Between February 2003 and July 2010 each appellant was a director of the Borrower. Between 2004 and 2006 Harjit, Mandhir and Moninderjit were also directors of Shah MS Property Group Pty Ltd (Shah).
Kulwant was a director of the Borrower and the "principal managing executive in the enterprise of property development undertaken by Shah and [the Borrower]". [4] Kulwant worked with Mandhir and Moninderjit in the United Real Estate Agency at Castle Hill (United Real Estate).
The Lenders first met Kulwant in early 2005 when he introduced them to a block of land at Castle Hill which they duly purchased. Moninderjit was one of the vendors of that property. The Lenders subsequently retained United Real Estate to sell their property at Quakers Hill.
In the course of these transactions Kulwant recommended an investment property in Cairns to the Lenders. They purchased the Cairns property, which was "part of Shah's development enterprise", [5] for $280,000. This was the Lenders' second investment property as they already owned a property at Plumpton.
At about this time Kulwant suggested that the Lenders should invest with Shah. He indicated that the return would be 20 per cent per annum and that, accordingly, an investment of $300,000 would earn them $5,000 per month.
Following this conversation, the Lenders obtained two loans from Community First Credit Union, one for $300,000 and one for $140,000. The loans were secured by first mortgages over the Plumpton and Cairns properties.
On 23 June 2005, the Lenders signed a loan agreement with Shah by which they lent Shah $140,000 at an interest rate of 20 per cent per annum. The loan agreement was five pages in length and on its face included a guarantee by Harjit, Mandhir, Moninderjit and Kulwant. There was no dispute that these four guarantors signed the fifth page of the loan agreement with Shah (Exhibit A). However Harjit, Mandhir and Moninderjit maintained that the first four pages of Exhibit A, which incorporated the guarantee, were not in the document when they signed.
On 31 January 2006, the Lenders entered into a second loan agreement with Shah (Exhibit B). By the second agreement, the Lenders agreed to advance $150,000 to Shah at the same interest rate of 20 per cent per annum. This loan agreement included a guarantee by the same four guarantors. Once again there was no dispute that the four guarantors signed the fifth page of Exhibit B, but Harjit, Mandhir and Moninderjit maintained that the document they signed did not incorporate a guarantee.
The Lenders received regular monthly interest payments under each of the loan agreements with Shah.
In mid-2006, Shah changed its name to the Australian Academy of Management & Science Pty Limited (Australian Academy).
In August 2006, Kulwant informed the Lenders that the Borrower intended to invest in property development and that Shah, under its new name, was moving into the provision of education services. At the urging of Kulwant, the Lenders agreed that Shah should repay the amount due to them and that they would reinvest $300,000 with the Borrower at an interest rate of 12 per cent per annum.
At the end of August 2006, cheques amounting to $304,405.28 were deposited into the Lenders' bank account in repayment of the Shah loans.
The primary Judge found that on 11 September 2006, Harjit came to the Lenders' home with two counterparts of the Loan Agreement (Exhibit C). [6] Both counterparts (on his Honour's findings) had already been signed by each of the appellants (and Kulwant) on page 5. The Lenders signed both counterparts in the presence of Harjit and gave one counterpart to him. The counterpart retained by the Lenders became Exhibit C in the District Court proceedings.
The primary Judge found that Harjit, Mandhir and Moninderjit signed the Loan Agreement in the offices of United Real Estate at Kulwant's request. However, his Honour considered that the evidence was "inconsistent" as to whether Sukhdev and Gurmeet signed the Loan Agreement at United Real Estate or elsewhere. [7]
The Lenders received the sum of $70,000 in February 2009 in reduction of the principal. They also received monthly interest payments from the Borrower until May 2009. Thereafter the Borrower failed to make all interest payments and by September 2011 it ceased to make any payments.
On 8 July 2010 Sukhdev wrote a letter addressed to the secretary of the Borrower resigning as a director (Resignation Letter). The Resignation Letter included the following paragraph:
"Following my resignation as a director, I am released from any guarantee I have given in favour of New Ridge Property Group Pty Ltd ACN 100 347 635 and am released from all past, present and future claims relating to the company."
The Resignation Letter was signed by Sukhdev. It was endorsed with an acceptance of Sukhdev's resignation and of the "notation contained within the resignation". The acceptance was signed by Kulwant, Harjit, Mandhir and Moninderjit.
In September 2011 Ignacio informed Kulwant that because of Ignacio's illness the Lenders wanted the loan to the Borrower terminated and all moneys repaid. On 18 March 2012, Mandhir paid the Lenders $20,000 but no further payments were made to them in respect of moneys due under the Loan Agreement.
On 30 June 2013, the Lenders attended a meeting with Harjit and Moninderjit at the offices of Australian Academy. Harjit and Moninderjit presented the Lenders with a two page loan agreement (Exhibit D). The loan agreement was expressed to be between the Lenders and Harjit as "The Borrower". The document presented to the Lenders had been signed on the second page by Harjit, Mandhir and Moninderjit.
The document contained the following provisions:
"• New Ridge Property Group Pty Ltd was engaged in property development projects and has borrowed money from Lenders for property development projects at Northmead NSW. New Ridge Property Group Pty Ltd suffered losses in the property development and is not in a position to repay the loan of the Lenders.
