Baiada Poultry Pty Ltd v Sztrochlic

Issues

1. The Defendant was the sole director of Raphco from January 1995 until the appointment of the liquidator. At least since March 2005 he has held both of the two issued shares in the company, one beneficially and one not. On 27 June 2003, at the commencement of Raphco's trading with the Plaintiff, the Defendant completed and signed the Plaintiff's credit application form, entitled Application for Commercial Credit Account. This was in part an application by Raphco for the supply of goods to it on credit in accordance with the Plaintiff's printed standard terms ("the 2003 Application"). The document also incorporated guarantee wording which the Defendant signed in his personal capacity. He thereby guaranteed "all sums which are now or may hereafter become owing in relation to the account" ("the 2003 Guarantee").
2. After nine years of trading between the two companies, at the request of the Plaintiff the Defendant on 16 July 2012 signed, in the name of Raphco, a document entitled Commercial Credit Account Application. This comprised the Plaintiff's new form of application for credit trading, with new standard terms ("the 2012 Application"). It also contained within it a personal guarantee by the Defendant of "the punctual payment of all monies owing by [Raphco] to [the Plaintiff] now or in the future for the supply of Goods or Services" ("the 2012 Guarantee"). The Defendant signed the 2012 Application as director of Raphco and the Guarantee in his personal capacity. The executed document was handed to a representative of the Plaintiff on 18 July 2012. The supply of goods which has given rise to Raphco's outstanding debt occurred in December 2012 and January 2013.
3. The Plaintiff relies primarily upon the 2012 Guarantee as giving rise to a binding obligation of the Defendant. The Plaintiff says this is either a contract of guarantee or a deed. The Defendant's response to this primary case gives rise to the following issues: 1. Were the 2012 Application and the 2012 Guarantee, as signed and delivered, acceptances of offers from the Plaintiff to them respectively, giving rise to contracts upon the terms of the documents? 2. Alternatively, were the 2012 Application and the 2012 Guarantee offers from Raphco and from the Defendant (to purchase goods on credit and to guarantee the debts thereby arising) and if so were those offers accepted by the Plaintiff? 3. Did the 2012 Guarantee, when signed and delivered, operate as a deed of guarantee? 4. Did the Plaintiff represent to the Defendant that it would not enforce the 2012 Guarantee and did the Defendant rely upon that representation in signing the document in such a way as to estop the Plaintiff from asserting enforceability? 5. Did the Defendant and the Plaintiff lack intention to create legal relations by the execution and delivery of the 2012 Guarantee? 6. Did the Defendant represent to the Plaintiff that the 2012 Guarantee was legally binding upon him, whether it really was or not, and has he thereby become estopped from resiling from that position?
4. The Plaintiff contends that if it fails with respect to the 2012 Guarantee it is entitled to fall back upon the 2003 Guarantee. The Defendant has rejoined by raising two further issues: (g) Did the Plaintiff accept (i) the 2003 Application and/or (ii) the 2003 Guarantee, thereby concluding contracts upon the terms of these offers? (h) By the 2003 Guarantee, on a proper construction of its terms, did the Defendant guarantee the debts the subject of the proceedings, which were incurred by Raphco in December 2012 and January 2013, assuming the "account" between the Plaintiff and Raphco was changed by the Plaintiff's introduction of new trading terms in July 2012?
5. I will state my findings of fact chronologically. In the course of doing so I will state my conclusion on issue (g) out of the above order, as it arises from early dealings between the parties.

The 2003 Application and Guarantee

1. From 1995 to late 2002 Raphco's main supplier of fresh poultry stock was Eatmore Poultry Pty Ltd. In about 2002 the Plaintiff purchased either the shares in Eatmore Poultry Pty Ltd or the business of that company, the evidence does not make clear which. At that time Raphco owed Eatmore Poultry Pty Ltd $953,349.86. In June 2003 terms were agreed between the Plaintiff, Eatmore Poultry Pty Ltd and Raphco for the discharge of this balance.
2. The printed part of the 2003 Application was a proforma document prepared by the Plaintiff which called for the insertion, in spaces provided, of information regarding the trading name, contact name, delivery address and other details of an applicant for credit. The form also required information regarding the trading history of the applicant and, in the case of a company, the names of directors and proprietors. It incorporated fourteen clauses of "Terms and Conditions" and another four clauses of "Credit Terms". The document required signatures to warrant that information supplied was correct and that the signatory, on behalf of the applicant for credit, had read and understood the Terms and Conditions and the Credit Terms.
3. When Raphco sought to trade with the Plaintiff upon the latter taking over the Eatmore Poultry Pty Ltd business, the Plaintiff required that the 2003 Application be completed. Someone on behalf of Raphco filled it out appropriately with company particulars. The Defendant, as director, signed the warranty of information supplied and the acceptance of the Plaintiff's printed standard terms.
4. Those standard terms did not commit the Plaintiff to supply any particular quantity of goods or to supply over a fixed period. Clause 3 of the Terms and Conditions provided as follows: "3. Contract. The placing of an order by the Customer shall be an offer to purchase (in accordance with these Terms and Conditions) which may be accepted by Baiada…"
5. Clause 8 of the Terms and Conditions provided that title to goods delivered would not pass: "…until such time as the Customer pays the full price of all the goods supplied by Baiada. Until that time the Customer shall be bailee only…."
6. The Credit Terms incorporated in the 2003 Application did not bind the Plaintiff to allow a specific number of days for payment, either from delivery or from invoice. Nor did the Credit Terms bind the Plaintiff to trade with Raphco upon the basis of delivery on credit for any particular duration.
7. The Credit Terms comprised only four clauses as follows: "1. Normal Supply Terms. Baiada's terms and conditions are cash on delivery. 2. Credit Terms. The Customer agrees that it is not entitled to credit facilities until the Customer receives notice in writing from Baiada stating that credit facilities have been approved and confirming the credit terms (and conditions) upon which such facilities have been approved. 3. Termination and Credit. Baiada reserves the right to terminate credit facilities from time to time or at any time. 4. Security. Baiada reserves its right at any time to require the Customer to provide security as a condition for the continuation of credit facilities. Security may take the form of a bank guarantee or mortgage or charge or bill of sale as required by Baiada."
8. The 2003 Guarantee was quite brief. Of its four simple operative clauses it is sufficient to quote cl 1: "1. In consideration of the granting of credit to the company [named above as Raphco] we agree that we will be jointly and severally liable with the company for the due payment of all sums which are now or may hereinafter become owing in relation to the account." Although this was expressed in the plural and spaces were provided for the signatures of two guarantors, only the Defendant signed it.

