RAWCLIFFE v BIANCO HIRING SERVICE PTY LTD No. SCCIV-02-781 [2002] SASC 430

In those circumstances, the fact that Ms Rawcliffe and Mr Monz signed the guarantee (assuming for the moment that they did intend to sign it in their personal capacity) and returned the guarantee to Bianco with the application, is powerful evidence that they were offering to Bianco to provide a guarantee, in terms of the guarantee, in consideration of Bianco agreeing to provide goods and services to Rams on credit.

A reasonable person in the position of Bianco, on receipt of these documents, and knowing the circumstances in which they were provided, would be entitled to so conclude.

The evidence indicates that when the guarantee was returned to Bianco, the spaces in the Schedule for the insertion of "name and address of customer" and "names and addresses of all persons executing guarantee" had been left blank. In my view that does not alter the fact that a reasonable person in the position of Bianco was entitled, on receipt of these documents, to conclude that Mr Monz and Ms Rawcliffe were offering to enter into a guarantee in terms of the guarantee.

It is not uncommon for parties to legal documents to fail to complete all parts of the document. The failure to complete the Schedule could easily be regarded as an oversight. In the circumstances, the failure to complete the Schedule did not detract in any way from the force of the other circumstances, leading to the conclusion that Mr Monz and Ms Rawcliffe were offering to Bianco to enter into the guarantee.

It follows from this that if they are to be taken to have executed the guarantee, the fact that an employee of Bianco completed the Schedule is neither here nor there. The completion of the Schedule did not involve a material alteration to the guarantee. The guarantee was complete and effective even if the Schedule was left blank. The court was entitled to have regard to the surrounding circumstances to identify the customer and the persons executing the guarantee. Those circumstances identify Rams as the customer and Mr Monz and Ms Rawcliffe as the persons offering to enter into the guarantee. There is no reason to think that Rams was making that offer.

That leaves the question of whether, again considering the matter objectively, the guarantee was executed by Mr Monz and Ms Rawcliffe in their personal capacity. For the reasons given by Lander J, the court was not confined to a consideration of the attestation clause standing alone. The court was entitled to have regard to the fact that the guarantee was provided to Bianco with the application, and to have regard to the circumstances in which or the basis on which those documents were provided to Bianco. The court was in any event entitled to have regard to the fact that Mr Monz and Ms Rawcliffe had signed the guarantee as a deed, suggesting that they were offering to be bound by its terms. It was open to the court to conclude in any event that the affixing of the company seal, in the space above Ms Rawcliffe's signature and below Mr Monz's signature, could be regarded as mere surplusage, probably attributable to some confusion about the need to link Rams in some way to the guarantee.

When the circumstances are viewed objectively, there is no basis for disturbing the conclusion that Mr Monz and Ms Rawcliffe executed the guarantee in their personal capacity, and are to be treated as having offered to Bianco to enter into the guarantee in consideration of Bianco agreeing to provide goods and services on credit to Rams.

For those reasons I agree with the conclusion reached by the District Court Judge. The appeal should be dismissed.

This is an appeal by a defendant to proceedings brought in the District Court in which a District Court Judge entered judgment for the plaintiff against the appellant in the sum of $71,777.75.

The respondent brought proceedings against three defendants, Rams Developments Pty Ltd (Rams), Mr Stephen Monz and the appellant. Mr Monz and the appellant were directors of Rams. It claimed that Rams was indebted to it in the sum of $56,093.90 for goods and services which the respondent had provided to it. It claimed that the second defendant and the appellant were liable to it upon a guarantee made in writing dated 27 March 1997, in which the respondent claimed Mr Monz and the appellant had guaranteed Rams' debt.

Despite what was said by the appellant's counsel, Mr Manetta, there was only one issue in the trial. The only matter raised in the appellant's further amended defence was:

"(2) The defendants admit executing a document on 27 March 1997 but state that they executed the document in their capacity as directors of RAMS Developments Pty Ltd ("RAMS") and affixed the common seal of the company to the Guarantee to record the status by which they executed it and accordingly deny that the guaranteed (sic) with the plaintiff that they would be answerable and responsible to the plaintiff for due payment of all moneys as may become payable to the plaintiff by RAMS."

It was conceded that Rams was indebted to the respondent in the amount claimed. It was further conceded that Rams had not paid that debt. It was conceded that a document had been executed on 27 March 1997 by Mr Monz and the appellant. The sole issue was whether Mr Monz and the appellant had executed the document in their capacity as directors of Rams or whether they had executed the document intending to guarantee Rams' debt to the respondent.

During argument on this appeal Mr Manetta claimed that the appellant was entitled to avoid any liability under the guarantee, because after executing the guarantee there had been a material alteration to it which made the guarantee void.

The appellant had not pleaded material alteration as a defence. There was no reference to material alteration in the notice of appeal. The appellant's outline of argument on this appeal did not refer to this argument. Notwithstanding those matters Mr Manetta claimed that material alteration had been a live issue at the trial. He sought leave to amend the appellant's notice of appeal to allege that the trial judge should have found that the guarantee was void, on the ground of material alteration subsequent to the execution of the guarantee. The application was opposed.

The Court did not rule on the application to amend the notice of appeal but reserved its decision on the application until such time as the parties had been heard on that issue and the other issue raised on the appeal.

