Doka Formwork Australia Pty Ltd v Complex Formwork Pty Ltd, Romeo Ibrahim, and Toplace Pty Ltd

ISSUES IN DISPUTE

1. The issues in dispute between the Plaintiff and the Second and Third Defendants may be summarised as follows: 1. Whether the outstanding invoices alleged by Doka are a debt claimable against Toplace, and if so, the quantification of the indebtedness, that is whether cheques drawn by Toplace that Doka alleges were never paid to it, could constitute repayment of amounts due under the contract so as to discharge some or all of the defendant's obligations under the guarantees and indemnities; and 2. The proper allocation of the payments made by Toplace, in particular the validity of Doka's allocation of $73,811.52 of the payments it received to the Granville Project; and 3. The existence and the extent of a rent-free period in relation to the River Road Project; and 4. The agency relationship (if any) that existed between Doka and the Second Defendant, Romeo Ibrahim; and 5. The whereabouts of the cheques and the alleged misappropriation of those cheques.

DISPUTED CHEQUE PAYMENTS

1. In the defence filed by Toplace in response to the Amended Statement of Claim filed by Doka, Toplace pleads repayment as a defence to the plaintiff's claim. They contend that Toplace issued 4 cheques to Doka (the disputed cheques). I accept that the defendant bears the onus of proof that an amount due under the contract has been repaid. (see Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 562).
2. It is common ground that the disputed cheques were delivered by Toplace to Romeo Ibrahim (see Affidavit of Danny Ibrahim sworn 25 January 2018 at paragraphs 13 and 29). It is also common ground that these cheques were eventually drawn against Toplace, with the funds being debited from Toplace's Westpac bank account.
3. However the cheques were never delivered to Doka, and the funds debited from Toplace's accounts were credited to accounts of parties unrelated to Doka (unknown payees) as follows: 1. Cheque number 401859 in the amount of $50,000 dated 14 May 2015 funds were paid to GM Cabs Pty Ltd; and 2. Cheque number 401924 in the amount of $50,000 dated 16 May 2015 funds were paid to Apollo Security Pty Ltd; and 3. Cheque number 401917 in the amount of $75,000 dated 11 June 2015 funds paid to Apollo Security Pty Ltd; and 4. Cheque number 401960 in the amount of $92,944.53 dated 30 June 2015 funds paid to Go Gas Campsie.
4. The affidavit of Grahame Smith affirmed 5 April 2018 (Exhibit 1) confirms that all of the cheques cleared, and this is verified by the bank statements annexed to the affidavit of Danny Ibrahim (Exhibit 2).
5. I accept that Toplace has issued cheques in the name of Doka totalling $457,944.53, and that money has been paid out of Toplace's account.
6. Section 3 of the Cheques Act 1986 (Cth) states that 'delivery' in relation to a cheque, means 'the transfer of possession of the cheque from one person to another'.
7. In Australian Competition and Consumer Commission v Yellow Page Marketing BV and Anor (No 2) [2011] FCA 532, at [139], Gordon J stated that 'delivery means the transfer of possession of the cheque from one person to another: ss3 and 25 of the Cheques Act 1986 (Cth). Absent effective delivery of the cheques, property in the cheques is retained by the drawers. Under s 25, a contract arising out of the drawing or endorsement of a cheque is incomplete and revocable until the delivery of the cheque.'
8. Further, in Westpac Banking Corporation v Hughes and Anor [2011] QCA 42 at [621], Fraser JA stated that '[t]he drawer of a cheque is the true owner until the cheque is delivered to the payee.'
9. Doka therefore submits that there can be no foundation for a claim that the disputed cheques ever became the property of the Plaintiff or that they were ever effectively delivered to the Plaintiff.

