Busic v Tokoragi

Busic v Tokoragi - [2019] NSWCATAP 36 - NSWCATAP 2018 case summary — Zoe

[4]

Tribunal's reasons

The Tribunal relied on the following principle as to the existence of a contract as set out by Heydon J in Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61 at [81]: … in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the Council and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?
The Tribunal also referred in detail to a decision of the Appeal Panel of the Administrative Decisions Tribunal - Plant v Meriton Properties Pty Ltd (RLD) [2009] NSWADTAP 62 - where the facts were said to be "not too dissimilar" to the present case. The Tribunal summarised the Appeal Panel's decision as concluding that although Mr Plant did not sign the lease as guarantor, he was a guarantor because he had adopted the lease and consequently the guarantee provisions. However, the Tribunal distinguished that decision because the lease in the present case states that a person is a guarantor if he or she "is named in item 10A in the schedule and has signed this lease". That wording did not appear in the lease between Mr Plant and Meriton Properties Pty Ltd.
The Tribunal's reasoning is set out at [50]-[52]: [50] Clause 13.1 requires execution of the lease by the named guarantors in item 10A. However, the first respondent (Ms Tokoragi) signed as an officer of the company, New Design to bind New Design to the terms of the lease. It is a fact that the First Respondent only signed once and did not sign in any other capacity. [51] It is the view of the Tribunal that it would be illogical to suggest that the first respondent is caught by clause 13.1 by her execution only as an officer of the lessee. For example, if the guarantor was not an officer of the lessee and therefore did not need to sign on behalf of the lessee and the guarantor had not signed the lease anywhere else, then that guarantor would not be bound because the clause does not operate, eg. This clause applies to a Guarantor ... and has signed … [52] To put it in other words, clause 13.1 cannot operate to make a guarantor liable, when such person is an officer of the lessee company and only signs in that capacity. The wording is quite clear. Mr McDonald is correct in submitting that a strict interpretation of the wording of clause 13.1 should apply. There is no ambiguity. Clause 13.1 requires the signing and executing of the lease to be by the guarantor in the personal capacity of the guarantor for the guarantee clause to apply.

[5]

Grounds of appeal

The lessors are entitled to appeal on questions of law: Civil and Administrative Tribunal Act 2013 (NSW), s 80(2)(b) (NCAT Act). The first ground of appeal is that the Tribunal made an error of law in concluding that Ms Tokoragi was not a party to the retail lease between the lessors and the lessee and therefore is not liable, pursuant to clause 13 of the lease, to guarantee the lessee's obligations under the lease.
With respect, this ground does not reflect the Tribunal's decision. The Tribunal's reasoning was that Ms Tokoragi was not liable because she did not sign or execute the lease in her personal capacity. The Tribunal's reasoning was not that Ms Tokoragi was not liable because she was not a party to the retail lease.
Ground 2 is that the Tribunal erred in law in concluding that Ms Tokoragi's execution of the lease as a director of the lessee did not give rise to acceptance on her part that she was bound pursuant to the guarantee.
This ground states the mistake that the Tribunal is said to have made but does not identify the faulty reasoning that gave rise to that mistake. We understand from this ground of appeal that the lessors are submitting that the Tribunal misconstrued clause 13.1 of Annexure B to the lease. Under that clause, a person is liable as guarantor if he or she "has signed or executed this lease". The Tribunal interpreted those words to mean, "has signed or executed this lease" in his or her personal capacity.
Ground 3 is that the Tribunal erred in law in failing to find that a reasonable person in the position of the parties would have concluded, in all the circumstances, that by signing the lease, Ms Tokoragi was agreeing to be bound by the terms of the guarantee contained in clause 13 of the lease. That is the situation regardless of whether there was a space for her to sign the lease as a guarantor.
Because we have found that the Tribunal did misconstrue the lease, we have decided to go on to ask the question posed by this ground of appeal.

[9]

Relevant principles

The test to be applied for ascertaining whether a bargain has been reached is the "reasonable person" test: Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61 at [81]. The Court of Appeal conveniently summarised the legal principles relevant to the interpretation of commercial contracts in Zhang v BM Sydney Building Materials Pty Ltd [2016] NSWCA 166 at [41]-[49].
The first principle is that interpretation is an objective exercise. It is not based on the parties' actual beliefs or intentions. [41] The primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. This is an objective exercise in which regard may be had to the "text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose." The "legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions." …
The second principle is that the test to be applied is what a reasonable business person would have understood the terms to mean. [43] In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable business person would have understood its terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. Unless a contrary intention is indicated, a commercial contract is to be construed to avoid "making commercial nonsense or working commercial inconvenience".
The third principle is that the process of construction is ordinarily governed by the terms of the contract alone. [46] The process of contractual construction ordinarily proceeds by reference to the contract alone. However recourse to events, circumstances and things external to the contract may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating, or in determining the proper construction where there is a constructional choice. Where such materials may be considered, the court may have regard to events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating, but not to evidence of the parties' statements and actions reflecting their actual intentions and expectations.
The fourth relevant principle is that a guarantee is be read contra proferentem (against the offeror) if the words of the document are ambiguous; Zhang v BM Sydney Building Materials Pty Ltd [2016] NSWCA 166 at [47]. As we have found that the words of the document are not ambiguous, it is not necessary to apply this principle.

At a glance

Court

Decision date

Source

Judgment (13 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (2)

Cited By (1)