• Harjit Singh being Guarantor of the loan of New Ridge Property Group Pty Ltd is making agreement to repay the principal amount of the loan by taking repayment responsibility on his personal name of the Lenders namely:
Leticia Decastro and Ignacio De Castro … $210,000 (principal amount)
• By signing this loan agreement Harjit Singh being Guarantor of the loan of New Ridge Property Group Pty Ltd and the Lenders … agrees to indemnity and release other three Guarantors namely Kulwant Singh, Moninderjit Singh and Mandhir Singh Sandha from any liability as Guarantor from these Lenders of the loan for New Ridge Property Group Pty Ltd.
• Other two Guarantors of New Ridge Property Group Pty Ltd namely Sukhdev Singh Dhaliwal and Gurmeet Singh Brar are not party to this arrangement. So they remain liable to repay as Guarantor of the loan for New Ridge Property Group and Lenders … and these lenders are free to take any action against them if they fail to meet their obligation."
The Lenders did not execute the document.
[2]
The Loan Agreement
The Blue Appeal Books contain a copy of the Loan Agreement (with one page duplicated). The parties did not ask the Court to examine the original Loan Agreement (Exhibit C).
The first page of the Loan Agreement identifies the parties as the Lenders, the Borrower and six "Guarantors", namely (in order of naming) Harjit, Gurmeet, Kulwant, Moninderjit, Mandhir and Sukhdev.
The second page records that the Loan Agreement is between the Borrower and:
"the party whose names appear in Item 4 of the schedule ('the Guarantors')".
No reference is made at this point in the document to the Lenders.
The second page of the Loan Agreement also contains the following recitals:
"A. The lender has at the request of the Borrower agreed to make an advance to the borrower
B. The Guarantors have agreed to guarantee the repayment of the loan and the obligations of the Borrower pursuant to this Agreement to the lender"
The substantive provisions of the Loan Agreement are set out on the second, third and fourth pages. The provisions commence with a clause numbered 1.29. The numbering proceeds in a haphazard manner as follows:
1.29 - 1.35
1.8
21.9.1
22-26
It can be inferred that whoever compiled the Loan Agreement (probably Kulwant) cut and pasted clauses from other documents.
The operative provisions of the Loan Agreement include clauses to the following effect:
the Lenders agree to lend the Borrower the sum of $300,000 for the period set out in Item 6 of the Schedule (cl 1.29);
the Borrower covenants to repay the loan at the expiration of the period, provided that if the Lenders do not give three months written notice prior to the expiration of each twelve month period, the loan will be automatically renewed (cl 1.30);
the Borrower agrees to pay the Lenders interest on the outstanding balance at the rate set out in Item 7 of the Schedule, namely 12 per cent per annum (cl 1.31);
in consideration of the covenants in the Loan Agreement and of the Lenders having advanced the loan to the Borrower at their request, the Guarantors jointly and severally guarantee to the Lenders the due and prompt performance by the Borrower of its covenants and obligations (cl 1.34); and
the Guarantors undertake in "respect of the guarantee contained in clause 5.1 [sic]", that the guarantee is a continuing guarantee (cl 1.35(a)).
The Schedule to the Loan Agreement is on page 4. Item 4 of the Schedule, which identifies the Guarantors, contains the names (in this order) of Harjit, Gurmeet, Kulwant, Mandhir, Moninderjit and Sukhdev.
The fifth page of the Loan Agreement is reproduced below:
Although Exhibit C does not include the signatures of the Lenders there was no dispute that they signed a counterpart of the Loan Agreement.
[3]
Primary Judgment
The primary Judge noted that the appellants identified the central issue for determination to be: [8]
"Whether the loan agreement dated 11 September 2006 relied upon by the plaintiffs [was] the actual loan agreement executed by the defendants?"
His Honour also noted that the third to fifth defendants (Harjit, Mandhir and Moninderjit) conceded that their signatures appeared on page 5 of the Loan Agreement. [9]
The primary Judge addressed the critical issue insofar as it concerned Sukhdev and Gurmeet (the sixth and seventh defendants) as follows: [10]
"[7] [Sukhdev] by his Statement of Issues concedes that the signature on page 5 above his name 'resembles his usual signature' but then inconsistently states; '[Sukhdev and Gurmeet] categorically state that they have not signed the guarantee'. In closing oral submissions counsel for [Sukhdev] took me to signatures on a letter dated 8 July 2010, Exhibit E [the Resignation Letter], being a document which [Sukhdev] says he signed, and on the loan agreement Exhibit C; but then conceded that there was no apparent difference between those signatures. I understand [Sukhdev's and Gurmeet's] case to be that they do not recall signing a document providing for their guarantee of the subject loan. Their signatures appear on page 5 of the Exhibit C. They having not given evidence and there being no evidence to the contrary, I find that [Sukhdev and Gurmeet] signed the loan agreement. Indeed, I understand from submissions made by their counsel on the first day of the hearing and in closing submissions on the ninth day that, ultimately, the denial of their execution on page 5 was not pressed."
His Honour stated that the substance of the denial by Harjit, Mandhir and Moninderjit was that: [11]
[8] … after they signed a document of loan agreement between the [Lenders] and the [Borrower] on about 11 September 2006, being a document which included page 5 of the loan contract Exhibit C; [Kulwant] or some other unidentified person tampered with the document. They do not contest the loan from [the Lenders] to [the Borrower]. Their case is that the first four pages of loan contract Exhibit C, which contain terms of guarantee and warranties for the performance of the [Borrower], were not in the contract they signed. In the event that this defence in regard to which only [Harjit, Mandhir and Moninderjit] gave evidence is successful; then it will follow that the [Lenders] also fail to prove the document of loan contract, containing guarantees and warranties entered by [Sukhdev and Gurmeet] also. That is the case put by [Sukhdev and Gurmeet]."