Acceptance of Raphco's 2003 Application - issue (g)(i)

1. The Plaintiff acknowledged receipt of the 2003 Application in a letter dated 27 June 2003, at paragraph 9. By paragraph 6 of that letter the Defendant and Raphco were notified that "official trading terms between [Raphco] and [the Plaintiff] are 21 days paid weekly effective June 26, 2003". In the records of the Plaintiff Raphco was assigned account number E02590. By issuing its letter of 27 June 2003 the Plaintiff accepted Raphco's offer to make purchases of goods on credit upon the terms of the document. There is no doubt the Defendant received this letter. He countersigned it. It was not expressed in terms of "credit facilities [being] approved" (see Credit Terms cl 2 at [15], above) but in so far as it nominated 21 days payment terms it did, implicitly, convey the Plaintiff's acceptance of Raphco's 2003 Application.
2. From soon after receipt of the 2003 Application the Plaintiff accepted Raphco's orders and delivered goods in accordance with them. Invoices accompanied delivery and were endorsed with the words "Terms 21 Days".
3. The evidence of the Plaintiff's general manager, Mr Singh and of its national credit manager, Mr Willard, is that throughout the trading relationship between the two companies the Plaintiff required Raphco to pay for all goods delivered during a particular week no later than 21 days from the end of that week. This was generally complied with.
4. From some time before Mr Willard commenced as national credit manager in 2008, the Plaintiff routinely accepted payment at the end of the 21 day period by way of four post-dated cheques which in total would cover the amount then due. These were able to be banked sequentially on the following Monday, Tuesday, Wednesday and Thursday. Raphco thereby had credit for between 24 and 26 days from the end of the week in which goods had been supplied. The Plaintiff consistently referred to these payment terms, by notation on all of its invoices to Raphco, as "Terms 21 Days".
5. It was submitted on behalf of the Defendant that by force of cl 2 of the Credit Terms (quoted at [15] above) there could be no acceptance of the 2003 Application by any means or in any form other than the Plaintiff giving "notice in writing … that credit facilities have been approved and confirming the credit terms (and conditions) upon which such facilities have been approved". The Defendant contended that this clause required more than merely the nomination of 21 days payment terms, as stated at par 6 of the letter of 27 June 2003 and as endorsed on the Plaintiff's invoices. I do not accept this. There is nothing in cl 2 to stipulate what degree of detail should be included in the "credit terms (and conditions)" which the Plaintiff should confirm. Having regard to the detail of the Plaintiff's standard terms set out in the 2003 Application, it would appear that nothing more was required, in order to settle the terms on which the parties would trade, than to nominate so many days for payment. The Plaintiff's letter of 27 June 2003 and its subsequent invoices did this. They thereby conveyed, in effect, written approval for credit trading.
6. As between the Plaintiff and Raphco the agreement which resulted from the Plaintiff's acceptance of the 2003 Application was merely an overarching arrangement whereby the parties established the terms upon which individual sales of goods would thereafter take place. Acceptance of the Application did not give rise to an agreement for the sale of any particular goods at any agreed price. There would only ever be such sales, to which the agreed standard terms would attach, if Raphco should thereafter place orders and if the Plaintiff should fulfil them - which neither party bound itself to do in advance.

Acceptance of the Defendant's 2003 Guarantee - issue (g)(ii)

1. The Defendant's offer contained in the signed 2003 Guarantee was to guarantee Raphco's debts "in consideration of the granting of credit to the company". Such granting of credit did occur, commencing immediately after 27 June 2003, by the Plaintiff proceeding to deliver goods on the "21 Days" invoices as described above. The supply of goods on credit, especially having regard to the letter of 27 June 2003, was unequivocally referable to the Defendant's offer of a Guarantee (as well as to Raphco's application for credit).
2. The Plaintiff relies upon its approval of Raphco as a credit customer on "21 Days" payment terms and its supplies of goods accordingly, after 27 June 2003, as both acceptance of the Defendant's offer of a guarantee and as the movement of consideration from itself to support the guarantee obligation. On closely similar facts in Dalgety Australia Ltd v Harris [1977] 1 NSWLR 324 it was said by Glass JA at 328E that: "…the conduct of the offeree relied upon both as acceptance and performance must be actuated by the offer at least in part: Scottson v Pegg (1861) 6 H & N 295; 158 ER 121."
3. That requirement is satisfied here. I readily infer that the Plaintiff's supply to Raphco on credit after 27 June 2003 was actuated by the Defendant's signed offer of a guarantee. It is apparent that the Plaintiff's standard practice was to require a director's guarantee for a corporate customer. Prima facie from the printed terms of the Application for Commercial Credit Account, such a guarantee was a prerequisite: a personal guarantee was integral to a credit application by a corporation. There was nothing in the circumstances of Raphco which would have suggested to the Defendant that the Plaintiff made an exception for his company or that its request for a guarantee, conveyed by the terms of the proforma, was in this case merely idle or a matter of indifference. To the Plaintiff's knowledge, Raphco's debit trading balance with its previous supplier had reached over $950,000. Raphco was not providing to the Plaintiff any security over real property or other assets. Getting the guarantee was one of the things that caused the Plaintiff to commence supplying on credit.
4. Dalgety Australia Ltd v Harris (supra) is an illustration of a principal of wide application concerning inference of the formation of a contract from the conduct of parties. Such an inference may be drawn where there is no express communication of either offer or acceptance and the only material from which a contract might be found is the evidence of conduct - a more difficult class of case than the present where the 2003 Guarantee is an identifiable express offer and only the acceptance of it is left to be inferred. The cases on inference of a contract from conduct have been collected and considered, for example, in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [71]-[80] and in Laidlaw v Hillier Hewitt Elsely Pty Ltd [2009] NSWCA 44 at [5]-[9].
5. Of the various formulations of the appropriate test emerging from the cases, the question arising in this part of the present proceedings may be framed as whether a reasonable bystander would have regarded the Plaintiff's delivery of goods on credit to Raphco after 27 June 2003 as having signalled to the Defendant that his offer contained in the signed 2012 Guarantee had been accepted. See for example Empirnall Holdings Pty Ltd v Machon Paull (1988) 14 NSWLR 523 at 535E. Taking into account the circumstances considered at [25] above, application of the suggested test would lead to the conclusion that acceptance was unambiguously indicated. The sequence of the Plaintiff seeking a guarantee by way of its credit application form followed by fulfilment of orders after obtaining the Defendant's signed offer of a guarantee would necessarily lead to an inference on the part of the Defendant that the Plaintiff had accepted his offer.
6. Hence, the 2003 Guarantee of Raphco's liabilities bound the Defendant from when the Plaintiff commenced to supply poultry goods, from 27 June 2003.