ROMEO IBRAHIM AS AGENT FOR DOKA

1. Toplace argues that Romeo Ibrahim was the agent of Doka in collecting cheques from Toplace. They submit that this is so bearing in mind that the arrangement between the parties was such that Toplace was paying Doka directly in respect of the River Road project. They submit that Toplace was not paying Doka pursuant to any obligation to indemnify or guarantee the obligations of Complex. I accept that was the case.
2. In evidence in his affidavit, Danny Ibrahim establishes a usual course of dealing whereby the cheques were collected by Romeo Ibrahim to be then handed to Derbyshire (Exhibit 2, paragraphs 28 and 29). Toplace submits that Romeo Ibrahim was an agent of Doka, which they say is supported by a statement made in Derbyshire's affidavit of 11 September 2017 (Exhibit F, paragraph 24), which is also replicated in the affidavit of Unger (Exhibit C paragraph 27), where he states as follows; "In most instances, Jonathan Derbyshire would pick up the cheques from Romeo directly".
3. In evidence both Unger and Derbyshire were cross-examined as to the procedure for payments and collection of monies outstanding. It is apparent that the majority of payments to Doka were made by electronic funds transfer (EFT), but that payments made by Toplace to Doka were effected by cheque. Sometimes the cheques were collected by Romeo Ibrahim to be given to Derbyshire, and I accept that there is no evidence that Unger, Derbyshire or anyone else requested that cheques for Doka be sent by post or some other means. I further accept that the arrangement whereby cheques were delivered to Derbyshire by Romeo Ibrahim, and that Derbyshire would then pass on cheques to the finance department at Doka for banking, was done with the consent of Doka.
4. Toplace argues that this situation gives rise to an agency arrangement in several ways, and they note that it is trite to propose that an implied agency agreement may arise from the conduct of the parties towards each other which allows an inference of an agency agreement.
5. Toplace submits that an implied grant of actual agency can result rom acquiescence in the course of behaviours by persons who have actual authority to delegate. Junger v Hepburn [2010] NSWSC 88; Equitycorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50. They submit that as the managing director and a sales representative of Toplace gave evidence that cheques were collected by Derbyshire from Romeo Ibrahim, who they both understood was not the payer of the cheques, they had acquiesced to an arrangement of actual agency.
6. They further submit that an agency arrangement arose by estoppel on the basis that Doka represented that Romeo Ibrahim was their agent and that Toplace entered into the transactions in reliance upon that representation, and thus are bound as representor, irrespective of whether or not the agent in fact had authority to enter into the transaction. (see Australasian Brokerage Ltd v Australian & New Zealand Banking Corporation Ltd [1934] HCA 34).
7. Toplace submit that they are an innocent party, as they had handed cheques to Romeo Ibrahim, as it had done before, with the knowledge of Doka. Romeo Ibrahim had previously handed the cheques to Derbyshire who sent the cheques on for processing. They submit that Derbyshire and Doka, by so acting, have endorsed this method as the appropriate one, and that they cannot now deny that Romeo Ibrahim is their agent. (see The Phoenix Assurance Company Ltd v Berechree (1906) 3 CLR 946).
8. Toplace submits that in providing cheques to Romeo Ibrahim they have effectively discharged any obligation to make payments to Doka. Toplace does however concede that their case rises or falls on the agency argument being accepted.
9. I note that there is no evidence before me of any steps taken by Toplace to have the monies returned to their account, nor did they make any complaint to their bank or the police that monies had been misappropriated. Romeo Ibrahim and Complex did not appear at the hearing, the proceedings against Complex having been discontinued.
10. In my view, the argument as to Romeo Ibrahim being the agent of Doka is unsustainable. It is, in my view immaterial that the cheques were drawn against Toplace and its account was debited with the relevant amounts, or that the cheques were made out to the Plaintiff as payee. The account of Doka was not credited with those funds, but they were instead credited to other payees. Accordingly those payments did not discharge Complex Formwork's liability under the contract for outstanding payments.
11. Romeo Ibrahim has not appeared, and in circumstances where it is within his knowledge as to how the disputed cheques were endorsed, the evidence on that point is silent. I accept therefore that Toplace has failed to establish that the disputed cheques ever became the property of Doka, and therefore the defence of repayment with regard to those cheques cannot succeed.

GUARANTEE AND INDEMNITY

1. Doka claims the following against Romeo Ibrahim and Toplace under the respective guarantees and indemnities provided: 1. Romeo Ibrahim - $339,009.82 in relation to the amount outstanding for the River Road Project and the Granville Project plus $78,978.86 in interest up to and including 22 July 2018; and 2. Toplace - $308,273.73 in relation to amount outstanding in relation to River Road project plus $71,818.29 in interest up to and including 22 July 2018.
2. Toplace submits that for a guarantee to be accurately described as such, the preconditions are several. They can be described as follows: 'A contract of guarantee is a binding promise of one person to be answerable for a present or future debt or obligation of another if that other defaults. Sunbird Plaza Pty Ltd v Malomet (1988) 166 CLR 245; Total Oil Products (Aust) Pty Ltd v Robinson [1970] 1 NSWLR 701.
3. Toplace submits that the guarantee is plaint and that Toplace is guaranteeing and providing an indemnity in respect of the obligations of Complex vis-à-vis Doka insofar as it pertained to the River Road Development. Thus it is submitted that to successfully sue on this guarantee, Doka must establish; 1. A binding promise by Toplace to Doka; and 2. To secure an obligation of Complex; and 3. That Complex defaulted under the primary obligation and the extent of that obligation, and 4. That a demand was made by Doka to Toplace.
4. Of note however, is the concession given by Toplace that a binding promise was made by Toplace to Doka to secure an obligation of Complex. They dispute however the scope of that promise, and as such submit that the promise was at all material times limited only to the works Doka undertook in respect of the River Road site only.
5. I accept that the Toplace guarantee requires Toplace to pay to the Plaintiff the amounts due by Complex in relation to the River Road Project, being the outstanding amounts due under the relevant invoices and the interest on those amounts calculated in accordance with the contract.
6. In general, a promise of indemnity, when performed by the indemnifier, secures the indemnified party against a loss within the scope of the indemnity. It is 'a contract by one party to keep the other harmless against loss. (see Yeoman Credit Ltd v Latter [1969] 1 WLR 828 at 830-831). An obvious loss suffered by the indemnified party as a result of a breach of an indemnified party's promise to indemnify, is it's failure to receive the sum that ought to have been paid. (see Forney v Dominion Insurance Co Ltd [1969] 1 WLR 928)
7. I accept that the indemnity does not require that a demand be made of Toplace prior to the Plaintiff making any claim under the indemnity. It is an additional promise to the guarantee.
8. Whilst I note the submissions of Toplace about the similarity of certain paragraphs of the affidavits of Derbyshire and Unger, I have had the opportunity of seeing them both give evidence before me. I accept that both were witnesses of truth and did not attempt to mislead the court, and gave their evidence in a most forthright manner.
9. I also accept that the above also apply to the Ibrahim guarantee and indemnity, but note that the Ibrahim guarantee and indemnity apply to both the River Road project and the Granville project.