The primary Judge noted that Harjit, Mandhir and Moninderjit had not tendered the first four pages of the document they claimed to have signed on 11 September 2006. Nor had they tendered the first four pages of the loan agreements with Shah made on 23 June 2005 and 31 January 2006 in the form they claim to have signed (that is, not including a guarantee). [12] The cross-examination revealed that Harjit, Mandhir and Moninderjit could not give positive evidence of the contents of the four pages that, on their case, formed part of the document they signed in September 2006. Nor could they identify in their oral evidence the contents of the earlier loan agreements they had signed. [13]
His Honour considered that the two page loan agreement presented to the Lenders on 30 June 2013 (Exhibit D) supported the Lenders' case that all five appellants had signed the Loan Agreement in a form that included the guarantee. [14] His Honour observed that Harjit, Mandhir and Moninderjit were "real estate trained, commercial people" who signed a document acknowledging that they had given guarantees to the Lenders in support of a loan to the Borrower. The Loan Agreement was the only document answering that description.
The primary Judge considered that in view of Exhibit D, it was implausible to conclude that Kulwant had tampered with the Loan Agreement in the manner suggested by Harjit, Mandhir and Moninderjit (and supported by Sukhdev and Gurmeet). The proposition was also implausible because at the time of the Loan Agreement, Shah was able to pay its debts. There was nothing that explained why Kulwant, even though he was a guarantor, would have acted in the manner attributed to him. [15] In his Honour's opinion: [16]
"Exhibit C is prima facie proof of the terms of the contract of loan and of guarantees made on 11 September 2006. Further, given the objective evidence of Exhibit D and of the surrounding circumstances to which I have just referred, the inherent commercial probabilities favour acceptance that the directors gave the guarantees and warranties over the contrary and commercially improbable proposition that in the absence of any evidence of the need to do so, after having obtained the signatures on page 5, Kulwant by tampering with the document added the personal guarantees and warranties".
The primary Judge carefully considered and rejected the arguments advanced by the appellants. In his view, the evidence satisfactorily explained why the Loan Agreement (Exhibit C) had four pairs of staple holes. [17] His Honour accepted the evidence of the Lenders in preference to that of Harjit as to the circumstances in which the Lenders received a counterpart of the Loan Agreement. In making this finding his Honour took into account that the recollections of the Lenders had been inaccurate on some matters. Despite the inaccuracies his Honour was satisfied that the Lenders had given truthful evidence. [18]
The primary Judge gave detailed reasons for concluding that Harjit, Mandhir and Moninderjit simply had no actual recollection that the document signed on or about 11 September 2006 was not the Loan Agreement. [19] He considered that their evidence was unreliable. [20]
The primary Judge recorded that the appellants relied on a number of "irregularities" in the Loan Agreement as vitiating their guarantees. [21] The only alleged "irregularity" relevant for the purposes of the appeals is the appellants' submission to the primary Judge that they executed the Loan Agreement in their capacity as witnesses and directors, but not as guarantors. His Honour rejected the submission, finding that the appellants signed the Loan Agreement both as parties to it and as directors of the Borrower. [22]
The primary Judge then dealt with the cross-claim by Sukhdev by which he sought indemnity or contribution from each of Kulwant, Harjit, Mandhir and Moninderjit. The cross-claim was based on the ground that the co-guarantors, by signing the acknowledgement on the Resignation Letter, agreed to release Sukhdev from his guarantee. His Honour found for Sukhdev on the cross-claim against Harjit, Mandhir and Moninderjit, but held that judgment could not be entered against Kulwant because he was bankrupt. [23]
[4]
Sukhdev's appeal
It is convenient to deal first with Sukhdev's appeal.
[5]
Notice of appeal
Sukhdev's notice of appeal contains seven grounds, one of which (Ground 7) was not pressed. Grounds 1, 3, 4 and 5 challenge the primary Judge's finding that Sukhdev signed the Loan Agreement in the form of Exhibit C (that is, including the guarantee). Ground 6 contends that the primary Judge failed to provide adequate reasons for concluding that Sukhdev was liable to the Lenders on the guarantee.
Ground 2 of the notice of appeal claims that the primary Judge denied procedural fairness to Sukhdev by refusing an application on the sixth day of the trial to amend his pleadings. The proposed amendment incorporated particulars of fraud allegedly perpetrated by Kulwant.
[6]
Grounds 1, 3, 4 and 5
The written submissions filed on behalf of Sukhdev acknowledged that he had not given evidence in the District Court proceedings but contended that there was only "very slight" evidence suggesting that Sukhdev signed the Loan Agreement. Accordingly, so Sukhdev argued, the primary Judge could not have been satisfied on the balance of probabilities that he had in fact signed the Loan Agreement on or about 11 September 2006. In his oral argument on behalf of Sukhdev, Mr Foster conceded that there was "evidence before the Court … upon which the Court could have come to the conclusion that it did", but submitted that it was "scant" and insufficient to justify the primary Judge's finding. .
As the primary Judge noted, the statement of issues prepared on behalf of Sukhdev recorded his concession that the signature on the Loan Agreement "resembles his usual signature". [24] Notwithstanding this concession, the statement of issues "categorically" denied that Sukhdev had signed the Loan Agreement. In effect, Sukhdev put the Lenders to proof that he had signed the Loan Agreement as they alleged.