Statements issued from 2010

1. From some date in 2010 Mr Willard introduced a form of statement of account for issue by the Plaintiff to its customers. Upon this form there appeared a dissection of the total price payable for all goods sold and delivered up to the date of the statement. The dissection was to show the value of sales in the 7 days preceding the statement and the date on which that sub-total would be payable; the value of sales made in the period 8 to 14 days before the statement and the date when that sub-total would be payable - and so on.
2. The statements issued to Raphco from 2010 followed this format. They clearly showed that the Plaintiff was allowing Raphco 21 days credit, payable weekly, as explained at [19] above. Some of these statements recorded sub-totals of sales which had been delivered more than 21 days before the statement date and which were therefore noted as overdue. From 2010 the Plaintiff's invoices to Raphco continued to bear the notation "Terms 21 Days". The statements confirmed that by this shorthand description the Plaintiff intended a payment cycle as described at [19]. There was no evidence from the Defendant that he had any different intention and I infer that he did not.
3. Over the nine years up to mid-2012 Raphco's account with the Plaintiff was from time to time out of order. On occasions arrangements were made between the parties for the overdue balance to be reduced by instalments while further sales continued on the 21 day payment terms. I accept Mr Willard's evidence that Raphco's defaults did not, up to mid-2012, cause the Plaintiff to stop credit supply. The Plaintiff did not at any time decline Raphco's orders altogether or demand cash on delivery.
4. Mr Singh's recollection was that there were such occasions up to mid-2012 but he was not in as good a position as Mr Willard to have knowledge and recollection of this. Mr Singh was closely involved with the filling of Raphco's orders and ensuring delivery. He did not have oversight of the state of the account. Mr Willard did. He was the person who would have been responsible for issuing an instruction to stop delivery or to insist upon cash payment in advance if the occasion for such a direction had arisen.

2012 revised Credit Terms and Sales Conditions and guarantee

1. In early 2012 the Plaintiff prepared new standard terms for its trading with credit customers. These revised terms and a re-worded personal guarantee were incorporated into a new Commercial Credit Account Application, as mentioned at [5]. This document was drafted and settled with the assistance of solicitors. It employed wording which Mr Willard intended would take account of the Personal Property Security Act 2009 (Cth) and the Privacy Act 1988 (Cth).
2. In the early months of 2012 Mr Willard commenced a campaign to secure signing of the new form by all existing customers of the Plaintiff. He began by contacting (and causing other employees of the Plaintiff to contact) the largest volume customers. Raphco was one of those.
3. The 2012 Commercial Credit Account Application was worded suitably for completion by new customers of the Plaintiff. It called for the insertion of detailed particulars concerning the applicant for credit and, in the case of a company, particulars of the individuals associated with it. It required the applicant to give information about its business history and to estimate the expected volume of its weekly purchases from the Plaintiff. Obviously in the case of an existing customer such as Raphco the Plaintiff already held data of this kind. The proforma did not offer any dispensation for an existing customer to omit information.
4. The re-worded personal guarantee within the Commercial Credit Account Application extended over two pages, with instructions for execution and signature spaces for one or more individual guarantors. Standard "Credit Terms" comprising nineteen clauses and "Sales Conditions", a further eleven clauses, were attached.