No application was made to amend the appellant's defence to raise this plea. Mr Manetta claimed that a reading of counsels' addresses shows that the question of a material alteration was a live issue at trial.

I have read counsel's addresses and, in my opinion, the issue was not raised in addresses or was not raised with sufficient clarity to put the respondent on notice that the appellant sought to avoid the guarantee on this ground.

The trial judge could not have understood this matter to be a live issue. The trial judge gave comprehensive reasons for his decision but did not address the argument in his reasons.

In his argument on this appeal, Mr Manetta also submitted that the contract was void because it was unintelligible. He said that the absence of a reference to the customer and to the guarantors in the schedule to the guarantee rendered the guarantee incomplete and therefore unintelligible.

This again was a matter which had not been pleaded. However, Mr Manetta said that it was a matter raised in the appellant's notice of appeal. He submitted that because the notice of appeal claimed that the learned judge erred in law, in finding that the guarantee constituted a valid contract, it was sufficient to raise this matter on this appeal.

I cannot agree with that submission. In my opinion, the claim that the contract was unintelligible and therefore ineffective was not raised in the notice of appeal. The general claim in the notice of the appeal, that the trial judge erred in his finding the guarantee valid, must be read against the pleadings and the trial judge's reasons. The trial judge did not address this issue in his reasons. Again it was not raised in the appellant's outline of argument.

Mr Manetta said that a party was not bound by its outline of argument. Of course that is the case, but the fact that the outline of argument does not refer to this matter reinforces my opinion that the notice of appeal does not include a reference to it.

Mr Manetta persisted with his submission that this Court should find the contract to be unintelligible and ineffective and therefore not binding upon his client, but he made no attempt to seek leave to amend the notice of appeal or indeed the pleadings.

It is apparently necessary from the outset to repeat matters which, in my opinion, are basic to a trial and an appeal.

A trial is governed by the pleadings. Pleadings are the manner in which the issues in dispute are defined. The pleadings also form the structure upon which the case is conducted and in particular define the issues which regulate discovery and the admissibility of evidence. The pleadings also form a record of the matter which the Court has been called upon to decide. Pleadings are therefore relevant in any subsequent proceedings in which res judicata or issue estoppel are claimed.

A most important function of pleadings is to give the opposing party fair notice of the party's claim or defence. Rules of Court (the Rules) are made for the purpose of regulating the manner in which litigation will be conducted. The primary function of the Rules is to ensure that the parties are accorded procedural fairness. A party can only be accorded procedural fairness if the party is aware of the substance of the opposing party's case, so as to have fair notice of the other party's claim or defence. That is why most litigation is conducted by way of exchange of pleadings. The Rules require a defendant to plead the material facts relied upon to constitute any ground of defence, any defences in law, any statutory provisions relied upon and most importantly any material facts as are necessary to give the plaintiff fair notice of the defendant's case: r 46A.05(2).

The respondent was entitled to be put on notice, in the further amended defence, that it was the appellant's case that the guarantee was unintelligible because the schedule had not been completed when executed; and/or had been materially altered after its execution by the schedule being completed; and as a result of either or both of those matters the guarantee was void and unenforceable.

It is not permissible for a party to raise, for the first time, in the party's address in the trial, defences which have not been pleaded and of which the plaintiff has not been given notice. It is certainly not permissible to adopt such a course without first seeking to amend the pleadings so that the opposing party can understand how it is that the defences are advanced. In this case I do not think that the matters were raised with sufficient clarity or particularity in the appellant's address to put anyone, including the Judge on notice of the appellant's arguments.

Mr Manetta said that a party was entitled, in the party's address, to rely upon any evidence which has been admitted in the trial and to any relief which may be available in accordance with the evidence given without reference to the pleadings. I think in making that submission he was relying on r 46.04(4).

"(4) (a) At the trial, subject to subrule (b) hereof, the court:

(i) shall grant all such relief on any cause of action to which the parties might be entitled on the evidence whether or not the relief granted is expressly requested in the pleadings;

(ii) will apply the rules as to admissibility of evidence, insofar as they require a consideration of the issues raised on the pleadings, without undue technicality and with regard to the substantial merits of the case, and, while having regard to the issues raised on the pleadings, will not refuse to admit an item of evidence solely on the ground that it relates to facts or matters not expressly pleaded;

(b) nothing in subrule (a) hereof allows the court to grant relief or admit evidence if to do so would infringe the principles of caseflow management as set out in Rule 2 or if by reason of surprise, the course of the trial or for any other reason, it would otherwise be unfair to do so."

Whilst the Court has power to admit evidence which would be outside the issues raised in the pleadings it will not do so where such a course would be unfair. Nor will a court grant relief to a party which has not been sought in the pleadings where it would be unfair so to do.

The very purpose of the Rules is to ensure that all of the parties to the litigation are accorded procedural fairness. Their role is to assist in the attainment of justice and not to frustrate justice by allowing parties forensic advantages. Fairness requires the parties to comply with the Rules. The courts have an obligation to ensure the parties comply with the Rules so that all parties are accorded natural justice and are treated equally and fairly.

In this case, the appellant gave no notice of the matter which she now seeks to advance by way of amendment to the notice of appeal, or the other matter which she claims is included in the notice of appeal. To allow the appellant to raise those matters at this stage would be to deny the respondent procedural fairness.