Sukhdev made an affidavit which was filed in the proceedings but not read on his behalf. Portions of Sukhdev's affidavit were tendered on behalf of the Lenders and were admitted into evidence. The relevant paragraphs are as follows:
"I do not recall ever signing the loan agreement of 11 September 2006 … I have examined the signature above 'Sukhdev Singh Dhaliwal' and say that the signature appearing on the loan agreement of 11 September 2006 appears to be mine.
There were some occasions when I did sign documents at the Office of United Real Estate. On such occasions Kulwant presented a document to me and said words to the following effect in Punjabi:
Kulwant: 'Look these are New Ridge documents. The other Directors have all signed this. I need your signature as well.'
On such occasions I signed the document after I observed that the other Directors of New Ridge Property Group had already signed. On such occasions when I asked him about signing the document, Kulwant said words to the following effect in Punjabi:
Kulwant: 'You can trust me, these documents are to do with the project. You don't need to worry about it.'
At all relevant times I relied on these words of Kulwant and upon reliance of such words I signed the documents. However before I signed any document I looked at the document before signing it."
This evidence constitutes an admission by Sukhdev that the signature on the Loan Agreement appears to be his. It is also an admission that he signed documents presented to him by Kulwant after he observed that the other directors of the Borrower had already signed. Sukhdev does not deny that he signed the Loan Agreement; he merely says that he does not recollect signing the document.
Sukhdev's own statement, taken in conjunction with the Loan Agreement itself, provides prima facie evidence that he signed the document on or about 11 September 2006. In the absence of a denial on oath or affirmation that the signature on the Loan Agreement was his, this evidence was sufficient to justify the primary Judge's finding on the balance of probabilities that Sukhdev signed page 5 of the Loan Agreement. In any event, other evidence supports the primary Judge's finding.
The primary Judge referred to Sukhdev's Resignation Letter principally (in the present context) for the purpose of comparing Sukhdev's admittedly authentic signature on the letter with the impugned signature under his name on the Loan Agreement. His Honour was entitled to make the comparison. [25]
The Resignation Letter is significant for another reason. It expressly acknowledges that Sukhdev gave a guarantee in favour of the Borrower (not Shah). The primary Judge said that the Loan Agreement was the only document containing a guarantee in favour of the Borrower. In fact the Loan Agreement was one of two virtually identical documents involving loans to the Borrower, although the second loan agreement (Exhibit L) involved different lenders. In each case Sukhdev appears to have signed on page 5 of the document. The Resignation Letter is an admission that in July 2010 Sukhdev understood that he had signed either the Loan Agreement or an agreement in virtually identical form (or both) in his capacity as a guarantor of the Borrower. The letter is probative of the primary Judge's finding.
In these circumstances it is not necessary to consider the significance of concessions made by Sukhdev's counsel on his behalf at the trial. There was ample evidence before the primary Judge to justify the finding that Sukhdev signed the Loan Agreement. Indeed, in the absence of evidence from Sukhdev himself (leaving aside the portions of his affidavit tendered by the Lenders), no other finding was open to his Honour.
Once that conclusion is reached it must follow, unless Harjit, Mandhir and Moninderjit make out their case, that the primary Judge was correct to find that Sukhdev signed the Loan Agreement in the form of Exhibit C (that is, including the guarantee).
[7]
Ground 6
The primary Judge gave brief reasons for finding that Sukhdev signed the Loan Agreement. His Honour clearly thought that no more was required because Sukhdev's counsel had not pressed the argument that Sukhdev had not signed the Loan Agreement.
His Honour may have slightly overstated the position adopted by Sukhdev's counsel at the trial. It is fair to say, however, that in view of the concessions made by counsel, the primary Judge was entitled to infer that there was only faint opposition to the finding sought by the Lenders. In the circumstances, the judgment exposed his Honour's reasoning process sufficiently.
In any event, even if the reasons were inadequate there would be no basis for ordering a new trial. This Court is not to order a new trial on any ground unless it appears that some substantial wrong or miscarriage has been caused thereby. [26] Since the finding made by the primary Judge was inevitable, any inadequacy in the reasons did not cause any substantial wrong or miscarriage.
[8]
Ground 2
Ground 2 of Sukhdev's notice of appeal complains that the primary Judge refused to permit counsel for Sukhdev (and Gurmeet) to file a document headed "PARTICULARS OF FRAUD". The application for leave to file the document was made on the sixth day of a trial which had been listed on the basis of an estimate of four days. The document for which leave was sought was not included in the appeal books.
Sukhdev's written submissions on the appeal did not identify any basis on which it might be said that the primary Judge's discretion to refuse leave miscarried, other than an unsubstantiated assertion that a grant of leave would not have prejudiced the Lenders.
When Mr Foster began to address Ground 2 in his oral submissions the Court pointed out that it was impossible to assess his argument without access to the document which counsel had sought leave to file at the trial. Mr Foster was unable to produce the document and he did not dispute that in its absence he was unable to pursue Ground 2. Nonetheless, it is appropriate to record that the primary Judge gave cogent reasons in the course of an interchange with counsel as to why leave to file the "PARTICULARS OF FRAUD" should be refused.
Ground 2 also complains of the primary Judge's refusal of an application to amend Sukhdev's pleading to add a claim founded on the Contracts Review Act 1980 (NSW). The application to amend was made on the seventh day of the trial. His Honour gave an ex tempore judgment which also provided cogent reasons refusing leave to amend.