The Plaintiff's request for signing of the 2012 Application

1. In about May 2012 Mr Singh and Mr Willard met with the Defendant and Ms Pettiona, Raphco's general manager. Affidavits of all of these individuals have been read. It is common ground amongst them that at the meeting Mr Willard said words to the effect that the Plaintiff had amended its credit application, credit and sales terms and guarantee document to conform with legislative changes and that the Plaintiff required the new form of credit application to be signed and returned to it. A proforma Commercial Credit Account Application was provided to the Defendant and Ms Pettiona.
2. In May, June and July 2012 Raphco's business premises were in the same street as those of the Plaintiff, in Laverton Victoria. During those months Mr Singh attended Raphco's premises three or four times per week in the ordinary course of servicing Raphco's orders and deliveries. On those occasions he spoke with Ms Pettiona or the Defendant or both.
3. By June 2012 the new credit application form had not been signed or returned. On some date in that month another meeting took place between Mr Singh, Mr Willard and Ms Pettiona. I accept Mr Singh's evidence that Mr Willard said during this meeting: "We haven't received back from you the signed credit application and guarantee. If you want continued business and credit with us we need this signed."
4. Ms Pettiona agreed that words to this effect were spoken at a meeting. She also agreed that the Defendant joined this meeting and said he would take the document to his solicitor and get advice. The Defendant did not dispute this aspect of Mr Singh's evidence.
5. Ms Pettiona and the Defendant subsequently met with Raphco's accountant, Mr Berkovic, to take his advice on the new credit application. He advised that its terms were directed only to protecting the Plaintiff's position and that if the Defendant was not comfortable with it then he should not sign. On about 4 July 2012 the Defendant also consulted a solicitor, Mr Erlichster in Caulfield. Mr Erlichster's email of the same day to the Defendant's accountant, Mr Shah, records that the Defendant instructed that the personal guarantee "was not a concern as he has 'no assets' in his name". The solicitor emailed Mr Shah to inform him of the Defendant's understanding and to have it confirmed that indeed there were no assets in the Defendant's name. In cross-examination the Defendant did not recall having instructed his solicitor to the effect quoted above but as this is clearly recorded in Mr Erlichster's email I am satisfied that he did. I am also satisfied that this reflected the Defendant's state of mind. The evidence does not suggest any reason why his instruction to his solicitor on this occasion would not have been truthful.
6. By Monday, 2 July 2012 Raphco's account with the Plaintiff was significantly out of order. Its cheques to a value of $115,496.17 had been dishonoured. The value of further cheques due to be presented during the week commencing 2 July 2012 was $223,291.72. Raphco's immediate liability was thus a total of $338,787.89. By email of 2 July 2012 Ms Pettiona put to the Plaintiff a proposal to discharge this amount by a series of more or less equal instalments to be paid over the ensuing eight weeks. The evidence does not establish whether this proposal was accepted or implemented.
7. In early July 2012 Mr Singh spoke by telephone with the Defendant who said he did not trust the Plaintiff and was concerned that if he signed the new credit application the Plaintiff might lodge caveats on property. Mr Singh told him: "If you sign it and Raphco pays Baiada within terms, Baiada will not have to enforce the guarantee against you. If there is no default by Raphco then Baiada won't have to exercise the guarantee…" Affidavit evidence of Mr Singh established this conversation and the defendant did not dispute it.
8. The Defendant asserts that during June the Plaintiff intermittently "cut off supply to Raphco". He deposed that from time to time he would telephone Mr Singh about this and was then informed that Raphco's account had been put on "stop credit". In oral evidence Mr Willard denied that that occurred at this time and said that instances of stopping credit to Raphco arose only late in 2012. Mr Singh, likewise, did not recall such occurrences during June 2012. I have formed the view that the Defendant is mistaken in his recollection about this. Exhibit D, the Plaintiff's debtor's ageing report, appears to contradict the Defendant's assertion. It lists invoices rendered to Raphco in June 2012 and the dates on which they were paid. None of the invoices appear to have been paid on the date rendered, which is what one would expect if Raphco was on "stop credit". Further, Ms Pettiona's email of 2 July 2012 seeking approval of the eight week plan for making up arrears makes no reference to cessation of credit. If this had occurred one would expect it to have been referred to in this email.
9. In about late June 2012 or early July 2012 Mr Singh had a conversation with Ms Pettiona in which she said either that the Defendant would sign the new Commercial Credit Account Application or that he may sign it. It is common ground between these two witnesses that at this time Mr Singh enquired about execution of the document. I accept Ms Pettiona's evidence that she enquired of Mr Singh during this conversation, "What happens if he signs the document?" and Mr Singh replied, "Everything will go back to being as usual".
10. All witnesses agreed that on a number of occasions in late June and in early July 2012 Mr Singh enquired of Ms Pettiona and the Defendant about when the new credit application would be signed. The Defendant has deposed that during that period he told Mr Willard in the course of telephone conversations that he had no assets in his name. He has deposed that Mr Willard replied to the effect that obtaining the signed application, including the guarantee, was: "...only to maintain Baiada's internal regulatory compliance. It's just a formality. I have to get you to sign the application including the personal guarantee document or I may not be able to get Baiada to supply stock."
11. Mr Willard has contradicted this. He only spoke to the Defendant by telephone on two or three occasions, usually to press for payment of money overdue according to the terms of trade between the parties. I prefer Mr Willard's evidence in this respect. I find it unlikely in the extreme that he would have told the Defendant either that the signing of the application form and guarantee was "just a formality" or that the consequence of not signing was only that the Plaintiff "may" terminate supply. In his capacity as the Plaintiff's national credit manager he had invested significant time and effort in having the Commercial Credit Account Application drafted and settled, with external legal advice. From the perspective of the credit manager of a substantial company such as the Plaintiff it was evidently important to procure the adoption of the new terms and guarantee wording by all of the Plaintiff's customers, particularly and in priority the large customers such as Raphco.
12. Further, it is most improbable that a credit manager in Mr Willard's position would discount the obtaining of a personal guarantee for the unsecured debts of a proprietary limited company as "just a formality". Mr Willard gave evidence, which I accept, that he was aware the Defendant did not have assets in his own name but nevertheless considered that the holding of a personal guarantee was important for the "leverage" that it would give the Plaintiff in trying to obtain payment of monies owing to it. He understood that the Defendant "was a director of many other companies and had a lot of assets in other names, so [a personal guarantee] still was….leverage towards obtaining monies…" (T 71). Mr Willard impressed me as a capable and professional credit manager who was pursuing execution of the revised Commercial Credit Account Application, including the director's guarantee, for rational and important purposes.
13. On 5 July 2012 Ms Pettiona wrote to Mr Willard to respond to an enquiry which he had apparently made orally that day as to how Raphco could give assurance to the Plaintiff for outstanding monies. Ms Pettiona pointed out that the plaintiff "has already in place a charge over stock to cover any debt outstanding". She wrote that weekly purchases and frozen stock held by Raphco at any time would "well and truly cover any debt owed". She concluded by saying "the credit application can be signed with the above".
14. By email of 6 July 2012 Mr Willard responded pointing out that if an administrator or a liquidator were appointed to Raphco the Plaintiff would be entitled to recover any goods invoiced and held on the premises that had not been paid for. However, with a then current balance of $950,000 owing to the Plaintiff, "unless you hold $950K worth of salvageable Baiada stock on premises" Baiada would experience the difference as a loss.
15. Mr Willard's email continued: "The completion of the new credit application is appreciated and required to maintain our regulatory compliance though there is no realisable security offered to Baiada with the guarantees provided by either Raph or Raphco Pty Ltd given there are no real assets held by either party that could be utilised to recover monies owed to Baiada. In view of the above I would greatly appreciate Raph's consideration to providing real security to Baiada by way of guarantees from the registered owner and directors of personal and/or commercial real estate…or by way of providing a bank guarantee…. Please confirm when the credit application will be available for collection and please call me to discuss the above at your earliest convenience."
16. The Defendant has deposed that by early July 2012 he thought the Plaintiff was "going to push me to sign these documents". He recalls a telephone conversation with Mr Singh on the afternoon of 16 July in which Mr Singh said "There'll be no poultry supplied until the documents are signed. You better call Craig [Willard]". Mr Singh did not recall having spoken the words attributed to him on 16 July but accepted that he did say words to that effect on some occasions, in June and July 2012. I accept that words to this effect were spoken on or shortly before 16 July 2012.
17. I am satisfied that by 16 July 2012 the conversations referred to at [37], [39], [40], [43] and [45] above had orally conveyed to the Defendant that the Plaintiff was insistent upon having the 2012 Application and Guarantee signed. Without any particular cut-off date having been stipulated it had been made clear to him in June and early July 2012 that the signing of the document was regarded by the Plaintiff as a pressing matter and that if it was not attended to in the reasonably near future the Plaintiff would cease to supply the Defendant on credit. On the other hand, as these communications made equally apparent, supply on existing payment terms would continue if the document was completed and signed. Although Mr Willard sought an offer from the Defendant of additional security (for example by his email of 6 July 2012 - see [51] above), it was made clear that agreement on continued trading could be concluded without this, by signing the Commercial Credit Account Application.
18. On 16 July 2012 Ms Pettiona advised Mr Singh that the application had been signed and could be collected. It was handed to Mr Singh on 18 July 2012 at Raphco's premises. It had been filled out in the handwriting of Ms Bergado, Raphco's internal accountant, for the most part. Other handwriting on the document is either that of the Defendant or Ms Pettiona.

