendant acknowledged that the lease to which she had referred in her signed letter was the relevant lease in the case. That Lease was exhibit 13.[80] Parol evidence has long been recognised as admissible for the purpose of this identification and explanation.[81] The late Professor Williams described this as the 'explanatory evidence rule'.[82]

87 In Tawney v Crowther[83] the defendant wrote and signed a letter which referred to an unsigned oral agreement. The defendant had refused to sign the previous agreement. In the signed letter the defendant said that 'his word should be as good as any security he could give'. The Lord Chancellor held that this was sufficient writing and signature for the purposes of s 4 of the Statute of Frauds.

88 There were doubts about the ultimate conclusion on whether the defendant intended to be legally bound in Tawney, or whether the words in the letter really meant 'I will not bind myself, but you shall rely on my word'.[84] However, it became rapidly established that a signature in a letter or document which was separate from the agreement was sufficient to satisfy the Statute of Frauds. Thus, in Saunderson v Jackson[85] s 4 of the Statute of Frauds was satisfied by a letter which was written and signed by the seller of goods, and which referred to the sale of 1,000 gallons of gin. Lord Eldon said that although the letter did not refer to the terms of the agreement it could be 'connected ... with something which does [a bill of parcels for the sale], and the letter is signed by the [d]efendants'.[86]

89 In Ridgway v Wharton[87] the House of Lords in a Chancery appeal held that the requirements of s 4 of the Statute of Frauds were satisfied by a written and signed note which merely referred to 'instructions'. Parol evidence was given to show that the instructions to which reference was made was a written document and the terms of that agreement were proved.

90 A liberal approach taken by the Court of Chancery, exemplified in Ridgway, also prevailed in relation to the required content of the separate signed letter. The stricter common law position which had required that the separate signed letter refer expressly to the written document[88] was rejected in Long v Millar.[89] In that case an agreement for sale of land was unsigned but a signed receipt was issued which said 'Received of Mr George Long the sum of thirtyone pounds as a deposit on the purchase of three plots of land at Hammersmith'. The unsigned agreement for sale together with the receipt were sufficient to satisfy s 4 of the Statute of Frauds.

91 In Australia, the decision and approach in Long v Millar has been approved on many occasions.[90] It has, therefore, been the law since 1807 that s 4 of the Statute of Frauds can be satisfied by a letter which refers to a written, although unsigned, agreement. The boundaries of this doctrine have varied but a situation such as the 30 October 2006 letter from the second defendant, which expressly referred to the Lease, has always fallen within the doctrine. The 30 October 2006 letter was signed by the second defendant and her signature was unqualified.

92 For this reason also, s 4 of the Statute of Frauds is not a defence to the claim.

93 The defence of illegality fails for three separate reasons.

94 First, a defendant is only permitted to raise issues of illegality with specific pleading or, possibly, clear notice and particulars. Although the second defendant's pleadings were prepared by lawyers, no defence of illegality was pleaded. Apart from one minor reference in opening, the defence of illegality was only raised in closing submissions by the second defendant. The only allegation of illegality about which the plaintiff had notice at the start of trial from the second defendant's opening was the suggestion that the Property was 'unsafe' because 'an electrical safety certificate was not prepared for the new lease that they went into in 2010'.[91] As McLure JA (as the President was then) said in Elvidge Pty Ltd v BGC Construction Pty Ltd:[92]

A court will not entertain a defence of illegality which has not been pleaded unless (1) the contract sued upon is ex facie illegal; (2) the plaintiff cannot prove its case without also proving that it is claiming under an illegal contract; or (3) exceptionally, where a fact comes to light in the course of the trial that the contract sued upon is illegal, in which event the court must be satisfied that all relevant facts are before the court.

