Zoe will write a short plain-English brief of this judgment and email it to you: what it was about, what the court decided and why. It can take up to a minute.
These proceedings were commenced by Summons filed on 9 June 2020. The plaintiff, Kailis Bros Pty Ltd, a company registered in Western Australia, sought a declaration that it has a caveatable interest in a property at Thornton. The property is owned jointly by the defendant, Justin Clarke, and Mandee Clarke. The plaintiff also sought an order pursuant to s 74K of the Real Property Act 1900 (NSW) extending the operation of a caveat (AP631871) it lodged in October 2019 against the title to the property. The defendant had served a lapsing notice in respect of the caveat on about 25 May 2020.
The interest claimed by the plaintiff in the caveat is a charge said to be by virtue of a Credit Application and Guarantee and Indemnity dated 31 May 2019 between the plaintiff and the defendant. The caveat affects only the defendant's interest as registered proprietor of the property.
On 12 June 2020 an order was made by consent extending the operation of the caveat until further order. Directions were also made for the defendant to file and serve any affidavits in opposition to the Summons, and for the parties to file and serve written submissions. No evidence was filed by the defendant. Further directions were made in relation to submissions on 10 July 2020, 7 August 2020 and 18 August 2020. In accordance with those directions, the Court has received submissions from the solicitor for the plaintiff, filed on 3 July 2020 and 14 August 2020, and from the solicitor for the defendant, filed on 15 July 2020 and 25 August 2020.
The parties agreed that it was appropriate for the matter to be determined on the papers.
The instrument described in the caveat as a Credit Application and Guarantee and Indemnity dated 31 May 2019 is in fact headed Terms of Trading Agreement. It is a five page standard form of agreement issued by the plaintiff.
On the first page various details of "the Applicant", Clarke Foods Pty Ltd, have been written in. Beneath that, under a heading "Director's / Individual's / Owners / Trustees / Partner's / Full Name And Address", the name and address and other details of the defendant have been written in.
The second page contains printed matter including the following:
In this document the expression "Company" defines and means either or all of Kailis Bros Pty Ltd ACN 008 723 000 and National Fisheries Pty Ltd ACN 009 412 382, all collectively and severally and each related entity (as defined in the Corporations Act 2001) of either or all of Kailis Bros Pty Ltd ACN 008 723 000 and National Fisheries Pty Ltd ACN 009 412 382 from time to time and any of the Company's assigns. This agreement extends to credit given to the Applicant in the future by a company which is not now, but is then a related entity of either or all of Kailis Bros Pty Ltd ACN 008 723 000 and National Fisheries Pty Ltd ACN 009 412 382.
The Applicant hereby applies to have an account opened with the Company on the terms and conditions contained within this document and any other accompanying additional terms and conditions. The Applicant acknowledges having had the opportunity prior to the execution of this document to obtain independent legal advice as to its meaning and the implications of executing this document.
In consideration of the Company at the request of the undersigned signatories agreeing to grant this trading facility to the Applicant, I/we the undersigned signatories (the "Guarantors") hereby jointly and severally guarantee payment to the Company, without any deduction or set off whatsoever in law or in equity, of the price and taxes charged by the Company to the Applicant for the supply of goods and services (the "Price") and the payment of all other sums which now or in the future may be or become owing (including contingently) by the Applicant to the Company on any account whatsoever (whether such indebtedness or liability be present or future, actual or contingent, fixed or fluctuating, liquidated or unliquidated) or relating to any other third party dealings or arrangements ("Other Monies").
The Guarantors further guarantee the performance of the covenants and obligations of the Applicant under this agreement.
The Guarantors agree to be bound by the terms and conditions within this document and any other accompanying terms and conditions as if they were the principal debtor. This is a continuing guarantee and irrevocable until the Company has been paid the entire Price and Other Monies. This guarantee may be enforced by the Company, its successors and assigns.
As a separate and independent agreement the Guarantors agree to indemnify and keep harmless the Company against any of the Price and Other Monies which is not paid by the Applicant to the Company from time to time and against any losses, costs (including but not limited to legal costs on a full indemnity basis) or damages of whatsoever nature incurred by the Company as a result of the Applicant failing to pay the Company the Price or Other Monies or in relation to registering, maintaining or releasing any security interest, charge or caveat (including the cost of registering any financing statement or financing change statement) or as a result of the failure or default of the Applicant in the performance of their covenants and obligations contained under this agreement or under any other agreement between the Company and the Applicant.
…
The Guarantors certify that prior to the execution of this guarantee and indemnity the Guarantors had the opportunity to take independent legal advice in respect of its meaning and effect.
This document is executed as a Deed. The undersigned signatories warrant they have the authority to execute this document for and on behalf of the Applicant, and are also executing this document contemporaneously in their joint and several capacity as Guarantors.
Beneath the date, 31 May 2019, under the heading "Applicant/Guarantors" there is space for up to four signatories to execute the document and have their signatures witnessed. In the first space, the defendant's name has been written, and below that he has signed his name. The signature appears to have been witnessed by Renae Morris.
Numerous printed Terms and Conditions appear on pages 3 to 5 of the document, including the following:
1. The Applicant agrees to pay, without any deduction or set off in law or in equity whatsoever, the Price within 30 days of the date of the invoice rendered by the Company or within such other period of time as may be notified to the Applicant from time to time by the Company.
…
3. The Applicant and the Guarantors agree that this trading application and each application for credit made by the Applicant shall be deemed to have been accepted from the date of the Company's first invoice to the Applicant after the date of this trading application and without further notice to the Applicant and the Guarantors this document shall immediately have effect as an agreement by deed between the Company, the Applicant and the Guarantors.