The terms of the 2012 Application

1. The opening words of the 2012 Application are as follows: "This is an application for credit made by the Customer in conjunction with such supplies of Goods by [the Plaintiff] as [the Plaintiff] may from time to time approve, subject to the terms and conditions which regulate such supply ('Sales Conditions'). This application for credit incorporates an application for credit form, Credit Terms, and the latest version of the Sales Conditions. This application for credit must be completed in full in order for the application to be considered."
2. On page 2, at the end of the section in which customer details are required to be inserted, there appears a heading "Agreement" under which is an attestation clause as follows: "Signed on behalf of the Customer by the people signing below who warrant that they are duly authorised to sign on behalf of the Customer and acknowledge having read and understood this credit application, the attached Credit Terms, the attached Sales Conditions and agree to be bound by them." The defendant signed this on behalf of Raphco and dated it 16 July 2012.
3. On pages 7 and 8 there appear nineteen clauses under a heading "Credit Terms". These commence with introductory words and cl 1, as follows: "The Customer applies for a credit account to be operated by [the plaintiff] in the Customer's name as set out in the application for credit and agrees to the following terms and conditions… 1. Subject to paragraph 2, credit (if approved) will be made available to the Customer…"
4. As with the 2003 Application, these terms stipulate that orders for goods placed by Raphco will constitute offers, which the Plaintiff may decline (cl 3). Clause 4 of the Credit Terms includes the following: "Credit Terms are as approved by [the Plaintiff] at its absolute discretion and notified to the Customer pursuant to the Customer's application."
5. Clause 5 provides that the customer and each person signing as guarantor agree that the Plaintiff may give information to credit reporting agencies and that it "may, in assessing whether to grant the Customer's credit application or whether to accept the guarantor as a guarantor", seek and obtain information about them.
6. Clause 18 contains a warranty from the customer that the information provided is complete and correct. It continues as follows: "The Customer requests [the Plaintiff] to accept this credit application and upon acceptance by [the Plaintiff] the Customer agrees to be bound by these Credit Terms and the Sales Conditions".
7. The Sales Conditions at page 9 of the 2012 Application included cl 4, as follows: "4.1. Cash on delivery. Subject to Condition 4.2, the Customer must pay the purchase price for the goods in advance or by cash on delivery. 4.2 Credit Terms. If the Customer has the continuing credit approval of [the Plaintiff] the Customer: (a) must pay the purchase price in conformity with the Customer's credit terms and into a bank account nominated by [the Plaintiff], unless otherwise agreed by [the Plaintiff]. (b) agrees to maintain its purchases at no less than the equivalent of the minimum weekly or monthly purchase amount as advised by [the Plaintiff]."

The 2012 Application and Guarantee viewed as acceptance - issue (a)

1. So far as the 2012 Application was concerned with legal relations between the Plaintiff and Raphco, the Defendant's counsel submitted that the document is to be characterised as an offer from Raphco to the Plaintiff, capable of acceptance by the latter only through formal notification of approval in accordance with cl 4 of the Credit Terms (quoted at [58] above). He pointed to the title, the opening words (see [52] above) and the structure of the printed part of the 2012 Application as stamping it with the character of an offer for which Raphco, by delivering it to the Plaintiff, sought acceptance. He also pointed to the introductory words of the Credit Terms and to cll 1, 4, 5 and 18 (see [57]-[60]).
2. This submission appears to me to prefer form over substance. On its face the document was drafted in terms primarily suitable to the commencement of a credit trading relationship between the Plaintiff and a new customer. But with respect to Raphco it was being employed to re-document an existing longstanding relationship under which the Plaintiff well knew the trading history, financial standing and commercial performance of the customer. The Plaintiff had already accepted Raphco as worthy of credit. At the time of presenting the 2012 Application to Raphco for signing the Plaintiff in substance communicated an offer to continue trading on 21 day terms. In short, Raphco was a pre-approved credit customer on a 21 day payment cycle. Raphco was invited to accept that pre-approval, on the new standard terms, by signing the document.
3. In the conversations by which the Plaintiff's executives requested that the 2012 Application be signed, there was no suggestion that it wished to consider afresh Raphco's creditworthiness. Statements made by Messrs Singh and Willard were inconsistent with any such intention. The Plaintiff's offer, during June and July 2012, to continue the existing commercial relationship on a revised set of overarching standard terms and with a reworded guarantee from the Defendant, was capable of being accepted by Raphco and the Defendant by execution and returning of the document. When they did communicate their acceptance in that manner, the result as between the Plaintiff and Raphco was a new concluded agreement as to the general terms which would attach to each sale of goods entered into thereafter pursuant to Raphco's orders placed from time to time.
4. As to the 2012 Guarantee, the Defendant wrote his own name into the form on page 5 with the result that the principal operative clause appeared as follows: "To: Baiada Poultry Pty Ltd (ABN 96002925948)" 1. In consideration of Baiada at the request of the person(s) listed as guarantor(s) below, (Guarantor), supplying in the future or continuing to supply the abovenamed Customer now referred to as (Debtor) with Goods or services from time to time, the Guarantor Raphael Strochlitz [sic, handwritten by Defendant] (a) guarantees to Baiada the punctual payment of all monies owing by the Debtor to Baiada now or in the future for the supply of Goods or services…" This 2012 Guarantee was signed by the Defendant and dated 16 July 2012.
5. As with the Plaintiff's offer to Raphco to trade on the printed standard terms of the 2012 Application, I construe the Plaintiff's request of the Defendant, that he complete and sign the document, as an offer to accept him as guarantor. The Defendant was asked to sign in circumstances where he was already the guarantor of Raphco's account under the 2003 Guarantee. Nothing was said by the Plaintiff's executives to suggest that they required any change of guarantor. Whilst the document was in the hands of the Defendant and Ms Pettiona pending completion and signing, a number of discussions took place which clearly showed the intention of all parties that the Defendant would be the guarantor. It was conveyed to the Defendant by clear implication, at the least, that he was acceptable.
6. Consequently, when the Defendant filled out the 2012 Guarantee, signed it and returned it he thereby accepted the Plaintiff's offer and concluded a fresh contract of guarantee in respect of the debts of Raphco. The agreed consideration was "supplying in the future or continuing to supply" Raphco with goods. Such consideration moved from the promisee almost immediately. Invoices dated shortly after 18 July 2012 show supply of goods to Raphco from that time.