95 Secondly, there was no evidence led at trial which could justify any defence of illegality. The only evidence about the state of the electricity was that from Mr Alonso who said that 'the electrical was completely correct' and that he could not remember whether he had provided SRS Investments with an electrical safety certificate before possession of the Property and that he did not have one (which I interpolate to mean in court) to prove that the Property was safe.[93] The absence of discovery of any such certificate is plainly because the matter was not raised as an issue before trial by the second defendant's lawyers. In the second defendant's witness statement (which she prepared and which was provided only after the trial had commenced) she said that the Property 'was unsafe and was totally illegal and unlawful. It did not have electrical RCD units fitted'.[94] Although no objection was pressed in relation to this paragraph, counsel for Mr Alonso correctly submitted that the evidence concerning the lack of safety due to absence of RCD units was inadmissible opinion evidence. Nor was it evidence about which the plaintiff had any notice.

96 Thirdly, although no reference was made by the second defendant to the Electricity Regulations 1947 (WA), reg 15A, it appears that this is the regulation which imposes obligations to install residual current devices. However, the obligations are imposed only in the circumstances contemplated in pt IV, none of which concerns commercial tenancies. Even if pt IV did apply to a commercial tenancy there is nothing in the regulations which would avoid the Lease. The regulations provide for a regime of specific penalties and enforcement by the Director. No regulation has the express or implied effect that the Lease would be void, voidable or unenforceable.

97 There were other allegations of illegality also raised by the second defendant for the first time in closing written submissions. These included a submission that the Lease was prepared on outdated REIWA stationery, that SRS Investments was only allowed to do partial due diligence on the Lease, that the previous tenant (Ms Cavill) did not have a written lease, and that Ms Cavill 'stole clients' from the second defendant so that final settlement of the sale of Ms Cavill's business never took place. Again, these matters were not pleaded, and no notice was given of them. They can also be rejected because there was no evidence which could permit a finding in relation to any of these matters. And, in any event, all are irrelevant to the plea of illegality.

98 A separate defence raised at the start of the trial by the second defendant, without objection,[95] was that Mr Alonso's failure to register the Lease was a defence to his claim.

99 The leading case which considered the effect of a failure to register a lease upon a guarantee is Chan v Cresdon Pty Ltd.[96] In that case the appellants and the respondent entered into a lease for a term of five years. The lease contained a guarantee by the appellants 'in consideration of the [respondent] entering into this lease'. The appellants guaranteed the due and punctual performance of 'the obligations to be performed ... under this lease' (emphasis added). The lease was not registered. The respondent sought to enforce the guarantee against the appellants. The appellants relied upon s 43 of the Real Property Act 1861 (Qld) which provides that until registration the lease was not 'effectual to pass any estate or interest' in the land.

100 The High Court of Australia held that the lack of registration of the lease meant that the lease took effect as an 'equitable lease' but not as a lease at law. The High Court further held that the obligations guaranteed 'under this lease' were obligations under a legal, not equitable, lease so the guarantor was not liable. In construing the words in the guarantee, 'under this lease', Mason CJ, Brennan, Deane and McHugh JJ held that the ambiguity should be construed in favour of the surety.[97]

101 The decision in Chan was applied by Ward J in the New South Wales Supreme Court in Barecall Pty Ltd v Hoban.[98] Like the lease in Chan, the four year lease in Barecall was expressed to be given in consideration of the grant of the 'within lease'.[99] The guarantee was of 'rent and interest and all other monies ... owing under this lease'.[100] Ward J explained that if it had been necessary to decide the point then her Honour would have held that the words used in the guarantee, 'the within lease', referred to a grant of a lease effective at law and not to the document containing the agreement to lease.[101] The guarantee in that case would not extend to liabilities in the 'within lease' which did not transfer any estate or interest in the land due to s 41 of the Real Property Act 1900 (NSW).

102 The New South Wales provision was described in Chan as 'the counterpart of s 43' of the Queensland Act considered in Chan.[102] On appeal to the Court of Appeal in Barecall, the reasoning of Ward J was endorsed.[103]

103 The Western Australian counterpart, although not in precisely the same terms, to the NSW and Queensland provisions is s 58 of the Transfer of Land Act 1893 (WA). That section provides as follows:

No instrument until registered in manner herein provided shall be effectual to pass any estate or interest in any land under the operation of this Act or to render such land liable to any mortgage or charge or to make any dealing in respect of Crown land effective, as the case requires; but upon such registration the estate or interest comprised in the instrument shall pass or as the case may be the land shall become liable in manner and subject to the covenants and conditions set forth and specified in the instrument or by this Act declared to be implied in instruments of a like nature, or the dealing in respect of Crown land is made effective, as the case required.