A notice of appeal must be drawn so as to give sufficient particularity to the proposed respondent and the Court of the matters which are to be raised on the appeal. The notice of appeal should include grounds of appeal which enable this court and the respondent to know what points are being relied upon to support each ground: r 95.01(1). It is not permissible to draw a notice of appeal in general terms so that the opposing party and the Court cannot understand the matters which are to be advanced. The notice of appeal ought to identify the particular error made by the trial judge and, if necessary, indicate how it is that the trial judge should have proceeded. Again, so as to ensure procedural fairness, care must be taken that the grounds of appeal unambiguously indicate the issues sought to be agitated on the appeal. Any order sought on appeal by the appellant must be included: r 95.02(1)(d).

Parties ought to understand that they will be bound by their notice of appeal and will not be allowed to advance arguments not raised in the notice unless they obtain leave to amend the notice of appeal.

Leave will not be given if it will occasion the other party irreparable prejudice and it may be given upon terms, one of which may be that the party or the party's legal adviser might have to pay the costs thrown away by the amendment.

In this case I would refuse leave to amend the notice of appeal to claim a material alteration not because the amendment would cause any prejudice to the respondent, because no prejudice was claimed. I would refuse leave because the point is without substance. I would also refuse leave, if it were sought, to allow the appellant to argue that the guarantee was unintelligible for the same reason, because it also lacks substance. Both matters have no prospect of success. It will become apparent in the reasons that follow why I believe those arguments lack merit.

I therefore do not need to consider whether leave should be refused for any other reason.

The trial judge found that the Mr Monz and the appellant had intended to guarantee Rams' debt to the respondent and that they were therefore liable under that guarantee to the respondent.

On this appeal the appellant claims that the trial judge erred in finding that the guarantee constituted a valid contract binding on the appellant. The appellant asserts that the trial judge should have found that the appellant executed the contract of guarantee in her capacity as a director of Rams and that in those circumstances the guarantee was binding upon Rams but not upon her.

Mr Monz approached the plaintiff on behalf of Rams seeking credit in respect of building supplies and for the hiring of building services.

The respondent sent Rams three documents. The first document was an Account Application which consisted of four pages. It provided for applications for accounts by sole traders/partnerships/trade accounts, personal accounts or company accounts.

It included a questionnaire which had to be answered whoever the applicant was. The Account Application included the terms and conditions of the account, which are unimportant in a consideration of this case, and it provided for the signature by the applicant or the applicant's authorised representative.

On the fourth page of the Account Application there was provision for the applicant to sign and for the respondent to accept the application and to approve the account.

When executed by the applicant the Account Application amounted to an offer to the respondent to open an account on the terms and conditions included in the account.

The questionnaire which, as I have said, had to be completed by the applicant, whoever it might be, sought information relating to the applicant's assets and the structure of its business including whether or not the applicant was the trustee of a discretionary trust and whether the applicant would make the trust deed available.

"NAME OF ANY DIRECTOR OR SHAREHOLDER TO GIVE PERSONAL GUARANTEE IF CALLED UPON TO DO SO."

It then provided a space for the names of two persons.

The second document which was sent was a Notice of Disclosure of the Applicant's Credit Information to a Credit Reporting Agency. That document required the signature of the applicant so that the respondent could obtain personal information about the applicant pursuant to s 18E(8)(c) of the Privacy Act 1988 (Cth). That document is unimportant.

The third document was a guarantee and headed "Guarantee" and was addressed to the respondent.

The opening words of the guarantee were in the following form:

"In consideration of Bianco agreeing to supply goods, on such terms as it may in its absolute discretion think fit, to the Customer (being the party or parties named and described in item 1 of the schedule hereto) the Guarantor (being the party or parties named and described in item 2 of the schedule hereto) AGREES as follows;"

The guarantee then makes it clear that the guarantor or guarantors are guaranteeing all monies payable for such goods and services as the respondent may supply to the customer.

The second page of the guarantee identifies the document as a deed and allows for three separate signatures to the deed by the guarantors, each signature to be appended in the presence of a witness. Provision is made for the witness' address.

Item 1 provides for the name and address of the customer and allows for inclusion of that information.

Item 2 provides for the names and addresses of all persons executing the guarantee and again provides for a place for the inclusion of that information.

When the documents were sent by the respondent to Rams they only included the printing on the documents and none of the information which was subsequently placed upon it, in hand writing, was on the documents.

The documents were received by the Mr Monz sometime in March 1997 and he completed the information on the Account Application. In error he completed the Application under the heading 'Sole Trader'. He later crossed that information out and then completed the application as a 'Company Account'. In that part of the application he identified himself and the appellant as directors.

He also completed the questionnaire and relevantly completed that part of the questionnaire, seeking the names of any directors to give personal guarantees if called upon to do so, and did so by including his name and the appellant's. In completing the questionnaire Mr Monz stated that the company would require $2,000 purchases each month. He executed the application in the presence of a witness. The appellant also signed the application as the applicant's partner.

Subsequently the respondent accepted the application and the acceptance was noted by Ms Barbaro signing the application on 11 April 1997 and ascribing an account number to the application.

Mrs Barbaro attached her signature to the Account Application after the Account Application had been returned to the respondent.

Mr Monz also signed the Notice of Disclosure of Credit Information.