The 2012 Application and Guarantee viewed as an offer - issue (b)

1. If I am wrong in having construed the Plaintiff's communications with Raphco and the Defendant during May, June and July 2012 as an offer capable of being accepted by return of the signed document then the only alternative character that the 2012 Application and Guarantee could bear would be that of an offer. If that is the correct view then the Plaintiff unequivocally accepted the offer.
2. The Defendant has acknowledged that immediately after he signed the document and gave it to the Plaintiff, the phone calls and face-to-face meetings in which the Plaintiff's representatives pressed for it abruptly ceased. Raphco's orders continued to be filled and invoices continued to be rendered with the notation "Terms 21 Days". The payment practices of the previous nine years continued thereafter until late in 2012 when Raphco commenced to default significantly.
3. Although the Plaintiff had been consistently supplying Raphco on credit under the terms and conditions of the 2003 Application up to 18 July 2012, I find that the Defendant knew in mid July that this would very soon cease if the new Application were not signed. A reasonable bystander or a reasonable person in the position of the Defendant would have clearly understood that by continuation of supply after that date, coupled with cessation of requests for re-documentation of the trading terms and relationship, the Plaintiff unequivocally signified that the 2012 Application and the 2012 Guarantee, viewed as offers from Raphco and the Defendant, respectively, had been accepted. I have here applied the tests authorised by the cases cited at [26] and [27].
4. If the 2012 Application and Guarantee are to be viewed as offers from Raphco and the Defendant then these facts are again closely similar to those considered by the Court of Appeal in Dalgety Australia Ltd v Harris (supra). The principle quoted from the judgment of Glass JA at [24] above is applicable. If the signed and delivered 2012 Guarantee was an offer from the Defendant then I would find that the Plaintiff's continued supply of goods to Raphco on credit after 18 July 2012 was actuated by it, at least in part. The Plaintiff's continuance of supply after 18 July 2012 constituted both consideration moving from the Plaintiff and also the communication of acceptance of the guarantee.
5. With respect to the 2012 Application, the Defendant's counsel has submitted that cll 1, 4, 5 and 18 of the Credit Terms and cl 4 of the Sales Conditions indicate that if the Application was an offer from Raphco to adopt a new set of overarching trading terms then it could only become contractually binding by means of an express notification from the Plaintiff in words to the effect of "approve", "grant" or "accept" (the terminology of the above clauses). However, the document must be construed in the context that Raphco was an existing customer with whom the Plaintiff, expressly, wished to continue to trade. It has been mentioned at [63] and [64] that the Plaintiff gave no indication of wanting to reconsider the 21 days payment terms. It merely wished to update its standard terms and conditions and the wording of the guarantee. In that setting a formal express notification of approval, grant or acceptance in response to Raphco's and the Defendant's submission of the signed Application would have been superfluous, to the common understanding of the parties.
6. Given the abovementioned surrounding circumstances I do not construe the clauses relied upon by the Defendant as stipulating the sole and strict means by which the Plaintiff could agree to Raphco's offer to abide by the terms of the 2012 Application. The document does not preclude acceptance of it by conduct. Still less do those clauses restrict the manner in which the Plaintiff could accept the Defendant's offer of the 2012 Guarantee.
7. With respect to the 2012 Guarantee the Defendant makes an argument that, on the assumption that it was an offer from him to the Plaintiff which the Plaintiff accepted, it only obliges him to guarantee debts of Raphco "arising under the 2012 credit application which was never accepted by Baiada". As I find that a contract was concluded between the Plaintiff and Raphco upon the terms of the 2012 Application, the premise of this argument is not established. Even if the premise were established I would reject the argument. The principal operative clause of the guarantee quoted at [65] above is general as to the debts guaranteed: "all monies owing by [Raphco] to [the Plaintiff] now or in the future for the supply of Goods or services". It is not limited to a guarantee of only such debts as may arise from the supply of goods upon the terms of the 2012 Application, if those terms should become binding between the Plaintiff and Raphco. There is nothing in the other clauses of the guarantee nor in its setting in the Commercial Credit Account Application nor in the surrounding circumstances which would support a construction pursuant to which the Defendant should be liable only for debts incurred in trading under the terms of the 2012 Application, if they should become contractual.