104 The decisions in Chan and Barecall were both relied upon by the second defendant in her closing written submissions. No mention was made of those cases in Mr Alonso's closing submissions in response, perhaps because the second defendant did not explain how they might apply in Western Australia or how they related to the different provisions of the Lease. Nevertheless, it should be noted that although the second defendant was a litigant in person with no legal training her submissions were of the quality of those of many lawyers.

105 Since neither Mr Alonso nor the second defendant mentioned the corresponding provision in Western Australia, s 58 of the Transfer of Land Act, nor made any submissions concerning the application of the principle in Chan to the provisions in the Lease, I raised these issues with the parties and invited further submissions. The plaintiff sought a further oral hearing, which occurred on 18 May 2012.

106 In oral closing submissions it was common ground that s 58 had the same effect as the NSW and Queensland provisions, so that the words 'under this lease' would not attract liability for a guarantor in relation to an unregistered lease. However, counsel for Mr Alonso pointed to significant differences in the provisions of the Lease, which was expressed to be a 2004 REIWA standard form lease. Counsel submitted that the differences with the provisions in the leases considered in Chan or Barecall embodied in the 2004 REIWA standard form lease served a clear purpose. They were intended to overcome the absence of liability on the guarantee which the High Court identified in Chan in the event that a lease containing a guarantee was not registered. This was especially so, he submitted, in the case of the Lease which, being for a term of five years or fewer, was not required to be registered.

107 There was no evidence about the nature or genesis of the guarantee provisions in the Lease from which these conclusions could be drawn. In any event, such speculation would, in this case, detract from the exercise of construction which must focus on the words of the Lease itself.

108 The relevant guarantee and indemnity provisions in the Lease were as follows.

The Guarantor guarantees unconditionally and irrevocably to the Lessor the due and punctual payment by the Lessee to the Lessor of all Money and the due observance and performance of the Lessee's Covenants.

(a) indemnifies unconditionally and irrevocably the Lessor against all loss, liability, cost or expense (collectively 'the Lessor's Loss') incurred or suffered by the Lessor arising from or in connection with any Event of Default or as a consequence of a disclaimer of this Lease by a liquidator or trustee of the Lessee; and

(b) as principal debtor agrees to pay to the Lessor on demand a sum equal to the amount of the Lessor's Loss.

The guarantee and indemnity contained in this clause 24:

(a) is a continuing guarantee and indemnity and not discharged by any intermediate payment or settlement of accounts; and

(b) continues in full force and effect during the Term and while the Lessee occupies or is entitled to occupy the Premises under this Lease or any form of tenancy or right of occupation or as a trespasser or other unauthorised occupier or holds an equitable interest in the Premises under an agreement for lease or as a periodical tenant or is holding over under this Lease,

until the Guarantor is expressly released by the Lessor.

109 In oral closing submissions, counsel for Mr Alonso confirmed that his case was based only upon cl 24.1 (although the case was conducted on the basis that issues concerning interest and costs under the Lease were to be deferred until after judgment).[104]

110 There are two limbs to the guarantee in cl 24.1. The first is a guarantee of the due and punctual payment by the Lessee to the Lessor of all Money. The second limb is a guarantee of the due observance and performance of the Lessee's Covenants.

111 Clause 24.3 is markedly different from the clause which the High Court of Australia considered in Chan and which the New South Wales Court of Appeal considered in Barecall. Clause 24.3 applies the 'force and effect' of the guarantee not merely to the situation in which the Lessee 'occupies or is entitled to occupy the Premises under this Lease' but also to 'any form of tenancy or right of occupation' including where the Lessee 'holds an equitable interest in the Premises under an agreement for lease'. An unregistered lease was described in Chan as the evidence of an antecedent agreement which creates the equitable estate or interest.[105]

112 A further difference between the guarantee in the Lease and the guarantees in Chan and Barecall is that the guarantee in the Lease was not expressed to be given in consideration of the entry into the lease, or in consideration of the grant of the 'within lease'.