The guarantee was signed in the following form:

It can be seen that both Mr Monz and the appellant signed in the place appropriate for a person executing a deed. It can also be seen that their signatures were witnessed, in Mr Monz' case by the appellant, and in the appellant's case by Leanne Pryor.

However, someone has placed the common seal on the document between the signatures of the directors of the Company.

The schedule to the guarantee did not include the name and address of the customer or the names and addresses of the persons executing the guarantee before or at the time that the guarantee was executed. An officer of the respondent filled out the details in that schedule. That must have occurred after the return of the documents to the respondent.

After the return of those documents to the respondent, under "Item 1", an officer of the respondent has included these words:

The trial judge was satisfied that all three documents were returned by Mr Monz to the respondent at the same time.

It is the appellant's submission that because the schedule was blank at the time that it was executed the guarantee is unintelligible and therefore void. Next she argued, which as I have said, was the only issue in the court below, that the guarantee was not executed by Mr Monz and herself in their personal capacity but was witnessed by them as directors at the time that the common seal of the company was affixed. Thus, it is argued the guarantee was given by Rams. Lastly, it is argued that because Items 1 and 2 of the schedule were filled out after the execution of the guarantee and the return of the guarantee to the respondent there has been a material alteration to the Deed.

In my opinion, the three documents were provided by the respondent to Rams in order that Rams might make an application to open an account. The documents were provided to Rams for the specific purpose that Rams might make an offer to the respondent. The guarantee was provided to Rams so that the directors or shareholders who were identified in the questionnaire could give a personal guarantee. In other words the respondent was calling upon the persons nominated in the questionnaire to give a personal guarantee.

When the documents were returned by Rams, through the agency of Mr Monz, Rams was making an offer to the respondent to open an account. In my opinion, the directors, Mr Monz and the appellant, were offering to guarantee the account if the respondent accepted the offer made by Rams. In a sense I have prejudged the second issue but, for reasons which I will come to, there is no doubt in my mind that the guarantee was executed by Mr Monz and the appellant in their personal capacity and was not witnessed by them as directors on the affixation of Rams' common seal.

When the documents are read together it is clear that the customer referred to in Item 1 of the schedule is in fact Rams and that the guarantors referred to in Item 2 of the schedule are Mr Monz and the appellant. The guarantee is not unintelligible.

The respondent accepted Rams' application and did so by Mrs Barbaro signing the account application on 11 April 1997.

If I am right, that the guarantee was executed by Mr Monz and the appellant in their personal capacity, then it would follow that the inclusion of their names in Item 2 of the schedule does not amount to a material alteration to the guarantee. That is because the guarantee contemplated that they were the guarantors. If I am right that when the documents are read together that it is clear that the customer referred to in Item 1 of the first schedule is Rams, again the inclusion of that information in Item 1 does not amount to a material alteration to the Deed because Rams is in fact the customer referred to in that item of the schedule: Wood v Slack (1868) LR 3 QB 379.

It would follow then on those findings that, upon the assumption that the guarantee was signed by Mr Monz and the appellant in their personal capacity, the other arguments alluded to by Mr Manetta have to fail.

It further follows that the real issue on this appeal, as it was in the trial, is whether Mr Monz and the appellant did sign in their personal capacity.

The appellant's case is that the appellants deliberately witnessed the guarantee so that the Rams guaranteed its own obligations to the respondent. Mr Monz and the appellant both claimed that the document which has been executed represents the agreement which they believed they executed on behalf of the first defendant, Rams.

The question in this case was whether or not the trial judge was right to conclude that Mr Monz and the appellant intended to guarantee Rams' debt at the time that they executed the Deed. The appellant submitted that in making that decision the trial judge was not entitled to have regard to any extrinsic evidence and was bound to answer that question by reference only to the document itself, and indeed only the attestation clause of the contract.

In my opinion, that submission must be rejected.

In my opinion, there was an ambiguity on the face of the document. The ambiguity arose because of the nature of the contract and its execution. Commercially it was unrealistic to think that a company would execute a contract by which it guaranteed its own performance. Thus, the ambiguity arose when the defendants asserted that their signatures were affixed to the contract as witnesses to the execution of the common seal.

Extrinsic evidence is admissible if there is an ambiguity. In White and Another v Australian and New Zealand Theatres Limited [1943] HCA 6; (1943) 67 CLR 266 at 270-271 Latham CJ said:

"The contract does not specify the nature of the professional services which the company hired and which the plaintiffs undertook to perform. It was therefore not only proper, but, indeed, necessary, to identify such services by means of extrinsic evidence. The law upon this subject was summarised by Isaacs J in Bacchus Marsh Concentrated Milk Co. Ltd. v Joseph Nathan & Co. Ltd. (1919) 26 CLR [410] at 427 in the following words: "It is not legitimate to refer to such" (that is, extrinsic) "evidence either for the purpose of adding a term to the written agreement or of altering its ordinary legal construction, and therefore it is not legitimate to show that it was intended to use words bearing in a different sense from that which the words used express when applied to the circumstances. But it is legitimate to adduce extrinsic evidence of the surrounding circumstances in order to prove that words susceptible of more than one meaning are applicable to one only of those meanings - that is, not to alter the contract to identify its subject. Further, for the purpose of identifying the subject of the contract, prior negotiations are available just as any other circumstance would be. But the prior negotiations cannot be used for the purpose of importing additional or different terms - that is, terms other than the words actually used express when the subject matter is fully identified.' "

Mr Manetta argued that this Court should follow a decision of the Court of Appeal in England in Ariadne Steamship Company Limited v James McKelvie and Company [1922] 1 KB 518 especially the reasons for decision of Atkin LJ.