Sukhdev's written submissions do no more than assert that the primary Judge "could have allowed the amendment". When Mr Foster addressed the amendment application in his oral submissions he was again met with the difficulty that the appeal books do not include the document containing the proposed amendments. Since Mr Foster was unable to produce the document, he did not dispute that the Court could not uphold Ground 2.
[9]
Gurmeet's appeal
The notice of appeal filed on behalf of Gurmeet is in substantially the same terms as the notice of appeal filed on behalf of Sukhdev. Mr Dean did not press Ground 2 (concerning the primary Judge's refusal to grant leave to file amended pleadings or particulars of fraud) or Ground 7 (concerning interpretation of the guarantee contained in the Loan Agreement).
[10]
Grounds 1, 3 and 4
Mr Dean submitted that there was insufficient evidence to justify the primary Judge's finding that Gurmeet signed the Loan Agreement. Mr Dean contended that the evidence against Gurmeet was much weaker than the evidence against Sukhdev. He pointed out that, unlike Sukhdev, Gurmeet had not expressly acknowledged at any time that he had guaranteed the Borrower's obligations.
Gurmeet, like Sukhdev, filed an affidavit in the District Court proceedings, which was not read on his behalf. As with Sukhdev, the Lenders tendered extracts from Gurmeet's affidavit in their case. Mr Dean accepted that the extracts provided some evidence that Gurmeet may have signed the Loan Agreement but he submitted that the evidence was insufficient to establish on the balance of probabilities that Gurmeet had done so. Mr Dean also acknowledged that Gurmeet's counsel had made some concessions at the District Court trial and that Gurmeet was bound by his counsel's conduct of the proceedings. Mr Dean contended, however, that any concessions made by counsel were equivocal and did not detract from Gurmeet's denial in the statement of issues that he had signed the Loan Agreement.
The paragraphs of Gurmeet's affidavit admitted into evidence are as follows:
"At some of these meetings I would be asked to sign documents. Any of the 2 [sic], 3rd, 4th, or 5th defendants [Kulwant, Hajir, Mandhir and Moninderjit] would say to me words to the effect, 'Gurmeet, we need you to sign these documents. There's no need to read them. They are just standard documents needed to run the business. There's no obligation on your part - just a formality.' On some of the occasions I would say words to the effect, 'What are these documents?', the person who had asked me to sign the documents would say words to the effect, 'You don't have to worry about reading these documents. They are standard. See we have already signed it - it just needs for you to sign it.'
I felt intimidated by the other directors and generally would sign as asked. I did not read the documents, did not know what I was signing but believed I had to sign it.
In relation to the guarantee that I allegedly signed, I have no recollection of signing a document being a guarantee in relation to Mr or Mrs De Castro, as a director, or in any other capacity.
If I did sign such a document, then I signed it without knowing it to be a guarantee, without having read it or without being allowed to obtain any advice into what my obligations could have b[een]."
This evidence is sufficient to establish that Gurmeet regularly signed documents at the request of the other directors of the Borrower, including Kulwant, without reading the documents. Gurmeet's evidence is entirely consistent with his having signed the Loan Agreement at Kulwant's request without troubling to read the document to determine whether it contained a guarantee by him in favour of the Lenders.
Gurmeet did not give evidence and thus did not deny on oath or affirmation that he had signed the Loan Agreement. On the contrary, the paragraphs from his affidavit admitted into evidence expressly acknowledged that he may have signed a guarantee, although he claimed in those paragraphs that he would not have read or understood the document. However, that claim is not relevant to Gurmeet's notice of appeal since there is no dispute, assuming that Gurmeet signed the Loan Agreement as guarantor, that he is bound by the guarantee. [27]
Gurmeet's own statements are enough of themselves to justify a finding on the balance of probabilities that he signed the Loan Agreement. The obvious inference from his admissions, taken with the Loan Agreement itself, is that he signed the document at Kulwant's request. Since Gurmeet did not give evidence himself, the inference is virtually irresistible. [28]
The primary Judge's finding receives further support from a concession made at the trial by counsel then appearing for Gurmeet. Mr Dean did not dispute that counsel appearing for a party has authority to make admissions against the interest of his or her client during the hearing. [29] His contention was that any concession by Gurmeet's counsel lacked probative value on the issue of whether Gurmeet signed the Loan Agreement.
On the first day of the trial, Gurmeet's counsel stated to the Court that Gurmeet had filed an affidavit in which he accepted that the signature on the Loan Agreement looked like his, although counsel also pointed out that Gurmeet said in the affidavit that he did not recall signing a guarantee. On the eighth day of the trial Gurmeet's counsel, in response to a question from the primary Judge, reiterated that Gurmeet accepted that the signature on the Loan Agreement looked like his.
These concessions amount to an admission that Gurmeet himself had examined the signature under his name on the Loan Agreement and formed the view that the signature appeared to be his. Since Gurmeet must be taken to be completely familiar with his own signature, the admission is probative of the fact that he signed the Loan Agreement.
The primary Judge was entitled to find that Gurmeet signed the Loan Agreement in a form that incorporated the guarantee. The challenge to that finding must fail.
[11]
Ground 5
Ground 5 of the notice of appeal contends that the Lenders did not proffer any evidence that they were involved in making an offer to Gurmeet and that his Honour erred in finding that Gurmeet's subjective intention did not matter. The argument actually advanced by Mr Dean, which he submitted was within Ground 5, was that the primary Judge erred in finding that Gurmeet signed the Loan Agreement in his personal capacity or as a guarantor of the Borrower's obligations, as distinct from signing in his capacity as a witness or a director of the Borrower.