ALLOCATION OF REPAYMENTS TO EITHER PROJECT

1. I accept that the plaintiff has received $190,000 in payment for hire services pursuant to the contract. The argument between the parties is to which project those monies ought be applied as it is noted that the Toplace indemnity and guarantee relate only to the River Road project, but the Ibrahim indemnity and guarantee relate to both the River Road project and the Granville project.
2. It is submitted by the Plaintiff, and I accept, that where several debts are owing by a debtor to a creditor, the general rule is that the debtor has the right, at the time of payment, to make an appropriation of the money to such debt or such debts as the debtor pleases, and the creditor is bound to apply the payment as directed by the debtor. If the debtor makes no appropriation at the time of payment, the creditor then has the right to appropriate the payment. The creditor need not make an immediate appropriation and such may be made up to the last moment even in the course of an action.
3. The Plaintiff accepts that where payments were made by Toplace on behalf of Complex, there is an implied direction that the payments made by Toplace be applied to Complex's debts that it has agreed to guarantee, or that are covered by its indemnity - that is the debts of Complex in respect of the River Road project.
4. Of the $190,000 in payments received by the plaintiff, only one payment has been identified by Toplace as having been made by Toplace which was paid into the plaintiff's account, in the sum of $50,000. There is no evidence of any direction being given by any of the defendants as to how the repayments should be allocated. I accept therefore that the plaintiff was entitled to appropriate up to $140,000 to either project. It actually appropriated the sum of $73,811.52 to the Granville project. I accept that it was entitled so to do as there had been no directive given by Complex as to the allocation to specific debts.

FREE HIRE PERIOD

1. The remaining issue between the parties is the duration of the "hire-free" period agreed between Doka and Complex. Toplace alleges 3 months, Doka alleges 1 month. The evidence of Derbyshire (Exhibit G) recounts a meeting between Romeo Ibrahim, Jo Schinella of Doka and himself on or about 15 May 2015. He makes no reference to Danny Ibrahim being in attendance at such meeting. However in paragraph 20 of his affidavit, Danny Ibrahim suggests that Derbyshire offered him a three month hire free period.
2. Whilst the internal documents from both Doka and Toplace make reference to a rent-free period, there is nothing in writing between Doka and Toplace confirming the duration of the rent-free period. However annexed to the affidavit of Danny Ibrahim (Exhibit 2) is a letter dated 31 May 2015 addressed to Romeo Ibrahim from Danny Ibrahim, and signed by them both, which refers to a three month period of free hire. A further annexure is a letter dated 20 November 2015 addressed again to Romeo Ibrahim and signed by both Danny Ibrahim and Romeo Ibrahim which refers again to the 'Off-hire Doka Formwork Material for 2-8 River Road West, Parramatta' and instructs that it be removed within 5 working days. I prefer the evidence of the third defendant and accept that the hire free period was one of three months. Thus the sum of $89,076.42 ought be credited against the sum of $308,273.73 which I accept is owed under the guarantee and indemnity for the River Road project.

Orders

1. Verdict and Judgement for the plaintiff against the Second and Third Defendants in the sum of $272,293.19 inclusive of GST and interest.
2. Second and Third Defendants to pay the Plaintiff's costs as agreed or assessed. I certify that the preceding 50 paragraphs are the Reasons for the Judgment of her Honour Judge Strathdee. Associate 31 October 2018 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: 31 October 2018