In that case the question was whether a party had signed a Charterparty as a principal or as agent.

The Charterparty in that case described the defendant, James McKelvie & Company as the Charterers. A number of terms referred to the Charterer's rights and obligations. The Charterparty was signed:

"For and on behalf of James McKelvie & Co (as agents)(s) J.A.McK"

The majority decided that the defendants had signed as agents and were not liable as principals notwithstanding that in the contract itself they had been described as Charterers, not as agents for the Charterers.

"My own view is that is a sound rule of construction, applicable to cases like the present, that where the signature is unqualified the presumption is the agent is personally liable, but that where sufficient words of qualification are annexed to the signature to indicate that the person signing signs as agent the presumption is the other way. No doubt the presumption in either case may be rebutted, and it must always be a question of construction merely whether, taking the document as a whole the presumption is or is not rebutted. This view is, I think, quite in accordance with the decided cases, some of which are decisions in reference to charterparties and some in reference to contracts in writing other than charterparties.

"Prima facie the persons liable on a written contract, the parties to it, should be discovered from the writing itself."

96. His Lordship identified exceptions to that rule, for example where evidence is given to bind an undisclosed principal or evidence led to prove that a person stated as a party to an agreement had been discharged by agreement between the parties.

97. Atkin LJ, who formed the majority with Bankes LJ said at 534-536:

"In the present case the dispute arises over a charterparty, but a charterparty differs not from any other contract in respect of the principles applying to its formation and construction and I apprehend the dispute must be determined on principles common to contracts as a whole. A contract in writing appears to be a term capable of more than one meaning. The parties may agree verbally and subsequently may reduce the terms of their agreement into writing. If that is their intention the terms can only be ascertained by the construction of the writing. The assent of the parties to those terms, if they have not signed the document, may be proved by parol evidence. If the parties have signed it, or if the document itself constitutes the contract - i.e., if the parties only arrive at a consensus ad idem by assenting to the written terms by adding their signature as a part of the document - their assent is conclusively proved by the signature. The terms of the contract to which they have assented will be ascertained from the body of the document. One of the material terms is the identity of the parties between whom it is made, and this term may be only apparent from the signature. '"We mutually agree, etc., signed A. and B.' shows that the parties to the agreement are the two signatories. But when the assent of the party sought to be charged is proved, it matters not what the terms of the contract expressed in the body of the document may be. Signature unconditionally appended is proof of unconditional assent to the terms recorded in the body of the contract. If the body of the contract records that the signer is a party, or leaves the name of the party to be inferred from the signature, the signature will be proof that the signer has assented to a contract made with him. The contract may, however, record that the contract is made between A. and B. acting by his agent C. and may be signed by C., in which case C. has assented to a contract between A. and not C., in which case C. has assented to a contract between A. and not C. but C.'s principal B. But the assent signified by the signature may be qualified so as to show that the signer is not assenting unconditionally to the contract, but is assenting in a representative capacity on behalf of a principal. 'B. by C. his attorney' written by C. is plainly an assent only by B. 'C. on behalf of B.' is, I think, equally plainly an assent of C. to the contract not so as to bind himself but to bind B. If the assent to the contract clearly appears from the form of the signature to be qualified, it appears to me to be impossible to charge the signer on the footing that there is an unqualified assent by him. Thus in the two instances given above, 'B. by C. his attorney,' or 'C. on behalf of B.,' it would seem irrelevant that the body of the contract expressed the contract to be made between A. and C. C. has not assented to such a contract. On the other hand the party signing may append words to his signature which leave it doubtful whether he intends an unqualified assent; e.g., C. may sign, 'C. broker,' or 'C. agent.' In such a case you must look to the body of the contract to see whether C. was intended to be a party or not. If the contract does not purport to be made with him, but with some one else, or uses words which make it plain that the only contracting party is C.'s principal, disclosed or undisclosed, C. will not be chargeable."

"I think, therefore, that the defendants in this case who were conceded below to have signed as agents, and whose signature, on looking at the original, I consider to be in that form, plural and not singular, were not personally liable on the contract. But if the distinction between the signature as recording assent and the body of the contract as recording the terms is not well founded, I agree entirely with the judgment of Bankes L.J. in holding that on the construction of the document as a whole the same result is arrived at."

Mr Manetta submitted that this Court should follow the dicta of Atkin LJ and determine the issue of capacity by reference only to the attestation clause guarantee itself.

In the alternative he submitted this court could not have regard to any more than the deed of guarantee itself and in no circumstances could it have regard to any extrinsic evidence.

If Atkin LJ must be understood as saying that in no circumstances, even where there is an ambiguity, can a Court go outside the written contract to determine the capacity in which the parties have executed the contract, that decision is not consistent with the authority to which I have referred and has not been followed by later authority, except perhaps in one case.