…
17. The Applicant and the Guarantors hereby, in favour of the Company, charge with the due and punctual payment and the due and punctual and complete performance of all their liabilities and obligations hereunder or on any account whatsoever to the Company all their legal and equitable interest of whatsoever nature held in any real property both present and future and each of the Applicant and Guarantors hereby consent to the Company lodging a caveat or caveats noting its proprietary interest herein.
There is evidence that in the period from 9 July 2019 to 16 September 2019 the plaintiff issued numerous invoices to Clarke Foods Pty Ltd in respect of goods supplied. The plaintiff claims that the invoices, in the amount of $177,628.90, remain unpaid. It seems that Clarke Foods Pty Ltd went into administration on 31 October 2019 and on 20 December 2019 became subject to a Deed of Company Arrangement.
On 13 January 2020 the plaintiff commenced proceedings against the defendant in the District Court of Western Australia to recover the amount outstanding pursuant to the guarantee said to have been given by the defendant. A Statement of Claim was filed on 20 February 2020. The defendant filed a Defence on 14 April 2020 which did not admit the existence of the guarantee. An Amended Defence was filed on 28 May 2020 which contained the assertions that the defendant did not sign the Credit Application as a guarantor, and only executed the document in his capacity as a director of the Applicant for Credit. The proceedings in the District Court of Western Australia have not yet been determined.
The plaintiff claims that by cl 17 of the Trading Agreement, the defendant granted a charge in favour of the plaintiff over his interest in the Thornton property to secure amounts that are payable to the plaintiff under the agreement. The plaintiff submitted that the defendant signed the document on behalf of Clarke Foods Pty Ltd and also in his capacity as a guarantor. This was said to be clear from the words that appear immediately above the defendant's signature.
The defendant submitted that the only party that signed the Trading Agreement was Clarke Foods Pty Ltd. It was contended that the defendant signed only in his capacity as sole director of the company. It was stated that the document used the terms Applicant and Guarantors interchangeably, and that under the heading "Applicant/Guarantors" there was no specific panel for the signature of a guarantor. It was submitted that in these circumstances there was at least some ambiguity about the capacity in which the defendant signed the document. Reference was made in this context to Aquawest Pty Ltd v Twynham [2017] NSWSC 652 where Lonergan J referred (at [29]) to Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2004] HCA 28 at [17]-[23]. The defendant further submitted that the document was not a deed, and no consideration was given for any promise given by the defendant.
I am unable to accept the submissions of the defendant. It is clear in my opinion from reading the Trading Agreement as a whole, and in particular the words above the signing section, that the defendant signed not only on behalf of Clarke Foods Pty Ltd but also in his personal capacity as a Guarantor. The words above the signing section make it plain that the defendant warranted that he had the authority to execute the document for and on behalf of the company, and also that he was executing the document contemporaneously in his capacity as a Guarantor. I have not overlooked the reference to "joint and several capacity as Guarantors", but consider that those words are merely a reflection of the fact that on occasions this standard form of agreement may be signed by more than one person. The words are a further indication that in that situation the Guarantors will have a joint and several liability. The expression "the Guarantors" was earlier defined as "I/we the undersigned signatories". It was evidently intended that one or more persons may constitute the Guarantors for the purposes of the agreement. I note that the defendant did not suggest that the reference to Guarantors in the plural itself gave rise to any ambiguity.
I do not see this as a case where there are ambiguous contractual provisions that should be construed in favour of a person who is sought to be held liable as a surety (see Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 561; Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 256; Andar Transport v Brambles Ltd (supra) at [17]).
It is also not correct to state that no consideration was given for the defendant's promise to be a guarantor. The agreement states that the Guarantors guarantee payment to the plaintiff of the price charged by the plaintiff to Clarke Foods Pty Ltd for goods and services, in consideration of the plaintiff "at the request of the undersigned signatories" agreeing to grant the trading facility to Clarke Foods Pty Ltd. It does not matter in these circumstances whether the instrument was executed as a deed.
The defendant's submissions did not specifically address cl 17 of the Trading Agreement. It is in any event clear that by cl 17 the defendant granted a charge in favour of the plaintiff over his interest in the Thornton property to secure the performance of his obligations under the agreement. It is appropriate for the Court to make a declaration to that effect.
It should be noted that in the most recent submission of the defendant the suggestion was made that it may be appropriate for all issues between the parties to be determined in this Court and for the proceedings in the District Court of Western Australia to be discontinued. It is unfortunate that the parties are litigating in two courts, but I do not see a good reason to defer the determination of the narrow issues (essentially questions of construction) raised on the plaintiff's Summons. The parties have, by agreement, proceeded towards a hearing of the matter on the papers. The parties will be bound by the decision of this Court, and to that extent the conduct of the proceedings in Western Australia will be affected. However, it will remain open to the defendant to advance whatever defences he has, although not of course any defence inconsistent with the determination of this Court. The District Court in Western Australia will determine the extent of any liability the defendant has under the guarantee he gave to the plaintiff.
The plaintiff should not be criticised for commencing the proceedings in Western Australia. The Trading Agreement is expressed to be governed by the law of Western Australia, and the parties submitted to the jurisdiction of the courts of that State (see cl 24). Those proceedings were well underway before the defendant served the lapsing notice in respect of the caveat. It was that step that brought about the duplication of proceedings.
The plaintiff seeks an order for costs. It is appropriate that such an order be made. In my opinion there is no reason why costs should not follow the event.
[2]
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: 27 August 2020