It is by no means clear that this argument is within Ground 5 or indeed any other ground of appeal. However, since the argument was identified in Gurmeet's written submissions and the Lenders addressed it in their written submissions, there is no unfairness to them in allowing the argument to be advanced.
After a comprehensive review of the authorities, not all of which were entirely consistent, Giles J in Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd [30] (Kiyose) concluded that the proper approach in determining whether a signatory to a contract is personally bound:
"… 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.
This statement of principle was followed by the Full Court of the Supreme Court of South Australia in Harris v Burrell & Family Pty Ltd. [31] In that case the Court pointed out that the approach taken in Kiyose is consistent with the reasoning of McHugh JA in Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd. [32]
Mr Dean did not dispute that Giles J's statement of principle is correct but he contended that the primary Judge erred in concluding that the objective circumstances demonstrated that Gurmeet signed the Loan Agreement in his personal capacity and therefore as a guarantor. In his written submissions, Mr Dean identified a number of matters that supported his contention. However, in the course of oral argument Mr Dean accepted that not all of the matters identified in the written submissions involved objective considerations. In the end Mr Dean relied on the following:
Gurmeet had no interest or involvement with Shah;
Gurmeet had never met the Lenders and had no financial interest in dealings with them;
the evidence suggested that Gurmeet was not actively involved in the development activities undertaken by the Borrower; and
the evidence also suggested that Gurmeet was not involved in drafting or negotiating the terms of the Loan Agreement.
Mr Dean's submissions underplayed the most important objective considerations indicating an intention that Gurmeet signed the Loan Agreement in his personal capacity. The attestation page of the Loan Agreement states that the "parties" (a term which includes the Guarantors) have caused the Loan Agreement to be duly executed. The attestation page also states that the seal of the Borrower was affixed by authority of the Board in the presence of six named persons, including Gurmeet. None of the six is identified anywhere in the Loan Agreement or on the attestation page as a director of the Borrower. None of their signatures is expressly qualified, for example by a statement that the person concerned has signed the Loan Agreement as a director or agent of the Borrower. While all six were in fact directors of the Borrower in 2006, only two directors had to sign the Loan Agreement in order for the Borrower to execute the document in conformity with the Corporations Act 2001 (Cth). [33]
The parties to the Loan Agreement are expressed to be the Lenders, the Borrower and the six named "Guarantors", including Gurmeet. The Loan Agreement recites that the Guarantors have agreed to guarantee the Borrower's obligations. The substantive provisions of the Loan Agreement set out the terms of the guarantee provided by each Guarantor. It is difficult to see what reason there could have been for all six Guarantors to sign the Loan Agreement unless it was for the purpose of binding each of them personally to the guarantee.
The observations of Wood J in NEC Information Systems Australia Pty Ltd v Linton [34] apply equally to the present case:
"An examination of the whole document … provides strong support for the contention of the plaintiff. The description of the parties appearing on page one of the Deed and in the First Schedule, the recitals, the nature of the contract and its terms, point unequivocally to the transaction being intended to be one of personal guarantee on the part of the defendant."
As Wood J noted, it would lack all commercial utility for a loan agreement incorporating a guarantee if none of the named guarantors who signed the agreement without qualification were liable on the guarantee.
It is instructive to compare the facts of the present case with those of Harris v Burrell & Family Pty Ltd. In that case, a loan agreement was executed by a corporate borrower as follows:
"EXECUTED by
HARDEL PTY LTD
(ACN 68 231 962 930)
[Signed by Peter Harris]
______________________
PETER HARRIS
Director"
The signatory was the sole director of the corporation. The loan agreement incorporated a guarantee by the director of the corporation's obligations under the agreement
The South Australian Full Court found that the director signed the agreement both in his capacity as director and also in his personal capacity. The Court took into account not only the terms of the guarantee but a number of surrounding circumstances, including the fact that the agreement had been prepared without legal advice. Nonetheless the decision indicates that even a sole director whose signature is necessary to bind a company and who is identified in the document as a director may be found to have signed the agreement in his or her personal capacity.
[12]
Ground 6
As explained when dealing with Sukhdev's appeal, the complaint in Gurmeet's notice of appeal that the primary Judge failed to give sufficient reasons does not assist his appeal.
[13]
Appeal by Harjit, Mandhir and Moninderjit
The notice filed on behalf of Harjit, Mandhir and Moninderjit (Three Appellants) contains eight grounds. In substance, Grounds 1-4 and 6-8 challenge the primary Judge's findings that each of the Three Appellants signed the Loan Agreement in a form that contained the guarantee. Ground 5 contends that the primary Judge erroneously imposed a positive onus on the Three Appellants to tender the alternative loan agreement which they claim to have signed or at least to provide a more detailed explanation of the terms of the alternative agreement.
[14]
Grounds 1-4, 6-8
The written submissions filed on behalf of the Three Appellants are replete with errors and are not easy to follow. The principal contentions appear to be the following:
the primary Judge gave insufficient weight to the fact that Exhibit C had been "unstapled and re-stapled many times at least 4 or more";
his Honour gave too little weight to the absence of initials on each page of Exhibit C bearing in mind that the Three Appellants gave evidence that their practice was to initial each page of any legal document they signed; and
his Honour gave too little weight to inconsistencies in the evidence of the Lenders as to who gave them the signed Exhibit C.