113 As to the first limb of the guarantee, the definition of 'Money' also clearly applies to the obligations of the Lessee under an unregistered (equitable) lease. The Lease provides that the term 'Money':

[M]eans the Rent[,] and any other money payable by the Lessee under this Lease[,] including without limitation money payable during any period of holding over or while the Lessee occupies or is entitled to occupy the Premises under any other legal or equitable right or tenancy or as a trespasser and includes any part of it. (emphasis added)

114 As with cl 24.3(b) there is a clear intention to include the obligation to pay 'Money' under a registered lease ('under this Lease') as well as an unregistered lease ('any other equitable right'). The only difficulty for construction might be the use of the word 'including' since a legal obligation ('under this Lease') does not 'include' an equitable one. The clause can only be read sensibly, and consistently with the underlying intention, by a construction that breaks the sentence in the places where I have inserted commas. Consistent with the plain meaning of cl 24.3(b) this applies the guaranteed obligations to those arising at law and those enforced in equity.

115 The definition of 'Money' and the terms of the first limb of the cl 24.1 guarantee are also expressed in broader terms than the words of the guarantee in another case[106] where the phrase 'agreements and undertakings contained in the above Agreement', was held to include obligations under an unregistered lease.

116 The application of the second limb of the guarantee to unregistered leases is far less clear. The definitions in the Lease provide that the term 'Lessee's Covenants':

[M]eans the covenants, agreements and duties contained or implied in this Lease or imposed by law to be observed and performed by any person other than the Lessor.

117 'Lease' is defined, in a circular manner, as 'this lease as supplemented or varied from time to time'.

118 The reference to 'covenants, agreements and duties contained or implied in this Lease' is not materially different from the phrases 'obligations ... to be performed under this lease' or duties in 'the within lease' which were considered in Chan and Barecall respectively. As I have explained, in those cases it was held that liability only arose if the lease were registered. The words 'in this lease' attract the same response that, as the majority in Chan explained, 'there is no justification for reading [the provision] as extending to obligations which, at best, as between the landlord and the lessee, arise, not under a lease at law but under an equitable lease'.[107]

119 The issue is then whether the words 'or imposed by law to be observed and performed by any person other than the Lessor' is sufficiently broad to encompass obligations arising under an 'equitable lease'. For reasons explained below, it is not necessary to decide this point. It suffices to observe that it is strongly arguable that obligations arising under an 'equitable lease' arise as a result of the agreement of the parties rather than by imposition of law which might include obligations under statute or regulation: 'it is that antecedent agreement, evidenced by the unregistered instrument ... which creates the equitable estate or interest'.[108]

120 A second reason which supports this narrow interpretation of the second limb of the guarantee is that the broad definition of Money, which specifically contemplates payments while the lessee occupies the premises under an equitable right or tenancy, contrasts with the narrow definition of Lessee's Covenants, which makes no such reference.

121 A third reason which supports this interpretation is that any conflict between the second limb of the guarantee and cl 24.3 should be resolved in favour of the surety, the second defendant. As a plurality of the High Court of Australia said in Ankar v Westminster Finance (Australia) Limited[109] 'the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety'.

122 Since Mr Alonso relied only upon the guarantee, and not the indemnity,[110] it is not necessary to consider whether the same conclusions apply in relation to the cl 24.2 indemnity. However, it is noteworthy that the indemnity refers to Events of Default which themselves also involve (a) unpaid Money (as defined); and (b) a failure to remedy a breach of the Lessee's Covenants (as defined).

123 For these reasons, the absence of registration of the Lease is not a bar to recovery under the guarantee for the obligations arising from a failure to make the due and punctual payment by the Lessee to the Lessor of all Money. But it may be a bar to a claim on the guarantee based upon the due observance and performance of the Lessee's Covenants.

The Lease obligations and the quantum of recovery

124 The claim on the guarantee by Mr Alonso which was liquidated in his pleading was a claim for $104,178.83. In the pleading there were also claims brought for 'damages', and interest and costs under the Lease.