That decision was appealed to the House of Lords: Universal Steam Navigation Company Ltd v James McKelvie & Company [1923] A.C. 492. The decision of the Court of Appeal was affirmed but in the speeches of some of their Lordships subject to qualification. In particular Lord Sumner with whom Lord Birkenhead agreed, said at 499-500 after referring to the reasons of Atkin LJ:

"My Lords, for myself, I can hardly go so far as this. I agree that for many years past it has, I believe, been generally understood in business, that to add 'as agents' to the signature is all that is necessary to save a party, signing for a principal, from personal liability on the contract, and I agree also that, even as a matter of construction, when a signature so qualified is attached to a general printed form with blanks filled in ad hoc, preponderant importance attaches to the qualification in comparison with printed clauses or even with manuscript insertions in the form. It still, however, remains true, that the qualifying words 'as agents' are a part of the contract and must be construed with the rest of it."

Viscount Cave LC, without referring to the dictum of Atkin LJ, concluded that the words "as agents" limited the capacity in which the respondents had signed the Charterparty. That also seems to be the reason for the decision of Lord Shaw who appears mainly to have agreed with the reasons of Bankes LJ. Lord Parmoor expressly approved Atkin LJ's reasoning.

In my opinion, however, there is no general endorsement of Atkin LJ's reasoning in the House of Lords.

Lord Goddard CJ referred to Atkin LJ's dicta with approval in Lester v Balfour Williamson Merchant Shippers Ltd [1953] 2 QB 168 at 175. In that case the question was whether the respondents to the appeal had entered in the contracts as principals or agents for disclosed principals. The Court concluded that notwithstanding the respondents had not signed as agents the body of the contract showed they were in fact agents for a disclosed principal. Lord Goddard CJ said at 175:

"It has been argued that because the respondents did not sign the contract 'as agents' they could not be heard to say that they sold only as agents. One hundred years ago, when Lennard v Robinson [1855] EngR 503; (1855) 5 E & B 125 was decided, that might have been a very good argument, but the law has moved a long way since then. The House of Lords has said expressly that Lennard v Robinson [supra] is not correct law, and it seems to me that now the cases show that the question is whether the person signing as seller or buyer, or whatever it may be, is signing as principal or whether he is signing as agent. It does not matter whether the qualification of his liability, if he be only an agent, is found in the body of the document, or whether it is found in words added after the signature."

The Lord Chief Justice then referred to Atkin LJ's dicta as putting the matter very clearly.

In Tudor Marine Ltd v Tradax Export SA [1976] 2 Lloyds Rep 135 Megaw LJ said at 143:

"But as Counsel for Tradax rightly stresses, the contractual documents do not stop there; and the law requires that all relevant contractual provisions, wherever they may appear in the written contractual documents, should be looked at and taken into account when a question arises whether a person named in a contract - charter-party or otherwise - is a principal party to the contract, or is an agent; and, if an agent, whether he also has in law liabilities under the contract. You do not look at one part of the contract only; for example, the signature. You weigh anything that may be relevant in any part of the contractual provisions and documents."

"I accept Mr Saville's contention founded on Gadd v Houghton (1876) 1 LR ExD 357, and other authorities to the effect that the status and capacity of the asserted or purported parties to a contract is to be determined by reference to the provisions of the contract looked at in its entirety. It is not sufficient, and it is certainly not conclusive, to have regard only to the terms in which the actual signatories to the contract are described, or to the fact that no qualifying description of their status accompanies their signatures."

There is no doubt that the English cases to which I have referred means that Mr Manetta's first submission has to be rejected. At the very least on the authorities already discussed the trial judge was entitled and indeed obliged to have regard to the guarantee as a whole.

However, in my opinion, the trial judge was also entitled to have regard to the surrounding circumstances and, in this case, to the other documents which were executed contemporaneously with the guarantee.

Clarke J, sitting in the NSW Supreme Court, followed Atkin LJ in National Commercial Banking Corp of Australia Ltd v Cheung & Anor (1983) 1 ACLC 1326 and said at 1331:

"In my opinion the distinction averted to by Atkin LJ is, despite the reservations of Lord Shaw (sic) and Lord Birkenhead correct in principle. Like Goddard CJ I am guided by it."

That case has itself been considered together with the reasons for the decision of Atkin LJ in a number of further cases in the Supreme Court of New South Wales.

In Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd [1984] SCNSW; BC8400352 (unreported, Foster J, 11 April 1984). The trial judge assumed that it was permissible to go beyond the words of signature and attestation provisions and to have regard to the other terms of the contract and the surrounding circumstances to determine the capacity in which a party had signed a contract. That case was considered on appeal, sub nomine Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909.

In that case the appellant company was an insurer which employed agents. The second respondent desired to become an agent. He and his wife were directors of a company through which he conducted his insurance business. The appellant consented to the appointment of the company as its agent, but upon the condition that the second respondent and his wife would give personal guarantees. In due course a written agency agreement was executed by the company under common seal and witnessed by the second respondent and his wife. The agreement contained the personal indemnity provision to which I have referred but this provision was mistakenly executed by the company in the same way as the main agreement was executed.

The appellant brought proceedings against the second respondent and his wife on the basis of the indemnity claiming that the indemnity had been given in their personal capacity.

Kirby P referred to a lively controversy in the law concerning the approach to be taken in the execution of a document where, on the face of the contract, the party executed it signifies a limitation upon the measure of assent to be derived from his signature (at 913).