The flavour of some of the written submissions can be detected in the following rather remarkable contention:
"Its clear the Judge felt sorry for the [Lenders] and such is apparent from the way he just dismisses and explains away and trivializes their inconsistencies and contradictions and just accepts that they caused the original document to appear with many staple marks."
As the Lenders' written submissions pointed out, the written submissions of the Three Appellants do not confront the difficulty that the primary Judge's findings were in large measure credibility based. His Honour expressed concern as to the truthfulness and reliability of the evidence given by Harjit, Mandhir and Moninderjit and preferred the evidence of the Lenders to the extent of any conflict. [35] His Honour gained the impression from their evidence that they were prepared to deny entering any document which contained any reference to "guarantor" or "guarantee" to the "point where their evidence was unconvincing". [36]
The primary Judge's observation of Harjit was that he had no recollection as to how the contents of the document he claimed to have signed differed from the Loan Agreement. Harjit's evidence was "motivated by a want to deny having agreed to guarantee the performance of [the Borrower] under the loan". [37]
The primary Judge was even more critical of Mandhir's evidence. His evidence was "unsatisfactory" to the point where he had invented the existence of a clause in the various loan agreements to support his claim that he never accepted any personal liability for the loan. [38] Moreover, Mandhir changed his evidence between days three and four of the trial and, in re-examination on day five, admitted the falsity of some of his answers on day four. [39] Mandhir maintained that he had "no idea" of the contents of the document he signed, yet insisted that Exhibit C was not the document he had actually signed. [40] The primary Judge found that Moninderjit's evidence, like the evidence given by Harjit and Mandhir, was "unreliable". [41]
The fact that the primary Judge's finding was based on his Honour's assessment of the credibility of witnesses does not relieve this Court from the task of conducting a real review of trial. [42] However, due allowance must be made for the advantages enjoyed by the primary Judge. This means that the Three Appellants must demonstrate that the finding was contrary to incontrovertible facts or uncontested evidence or was glaringly improbable or contrary to compelling inferences. [43]
As with the Three Appellants' written submissions, Mr Santisi's oral submissions did not come to grips with the need to demonstrate that the primary Judge's finding was erroneous in the relevant sense. Mr Santisi essentially simply repeated arguments that had been put to the primary Judge but rejected by his Honour.
For example, the primary Judge carefully considered the significance of the staple holes in the Loan Agreement (Exhibit C). His Honour noted that evidence had been given by a legal secretary employed by the Lenders' solicitors explaining that staples had been removed to allow for photocopying and then reattached. Leticia also gave evidence, accepted by the primary Judge, that she had separated the original document. [44] There is therefore no substance to the contention that the primary Judge failed to give proper weight to the physical appearance of the Loan Agreement. Similarly, there is no substance to the contention that the appearance of the document provides a basis for overturning the finding that the Three Appellants signed the Loan Agreement in the form of Exhibit C.
The primary Judge also examined in considerable detail the evidence of the Three Appellants that their practice was to initial all the pages of documents they signed. The significance of this evidence was that although the Three Appellants admitted that their signatures were on page 5 of the Loan Agreement (Exhibit C), none of the previous four pages bore their initials. Accordingly, so it was put on their behalf, the likelihood was that someone, presumably Kulwant, had substituted different pages in what became Exhibit C.
The primary Judge pointed out that the Three Appellants had signed a number of documents without initialling each page, both before and after the execution of the Loan Agreement. [45] He formed the view that the evidence of a practice of initialling documents was given in an "attempt to advance a corroborative element in the [Three Appellants'] evidence". [46] His impression was that none of the Three Appellants had any recollection of actually initialling the pages of the document they signed on or about 11 September 2006.
The significance of the evidence given by the Three Appellants as to the practice they followed when signing documents was a matter for his Honour to assess. There is nothing improbable or implausible in the conclusions he reached. Indeed it is difficult to see how his Honour could have regarded the evidence given by the Three Appellants on this issue as worthy of acceptance, given that they had apparently executed documents without following their asserted practice and that they failed to tender any documents that had been executed in a manner consistent with the asserted practice.
The primary Judge also addressed the inconsistencies in the evidence given by Ignacio and Leticia. His Honour pointed out that Ignacio never wavered in his evidence that it was Harjit who delivered the Loan Agreement to them. Leticia initially said in an affidavit that Kulwant delivered the Loan Agreement but corrected her evidence in a subsequent affidavit. His Honour recorded that she had been cross-examined on this issue and he was satisfied with her explanation. No error is shown in the primary Judge's findings merely by repeating arguments on appeal that his Honour rejected.
The primary Judge's finding that the Three Appellants signed the Loan Agreement in a form incorporating the guarantee was based not only on his Honour's assessment of the credibility of their evidence, but on the objective circumstances and commercial probabilities. [47] The Three Appellants have not made out any basis for setting aside the finding.
[15]
Ground 5
The written submissions on behalf of the Three Appellants do not attempt to develop Ground 5 in the notice of appeal and Mr Santisi's oral submissions did not carry the matter much further. However, the argument appears to be that the primary Judge required the Three Appellants to produce a loan agreement signed by them which contained no reference to a guarantee. In taking this course, so it is said, his Honour overlooked that the Lenders bore the onus of proving that Exhibit C (including the guarantee) had been executed by the Three Appellants.