125 The basis upon which the $104,178.83 was claimed under the guarantee was plain. It was based on the first limb of the guarantee: the due and punctual payment by the Lessee to the Lessor of all Money.

126 The basis of the claim for 'damages' was less clear. It was not particularised as a claim for money which had been unpaid after notice. However, it appeared to be concerned with the second limb of the guarantee, namely 'the due observance and performance of the Lessee's Covenants'.

127 As I have explained, the guarantee might not extend to liability arising under the 'Lessee's Covenants' in the unregistered Lease. However, there are difficulties with each of the heads of recovery sought under the claim for 'damages', which preclude recovery for these amounts under the guarantee. These difficulties were frankly and properly acknowledged in oral closing submissions by counsel for Mr Alonso.[111]

128 Mr Alonso's claim was quantified in a schedule as follows:

Arrears of rental and outgoings as at 30 August 2009 $104,178.83

As I have mentioned, the first item (arrears of rental) is the debt in Mr Alonso's prayer for relief. The remaining items were described as 'damages'.

129 The second defendant did not admit these items of 'damages'. She also challenged the amounts involving the cost of repairs and maintenance to the garden and the claim for the cost of a locksmith. There was conflicting evidence concerning the claim for changing the locks and this claim was abandoned by the plaintiff.

130 I accept the evidence which showed that SRS Investments owed, and did not pay, rent in arrears which was outstanding on 16 July 2009.[112]

131 The exhibit prepared by Mr Dawson which shows the rent outstanding on 16 July 2009 attributes $32,188.73 of the invoiced amount to a period from 1 November 2006 until 30 June 2007. Although the second defendant admitted that those amounts were owing,[113] on the pleaded case at trial they were not amounts which were owing in relation to the Lease or the guarantee provisions contained within it. As I have explained above, it was an admitted fact, and the trial proceeded on the basis, that the guarantee provisions were those contained in the Lease and that the Lease was effective only from the date of signature by Mr Alonso on 27 June 2007. It was never part of Mr Alonso's case that the rental obligations in the Lease were retrospective or that the guarantee provisions in the Lease could pick up liabilities previously accrued. The rent in the 16 July 2009 invoice for the period 1 September 2008 until 31 July 2009 was only $71,990.10.

132 The amount of $71,990.10 is an amount which was due and owing by SRS Investments under cl 3 of the Lease. It was demanded and it was not paid. It falls squarely within the guarantee cl 24.1 where the second defendant guaranteed the due and punctual payment by SRS Investments to Mr Alonso of all Money.

133 As for the claim for 'damages' for three months of lost rent, it is common ground that following the termination of the Lease by Mr Alonso for breach by SRS Investments, vacant possession of the Property was delivered up by the second defendant around December 2009.[114] The new lease over the Property had a commencement date of 15 November 2010.[115] I accept that the three months claimed for lost rent and outgoings, in the amount of $19,548, would be a reasonable claim for damages against SRS Investments. But this amount does not fall within the guarantee.

134 Mr Alonso never pleaded or submitted which of the Lessee's Covenants was relied upon to give rise to this head of 'damages' for 'the due observance and performance of the Lessee's Covenants'. And even if it could be proved that there had been a failure of the due observance and performance of one of the lessee's covenants, a further difficulty is that a lessee's covenant will only be an Event of Default if it is not remedied to the Lessor's satisfaction within fourteen days of notice of the breach being given. As counsel for Mr Alonso properly acknowledged in oral closing submissions, there was no pleading or evidence of any notice being given by the plaintiff in relation to the three months' lost rent.[116]

135 In closing submissions reliance was understandably placed only upon the guarantee. It was not pleaded that the three months' lost rent was within the cl 24.2 indemnity (which may have been subject to the same issue concerning absence of registration) as a 'loss or liability ... arising from or in connection with' the failure of SRS Investments to pay rent. Such a pleading would have given rise to questions such as whether that loss 'arose from or in connection with' the event of default. Such a pleading may also have given rise to the question of whether an Event of Default (the failure to pay rent being Money unpaid for seven days) could itself be a breach of a Lessee's Covenant giving rise to a different Event of Default. This would also raise questions of the notice to be given for the second Event of Default, and the notice period required for the second Event of Default for breach of the Lessee's Covenants. The Lease contains specific requirements for notice in cl 26.