He referred to Atkin LJ's dicta and Clark J's decision in National Commercial Banking Corp of Australia Ltd v Cheung & Anor (supra) and said that his inclination was in favour of the view expressed by Lord Sumner in Universal Steam Navigation Company Limited v James McKelvie and Company (supra).

He then construed the document by reference to a consideration of the whole of the agreement.

Mahoney JA concluded that the facts required an assessment of the director's intentions as to whether the document would operate as their document. By implication he rejected Atkins LJ's approach. He had regard to the surrounding circumstances in construing the agreement.

McHugh JA doubted Atkin LJ's reasons in Ariadne Steamship Company Limited v James McKelvie and Company (supra) and concluded that the contents of the document and the surrounding circumstances could be examined to determine whether the signatory was bound even though a qualification attached to the signature.

"The present case, therefore, depends on what the parties did and not on what they intended to do when they signed the Indemnity and the Agency Agreement. And what they did depends on the construction to be placed on the documents which they signed. A commercial document, however, must be construed in its commercial setting - in accordance with the surrounding circumstances known to the parties: Codelfa Constructions Pty Ltd v SRA of NSW (1982) 149 CLR 377 at 352-353. This is so whether the issues concerns construction in the strict sense or whether, as here, the issue concerns the capacity in which a person signs a document. There is, however, a dictum of Atkin LJ in Ariadne Steamship Co Ltd v James McKelvie & Co [1922] 1 KB 518 at 536 to the effect that, if a person signs a document " 'B by C his attorney', or 'C on behalf of B', it would seem irrelevant that the body of the contract expressed the contract to be made between A and C". The respondents rely on this dictum to circumscribe the inquiry before the court. You cannot go, they say, beyond the words "on behalf of" Reg Austin Insurances Pty Ltd. When the Ariadne case went to the House of Lords, Lord Sumner and the Earl of Birkenhead had reservations about the accuracy of Atkin LJ's dictum: Universal Steam Navigation Co v James McKelvie & Co [1923] AC 492 at 497 and 499. But if that dictum is correct I think that it should be confined to the special case of the agent who signs for an undisclosed principal. It cannot be accepted as applicable in all cases. In some cases the contents of a document may indicate that the signatory is bound even though a qualification attaches to his signature. Expressly or by implication the body of the document may make it plain that the signatory is a party to the contract. In the examples given by Atkin LJ, it would usually follow that there was no liability on the part of the person signing. But this is because the express disavowal of responsibility in those examples is so strong that no other consideration, based on the terms of the document, can overcome it. In other cases, however, the qualification to the signature may be overcome by the terms of the document and the surrounding circumstances. In the end the decision must depend upon the terms of the document including the qualification attaching to the signature together with the surrounding circumstances. This is a question of fact, not of law."

122. Between the time of the decision at first instance and the Court of Appeal giving judgment in the appeal in Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (supra) Wood J considered and decided a similar point in NEC Information Systems Australia Pty Ltd v John Linton [1985] SCNSW; BC 8500877 (unreported, Wood J, 17 April 1985). He said, speaking of Foster J's decision at 5:

"In (Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Limited (unreported 11 April 1984), Foster J took a somewhat different approach although the result for the plaintiff was the same. His Honour was prepared to assume, without deciding, that it was permissible to go beyond the words of signature and the attestation provisions, and to have regard to the terms of the document and the surrounding circumstances. In his view, the wording of the signature and the attestation provisions, combined with what actually occurred at the signing, gave the clearest possible indication that the defendants were not executing the document in a personal capacity. The decision is one on its facts, assuming in favour of the defendant, although without deciding, the question of law that arises."

123. His Honour then considered a number of cases including Young v Schuler (1883) 11 QBD 651, Ariardne Steamship Co Ltd v James McKelvie & Co (supra) and Tudor Marine Ltd v Tradax Export SA (supra) and other cases.

"The decisions to which I have referred, and in particular the passages cited by Clarke J, emphasise the need to bear in mind the differences which may arise depending on whether the contract is signed by a person unconditionally and without qualification, or with an expressed qualification showing that his assent is not unconditional but made on behalf of another, or with words appended which leave it doubtful whether a qualified or unqualified assent is intended. I do not read the dicta of Atkin LJ, the passages in the speeches in the House of Lords in Universal Steam Navigation Company: or the passages in the judgment of Lord Goddard CJ, in Lester v Balfour Williamson Merchant Shippers [1953] 2 QB 168, as excluding reference to the surrounding circumstances or to the terms of the document, when consideration is given to the manner of execution of a document. I do not think that Clarke J intended the contrary. Rather, it appears to me that his Honour was at pains to reject the proposition that the answer could be determined by simply disregarding any qualifications affixed to a signature out of accord with the body of the contract. Although his Honour did use language suggesting that the question was not one of construction, and that regard should be had only to the actual signature placed on the document, I do not think that this was intended as a general statement of principle. The test propounded in the passages in his judgment which I have set out earlier, to my mind involves his acceptance of a wider inquiry in appropriate cases in determining what was the objective intention of the parties.