The 2012 Guarantee as a deed - issue (c)

1. In pars 8H to 8K of its Further Amended Statement of Claim the Plaintiff has pleaded that the 2012 Guarantee as signed by the Defendant on 16 July 2012 and delivered to the Plaintiff on 18 July 2012 "is binding as against the Defendant as a deed (poll)". The Plaintiff's purpose in seeking to establish this characterisation is no doubt to enable it to hold the Defendant liable even if the Court should not be satisfied that the Guarantee became contractually binding through offer and acceptance.
2. I have found that the Defendant's 2012 Guarantee of Raphco's debts is supportable in contract, either by way of the Defendant's acceptance of an offer from the Plaintiff or vice versa, and that it applies to the debts claimed. It is therefore not necessary to resolve the parties' competing arguments about whether the document is a deed. That issue would turn upon whether they intended it to operate as a deed, their intentions being ascertained objectively from indicia within the wording of the document and from surrounding circumstances: 400 George St (Qld) Pty Ltd v BG International Ltd [2010] Qd R 245; (2010) 2 QDR 302 per Muir JA at [20], [27] and [29]-[32]; Segboer v AJ Richardson Properties Pty Ltd [2012] NSWCA 253 at [59].
3. If I had to determine this question I would not find that the 2012 Guarantee was intended to operate as a Deed. It contains none of the wording which is commonly adopted to signify intention to create a deed, such as "this deed witnesseth …" or "signed sealed and delivered as a deed" etc. In cl 2.2(g) the 2012 Guarantee refers to itself as "this deed poll" but in cl 2.1 it uses the expression "this contract". In cl 1 there is an acknowledgement of consideration which is appropriate to a contract formed by offer and acceptance but would be superfluous if this were intended to operate as a deed.
4. The proforma wording of the document included instructions for execution which required that the guarantor's signature be witnessed. This corresponds with the requirement in s 38(1), Conveyancing Act 1919 (NSW) that the signing of a deed "shall be attested by at least one witness". But it is not enough to indicate a mutual intention that this should operate as a deed. A promisee may equally require that the promisor's signature to a contract be witnessed. The formal requirement of sealing, as prescribed in s 38, would not be satisfied by the document. The provision in subs (3) of s 38 by which a document signed and attested in accordance with the section is deemed to be sealed would not be applicable because the document is not "expressed to be … a deed". In that respect, the conflicting self descriptions of the document, in cll 2.1 and 2.2(g), are not sufficient for the purposes of subs (3). It does not "clearly [appear] from the document itself that they are intending a deed": Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 373F.
5. The surrounding circumstances are entirely against the 2012 Guarantee having been intended to operate as a deed. It was clearly presented by the Plaintiff to the Defendant and subsequently signed and returned as part of a process of offer and acceptance with respect to concluding both new terms of trade between the Plaintiff and Raphco and new terms of guarantee between the Plaintiff and the Defendant. Whatever view is taken of whether the 2012 Guarantee constituted an offer or an acceptance, both of these alternatives are inconsistent with either party having evinced an intention that the Defendant would unilaterally bind himself by delivery of the signed document, irrespective of communications from and actions by the Plaintiff.
6. In this respect the 2012 Guarantee is to be contrasted with the Deed of Guarantee delivered by the bank in Segboer v AJ Richardson Properties Pty Ltd (supra) (especially at [55]-[59]) and the deed of acknowledgement of debt delivered by the debtor in Mirzikinian v Waterhouse Pty Ltd [2009] NSWCA 296. The circumstances of those cases, which supported findings that the respective documents were delivered as deeds intended to take effect as such forthwith and to confer legal rights without more, are in stark contrast to the process of offering and inviting acceptance which took place in this case.

Estoppel of the Plaintiff with respect to the 2012 Guarantee - issue (d)

1. In par 15 of his Amended Defence the Defendant alleges that "it was agreed between the Plaintiff and the Defendant that the Defendant was offering no personal security by way of signing any personal guarantee as the Defendant conceded he had no assets and no ability to stand behind a personal guarantee and the Plaintiff accepted that position whereby the Defendant signed the form of guarantee to satisfy the Plaintiff's request that Raphco and the Defendant complete the Plaintiff's paperwork".
2. In par 34 the Defendant alleges that, in consequence of the matter stated in par 15 of the Amended Defence, "an estoppel properly arises against the Plaintiff precluding the Plaintiff from relying upon the 2012 Guarantee".
3. The evidence relied upon by the Defendant's counsel to sustain this pleading was, first, the statement attributed by the Defendant to Mr Willard about the guarantee being a mere "formality", required "only to maintain Baiada's internal regulatory compliance" quoted at [46]. I have rejected this evidence for reasons given at [47] and [48].
4. Secondly the Defendant says that substantially the same thing was conveyed by Mr Willard in his email of 6 July 2012 which I have quoted at [51]. But Mr Willard did not there say that the Guarantee was required "only" to maintain the Plaintiff's regulatory compliance. The relevant passage of this email does not represent that the Plaintiff's need to maintain regulatory compliance is something in contradistinction to its desire to obtain a personal guarantee. That is a false dichotomy raised solely by the Defendant's argument. On the face of Mr Willard's email, the "regulatory compliance" to which he was referring was the Plaintiff's internal requirement of an enforceable personal guarantee to support trading on credit with a proprietary limited company.
5. The evidence does not disclose any communication from the Plaintiff which the Defendant could reasonably have understood as holding out to him that the 2012 Guarantee would not be enforced. In cross examination he acknowledged that he trusted Mr Singh and that he understood from him that, at least in some situations, the guarantee would be enforced (T 98-99). Mr Singh's statement to the Defendant quoted at [43] was quite inconsistent with any prospect that the Guarantee would not be called upon in the event of Raphco not meeting its debts.
6. It would not have been reasonable for the Defendant to have taken the Plaintiff's communications as a representation that the 2012 Guarantee would not be enforced or to have signed the document in reliance on such an understanding. Reasonableness (or otherwise) in these respects is determinative: Standard Chartered Bank Aust Ltd v Bank of China (1991) 23 NSWLR 164 at 180D-G; Hammond v JP Morgan Trust Australia Ltd [2012] NSWCA 295 at [52]. In any event, in mid 2012 the Plaintiff insisted upon the 2012 Guarantee as a condition of continued trading with Raphco. At that time the Plaintiff was the supplier of over 90% of Raphco's requirements and the Defendant wanted his company to continue buying from this source. He perceived that other suppliers were unwilling to trade with Raphco. I find that the only considerations which caused the Defendant to deliver the signed Guarantee on 18 July 2012 were that commercially he had to do so in order to maintain supply from the Plaintiff and that he considered himself not at risk because he had no assets in his own name: see [41]. The Defendant's defensive estoppel fails.