136 Finally, as explained above, the concern of the second limb of the guarantee namely the due observance and performance of the Lessee's Covenants, might not extend to the obligations in this unregistered Lease.

Land tax, council rates, water rates, water consumption and insurance

137 These amounts, claimed also as damages, also cannot be recovered for the breach of the Lessee's Covenants under the guarantee.

138 The second defendant said in crossexamination that outgoings had been included in the rental statement which Mr Dawson produced and which related to the liability of $71,990.[117] Although Mr Dawson gave evidence that land tax, council and water rates, water consumption and insurance bills were paid, there was no evidence that any reimbursement of those outgoings was sought from the second defendant other than as part of the compendious rent statements. Although the rental statements refer only to 'rent', I accept the second defendant's evidence that these statements of rent due included the outgoings which had not been paid by SRS Investments. To permit recovery of rent, and recovery of these outgoings separately, would be to allow double recovery.

139 None of these amounts claimed is recoverable under the guarantee.

140 In any event, as explained above, there is a serious concern that the second limb of the guarantee, namely the due observance and performance of the Lessee's Covenants, might not extend to the obligations in this unregistered Lease.

141 As to the cost of repairs and maintenance to the garden, cl 4.1(a) of the Lease required SRS Investments to 'maintain, replace, repair and renovate' the premises so that the Property was kept in good condition at all times. Clause 10.1(b) required SRS Investments, upon vacating of the Property, to leave it in a condition complying with SRS Investments' covenants.

142 I accept Mr Alonso's evidence that when the defendants vacated the Property the garden was in a state of complete disrepair which was a 'big difference' from the presentation of the garden when the first defendant leased the Premises.[118] I also accept his evidence that the reticulation, which had been properly working when the first defendant took occupation, was damaged beyond repair.[119] Neither of these matters was 'fair wear and tear'. A condition of the new lease of the Property was that the front of the Premises and the car park be landscaped and that garden beds be reticulated.[120]

143 Mr Alonso gave evidence, with supporting documents, that he had paid invoices from the 'Lawn Doctor' for $3,150,[121] Controlled Irrigation Supplies for $1,939.50,[122] invoices from Trim a Palm for reticulation for $880 and $2,000,[123] Northside Earthworks for $3,850.[124] The total of these amounts is $11,819.50.

144 This amount is not recoverable under the guarantee for the same reason discussed above in relation to the 'rental and outgoings by way of damages'. There was no pleading,[125] or evidence, of any notice being given by Mr Alonso to SRS Investments of this alleged breach, nor of any opportunity to rectify.

145 Separately, and again in relation to this separate head of damages, there is the further concern that the second limb of the guarantee, namely the due observance and performance of the Lessee's Covenants, might not extend to the obligations in this unregistered Lease.

146 I assess the amount which the second defendant owes to Mr Alonso under the guarantee to be the sum of $71,990.10 plus interest to be determined.

147 Although the sums involved in this claim are below the amounts usually encountered in this court, the case raised important issues of law, especially the proper construction and application of s 4 of the Statute of Frauds.

148 In the result, the second defendant is liable under the guarantee to the plaintiff in the amount of $71,990.10.

149 I will hear from the parties concerning the orders to be made including consequential issues of interest and costs.

CITATION : ALONSO -v- SRS INVESTMENTS (WA) PTY LTD [2012] WASC 168 (S)

Practice and procedure - Interest - Date from which interest commences

Practice and procedure - Application for leave to issue a subpoena for documents after delivery of reasons - Documents immaterial to legal issues at trial - Second defendant invited before trial to apply for an adjournment but she did not seek adjournment- Second defendant reminded several times to issue subpoena if needed but subpoena not sought before trial or during trial

(This judgment has been produced from the recording of the oral delivery of reasons at the hearing.)