I have accordingly reached the conclusion that the question in the present case is not to be determined by regard solely to the attestation clause and the actual signature placed on the document. In my assessment, the weight of authority favours the view that the question remains one of construction. As a result, despite the presumption attached to the actual signatures and the presence of the common seal, I consider that regard should be had to the remaining provisions of the deed, and to the circumstances surrounding its execution. The inquiry to be made by reference to these matters concerns what the parties must objectively and fairly be understood to have intended by the document once executed. Evidence of subjective intention is to be disregarded."

In my opinion, the last paragraph cited from His Honour's judgment correctly states the law.

In Clarke Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd and Others (1989) 21 NSWLR 160 Giles J refused to follow the previous decision of National Commercial Banking Corp of Australia Ltd v Cheung & Anor (supra). He said at 174:

"In the result, I conclude that the proper approach is to inquire whether there is to be found an intention that the signatory be personally bound to the contract evidenced in the document, meaning thereby not a subjective intention but an intention to be found objectively, notwithstanding a qualification attached to the signature. That intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible. The inquiry is not limited to consideration of the signature and its qualification in order to determine whether or not the signature indicates an assent to be personally bound.

I so conclude because to the extent to which Atkin LJ, and Clarke J adopting what Atkin LJ said, espoused a different approach I do not think that the different approach is in accordance with the weight of authority. The approach I have set out above (in which I am [in] respectful agreement with Wood J) was called for by the weight of authority quite apart from the decision in Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd, and that decision not only is consistent therewith but shows an inclination towards (Kirby P) and an express (McHugh JA) or implied (Mahoney JA) acceptance of that approach. I consider also that it is correct in principle. Whether a contract has been made, just as the meaning of a contract when made, is to be determined by seeking objectively the intention of the putative parties or parties; that must be so whether the question is whether a contract was made between A and B, whether a contract was made between A and B or A and C, or whether a contract was made between A and B in addition to A and C. To look only at the signature and any qualification thereto, whilst claiming to seek the objective intention of the parties, would be to throw overboard other possible factors relevant to showing that intention."

Giles J's decision has been followed by Finkelstein J in the Federal Court of Australia in Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067; BC200204931 (unreported, Finkelstein J, 07/08/2002).

With respect, I agree with the decisions of Giles J and Wood J.

The question in this case is the capacity in which the Mr Monz and the appellant signed. That question is answered by determining the objective intention of Mr Monz and the appellant at the time they executed the contract.

In determining that intention regard may be had not only to the attestation clause but also to the document itself and the surrounding circumstances including the accompanying documents.

That approach is consistent with the general principles relating to the construction of documents.

In Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 Mason J said at 352:

"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning."

Because of the ambiguity which I have identified the trial judge was permitted, in my opinion, to have regard to extrinsic evidence.

Where there is an ambiguity as to the capacity in which a party has executed a contract the court may have regard to the surrounding matrix of facts to determine the contracting party. That is only one incident of the wider rule to which Mason J referred in Codelfa Construction Proprietary Limited v State Rail Authority Of New South Wales (supra); Young v Schuler (1883) 11 QB 651; Edwards v Edwards [1918] ArgusLawRp 1; (1918) 24 CLR 312; Mallinson v The Scottish Australian Investment Company Limited [1920] HCA 51; (1920) 28 CLR 66 at 75; Perpetual Trustee Co Ltd v Bligh [1940] NSWStRp 59; (1940) 41 SR (NSW) 33.

In this case it was necessary to determine whether Mr Monz and the appellant executed the contract in their capacity as guarantor or whether they fixed their signatures as witness to the execution of the common seal.

It was therefore necessary to have regard to the matters of facts which surrounded the execution of the document to determine objectively the capacity in which they executed the contract.

The matter could not be resolved by their evidence as to what they intended. Their subjective intention was not relevant in the determination of that issue.

The trial judge found, as a matter of fact, that Mr Monz received the Account Application, the Notice of Disclosure of Credit Information to a Credit Reporting Agency and the Guarantee. He received those documents on 11 March 1997. At that time the appellant was in Queensland on holidays. Mr Monz filled out the documents. He filled out the section which stated that he and the appellant would give a personal guarantee "... if called upon to do so".

The trial judge found that the appellant executed the documents on or after 27 March in the presence of a witness.

Implicitly the trial judge found that the guarantee was executed at that time. He was not able to find if it was Mr Monz or the appellant who affixed the common seal but I think again implicitly he found one or other of them did.

The trial judge found that the contract documents indicate clearly that the Mr Monz and the appellant intended to give a personal guarantee. The Account Application, as has already been observed required the directors to give a personal guarantee if called upon to do so. The fact that the guarantee was then sent to the directors indicated that they had been asked to give the guarantee and the fact that they executed the guarantee, so the trial judge found, showed that they were prepared to do so.

He rejected the suggestion that the guarantee was out of the ordinary. He found that the inclusion of the common seal was of no significance.

In my opinion, the findings of the trial judge were open to him. Mr Monz and the appellant's claim that they executed the guarantee on behalf of the company and in their capacity as directors of the company, if accepted, would mean that they intended (objectively) that the company would guarantee its own obligation to the respondent. As the trial judge observed such a claim meant that the whole transaction lacked commercial reality.

In those circumstances the trial judge was entitled to conclude that the appellant intended to personally guarantee Rams' indebtedness to the respondent. In those circumstances he was right to dismiss the defence.

146. BLEBY J: I agree, for the reasons expressed by Lander J that the appeal should be dismissed.