Intention to create legal relations by the 2012 Guarantee - issue (e)

1. The Defendant's counsel argued that the Plaintiff and Defendant did not intend the 2012 Guarantee to create legal relations between them. This issue is not apparent on the pleadings. It was raised as a sub-issue to the question of whether the Plaintiff is estopped from relying upon and enforcing the 2012 Guarantee. The Defendant's counsel submitted that whether or not there was an intention to create legal relations would stand or fall with the Court's acceptance or otherwise of the Defendant's case that he signed the 2012 Guarantee only on the faith of representations by the Plaintiff that the Guarantee would not be enforced and that it was required merely to fulfil internal paperwork requirements of the Plaintiff.
2. To succeed on this analysis the Defendant would have to show that the absence of the requisite intention is demonstrated objectively by assessment of what a reasonable person in the position of each party would have been led to believe by the words and conduct of the other party. This has not been shown.
3. As will already be apparent from my findings in relation to the Defendant's defensive estoppel case (see [83]-[86]), I am not satisfied that a reasonable person in the position of the Defendant would have understood that the Plaintiff lacked intention to enter into a legally enforceable contract of guarantee with the Defendant. Certainly a reasonable party in the position of the Plaintiff would have understood that the Defendant was intending to bind himself enforceably to the 2012 Guarantee.

Promissory estoppel - enforceability of the 2012 Guarantee - issue (f)

1. The Plaintiff contends that even if the 2012 Guarantee did not become binding upon the Defendant either as a contract through offer and acceptance or as a deed, nevertheless the Defendant represented that it constituted a legally binding obligation and that he intended to be bound by it, upon which representation the Plaintiff relied in continuing to trade on credit with Raphco.
2. It is not necessary to decide this contention because I have found that the 2012 Guarantee is contractually binding. If it were not, I would not have upheld the Plaintiff's promissory estoppel case. I am unable to see that any conduct of the Defendant conveyed a representation as to the legally binding character of the 2012 Guarantee. He simply signed that which was presented to him and delivered it to the Plaintiff, leaving it to have whatever legal effect, if any, might follow. I find in the evidence no basis for inferring that the Plaintiff's representatives understood the Defendant to be making a representation about legal efficacy. The 2012 Application and Guarantee contained the Plaintiff's own wording. They presented the document for signing and received it back upon their own opinions and under their own advice as to the legal result. They neither inferred nor acted upon any representation from the Defendant with respect to contractual effect.

Operation of 2003 Guarantee if the 2012 Guarantee is not binding - issue (h)

1. If, contrary to my findings, the 2012 Guarantee did not become contractually binding upon the Defendant then the 2003 Guarantee continued in force and rendered the Defendant "liable with the company for the due payment of all sums which [became] owing in relation to the account". The unpaid balance of Raphco's account with the Plaintiff which accrued in relation to goods sold and delivered in December 2012 and January 2013 falls within the description of a sum "owing in relation to the account". This is so whether or not the terms of trade between the Plaintiff and Raphco were altered in July 2012 as a result of the 2012 Application becoming contractually binding between these parties.
2. Against this the Defendant has submitted that the last words of Clause 1 of the 2003 Guarantee, "arising in relation to the account", are to be construed as meaning that the Defendant only assumed liability for debts of Raphco incurred on the account which would be established if the Plaintiff should accept Raphco's 2003 Application. The Defendant says the 2003 Application was never accepted but I have found otherwise. The Defendant next says that if the 2003 Application became contractually binding and if it was superseded as a result of the 2012 Application being agreed, the result would be a new "account" between the Plaintiff and Raphco different from the "account" the balance of which the Defendant was liable for under the 2003 Guarantee.
3. I do not accept that the words "owing in relation to the account" in the 2003 Guarantee are to be construed in the restrictive sense which would be necessary to sustain the Defendant's argument. In the proforma text of the 2003 Application the word "account" appears only twice, once in the title and once at the end of cl 1 of the Guarantee. The word is not defined for the purposes of the document. According to common usage with respect to a seller and a buyer of goods on credit, the "account" between them would refer to a relationship of regular trading in which there is kept a formal record of debits and credits, for sales of goods and for payments. There is nothing in the proforma 2003 Application (including the Guarantee wording) to indicate that the meaning of "account" is narrowed from this general sense. In particular there is nothing to support the Defendant's construction that it refers only to trading between the Plaintiff and Raphco upon the "Terms and Conditions" and "Credit Terms" which formed part of the 2003 Application, for so long as those general terms of trade should apply between the parties.
4. Clause 3 of the 2003 Guarantee supports the view that by cl 1 the Defendant agreed he would guarantee debts of Raphco arising from trading between the two companies irrespective of whether the 2003 Application should become contractual and notwithstanding that the terms of trade, once agreed between the Plaintiff and Raphco, might later be altered. By cl 3 the Defendant agreed that: ".. this guarantee shall not be impaired by the granting of time or other indulgence to the company, and that this guarantee shall be a continuing guarantee".
5. The issue presently under consideration would arise only if the 2012 Guarantee did not become binding on the Defendant but the 2012 Application came into force between the Plaintiff and Raphco, bringing about a change in their terms of trade. If, contrary to conclusions expressed elsewhere in these reasons, that is what occurred in mid 2012, then I would hold that the Defendant remained bound by his "continuing guarantee" from June 2003 and he would be liable thereunder for the debt the subject of these proceedings.

Orders

1. As well as agreeing the amount of Raphco's principal debt the parties have agreed that the dates and transactions by which it accrued are as set out in Schedule A to the Further Amended Statement of Claim. This has enabled them to agree upon an interest calculation which has produced the figure of $290,711.02 up to and including 6 July 2015.
2. For the above reasons the Defendant is liable to the Plaintiff, pursuant to the 2012 Guarantee, for Raphco's debt and for interest thereon. The judgment and order of the Court are as follows: 1. Judgment for the Plaintiff in the sum of $2,113,129.10 inclusive of interest up to judgment. 2. Order that the Defendant pay the Plaintiff's costs of the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 July 2015