1 On 29 May 2012 I delivered my reasons for decision. Orders were delayed due to an application by the plaintiff for interest and costs to be awarded under the provisions of the guarantee contained in the Lease. Shortly before that issue was due to be heard the plaintiff abandoned that application.

2 The plaintiff now only seeks orders for (1) interest at 6% under s 32 of the Supreme Court Act 1935 (WA) and (2) an order that costs of the action be taxed on a party and party basis. There was some confusion in the communication from the plaintiff about to the date from which the cause of action arose and from which the interest should accrue.

3 At this hearing this afternoon the plaintiff explained that the date from which interest was sought was 24 November 2010, which is the date at which default judgment against the second defendant was set aside. The plaintiff does not seek interest from the earlier date of 31 July 2009 which might arguably be the date when the cause of action arose due to the money falling due under cl 24.1 of the guarantee (see Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168 [131] [132]).

The second defendant pay the plaintiff $71,990.10 together with simple interest under s 32 of the Supreme Court Act at 6% calculated from 24 November 2010; and
The second defendant pay the plaintiff's costs of the action to be taxed if not agreed.

5 The second defendant, Ms Elliott also now seeks leave to issue a subpoena for all documents and items held by her former solicitors to be returned. Ms Elliott had previously sought leave to issue a subpoena for these documents but only after all the evidence in the trial had been concluded. Leave was refused then for the reasons I explained in my judgment.

6 The basis upon which it is now reasserted that a subpoena should be issued was said to be that it is very evident that had these documents been available there would have been a very different outcome to the case and that the evidence would have placed a completely different complexion to the case. It was also said that the documents withheld by Ms Elliott's former solicitor had been discovered to the plaintiff.

7 Ms Elliott's renewed application for leave to issue a subpoena is refused.

8 As I explained in my reasons for decision at [28] [37], those documents could not have added anything of material significance to the legal issues in the trial. There was no suggestion that witnesses in the trial should be recalled to give further evidence. The subpoena was sought simply to tender the additional documents as exhibits. But for the reasons I explained, not only were the additional documents immaterial to the case, but I also accepted the evidence of Ms Elliott that a further original of the Lease was in existence which contained a handwritten notation as she had described (at [31]).

9 Ms Elliott also now says that these documents had been discovered to the plaintiff. It is not clear whether those documents, if discovered, were requested by Ms Elliott from the plaintiff. Counsel for the plaintiff did not mention to the court whether the documents were part of the discovery process, but, at the hearing of Ms Elliott's application for a subpoena after the conclusion of the trial, he explained that he could not see how the documents could 'advance matters any further' (ts 145).

10 Ms Elliott also submits that the absence of the documents did not allow her due process in defending herself. Even apart from the lack of relevance of the documents to my decision I do not accept this submission.

11 At the time that Ms Elliott's solicitor withdrew his representation I asked Ms Elliott whether she thought that she would be able to prepare for trial. I gave Ms Elliott a week to consider whether she was able to prepare her case despite the absence of the documents over which her former solicitor was exercising a lien. During that week, at my direction, the plaintiff provided Ms Elliott with his chronology and submissions.

12 At a directions hearing on 29 February 2012 I asked Ms Elliott whether she considered that she was reasonably able to prepare for trial. She said that there was 'no reason why we can't proceed' (ts 24). She said that there might be a few items that she might request from Mr Graham. I explained to her on that occasion, as I had explained the previous week, and as I reiterated at the start of the trial, that if she intended to issue a subpoena for production of any documents by her former solicitor then she should do so. As I explained in my reasons for decision, no application for a subpoena was made until after the trial had concluded.

13 If, as Ms Elliott asserts to be the case, her former solicitor is still retaining documents for reasons which have 'nothing to do with the money [she owes to him] at all' then there may be legal questions to resolve between her and her former solicitor. But with the pronouncement of these orders, these proceedings are now concluded before me.

ALONSO -v- SRS INVESTMENTS (WA) PTY LTD [2012] WASC 168 (29 May 2012)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (282 paragraphs)

Leave to reopen and to issue subpoenas was refused for two reasons

Potential difficulty with the sub poena duces tecem (bring with you under penalty)

Legislation Cited (5)

Cases Cited (14)