On the case presented by the Three Appellants, they signed the fifth page of the Loan Agreement and the fifth page of similar loan agreements, but in each case (so they said) the first four pages did not include a guarantee. The primary Judge took into account, in determining whether the Three Appellants had signed the Loan Agreement in a form incorporating the guarantee, their inability to describe the contents of the documents they had signed. His Honour also took into account that the Three Appellants did not tender the documents they claimed to have signed. They had failed to do so notwithstanding that Kulwant could have been located for the purpose of issuing subpoenas or notices to produce. [48] Moreover, the Lenders had issued notices to produce to the appellants as well as a subpoena to the solicitors previously acting for the Borrower yet no documents had been produced that supported the Three Appellants' case.
The primary Judge made it clear that he did not accept the Three Appellants' evidence that they had not signed a document in the form the Loan Agreement. Having formed this view, the absence of any other evidence supporting their case and the undisputed fact that they had signed the fifth page of Exhibit C led to the finding that they had signed the Loan Agreement incorporating the guarantee.
Towards the end of his judgment, the primary Judge made some observations which, on one reading, suggest that he assumed that the Three Appellants bore the burden of establishing on the balance of probabilities that the document they signed did not include the guarantee. His Honour referred to s 51 of the Evidence Act 1995 (NSW), which abolishes the so-called original documents rule, and to an authority dealing with proof of lost documents. [49] The point of that reference is not clear.
His Honour continued as follows: [50]
"[The Three Appellants'] evidence that they did not sign a document containing the words 'guarantor', 'guarantee' or 'warranties' was really not evidence of fact but only a submission of a negative proposition. I so find, and not purely as a matter of approach according to principle but also from my perception of how they gave their evidence, each of them protesting repeatedly that proposition and also that they initialled every page and saw each other do the same. In this case the approach [in the authorities does] not require application of strict prohibitive prescription of proof of content of document; but rather, exposition of the requirement of the burden of some positive proof borne by the defendants of the terms of some other agreement they allege."
His Honour added that: [51]
"As a general conclusion, on the whole of the evidence, the defendant [sic] case lacks evidence arising, in my opinion, to actual persuasion of the fact that the contract of loan which they signed was not Exhibit C; see Helton v Allen (1940) 63 CLR 691 at 712."
Despite these observations, when the judgment is read as a whole it is clear enough that the primary Judge appreciated that the factual issue he had to decide was whether the Lenders had established on the balance of probabilities that the appellants, including the Three Appellants, signed the Loan Agreement in a form that included the guarantee. His Honour in effect said so at several points in the judgment. [52] The primary Judge's observations towards the end of the judgment were made in the context of his Honour's rejection of the evidence given by the Three Appellants and their failure to adduce any documentary evidence to support their denial that the document they signed was the Loan Agreement.
It clearly would have been better if his Honour had not referred to the need for the Three Appellants to produce evidence amounting to "actual persuasion of the fact that the contract of loan which they signed was not Exhibit C". However when read in context, his Honour's observations were not intended to contradict what he had said earlier in the Primary Judgment. In my view, his Honour was intending to convey that the Three Appellants' admission that they signed page 5 of Exhibit C, the rejection of their evidence that they had signed a different document and the absence of any documentary evidence to support the "negative proposition" they advanced cast an onus on them to adduce some cogent evidence to support their case. His Honour's language was less precise than it could have been. However, in my view he did not depart from the principle recognised earlier in the judgment, namely that the Lenders bore the burden of satisfying the Court on the balance of probabilities that the Three Appellants signed the Loan Agreement in a form that included the guarantee. His Honour found that the Lenders discharged that burden.
[16]
Orders
The appeals must be dismissed. In each case the appellant or appellants must pay the Lenders' costs of the appeal.
[17]
Endnotes
De Castro v New Ridge Property Group Pty Ltd [2016] NSWDC 246 (Primary Judgment).
See at [52] below.
Singh v De Castro [2017] NSWCA 130.
Primary Judgment at [14].
Primary Judgment at [18].
Primary Judgment at [50]-[53].
Primary Judgment at [30].
Primary Judgment at [5].
Primary Judgment at [6].
Primary Judgment at [7].
Primary Judgment at [8].
Primary Judgment at [38].
Primary Judgment at [39].
Primary Judgment at [44].
Primary Judgment at [45].
Primary Judgment at [46].
Primary Judgment at [48].
Primary Judgment at [53], [56].
Primary Judgment at [71]-[85].
Primary Judgment at [85].
Primary Judgment at [92].
Primary Judgment at [92(b)].
Primary Judgment at [4], [104].
Primary Judgment [7].
JD Heydon, Cross on Evidence (10th Aust ed 2015, LexisNexis) at [39105]. New South Wales does not have legislation specifically permitting this course (cf the repealed Evidence Act 1898 (NSW), s 36). However if a document is admitted into evidence and it contains an authentic signature, the tribunal of fact may compare the authentic signature with the impugned signature: Adami v The Queen (1959) 108 CLR 605; [1959] HCA 70 (per curiam); Wendt v Lind; ex parte Lind [1913] St R Qd 240 (FC); R v Hannes [2000] NSWCCA 503; 158 FLR 359 at [323]-[325] (Spigelman CJ, Studdert J agreeing).
Uniform Civil Procedure Rules 2005, r 51.53(1).
Gurmeet argues that even if he did sign the Loan Agreement he did not do so as guarantor: see at [84] ff below.
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8.
Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (2008) 167 FCR 314; [2008] FCA 369 at [17]-[18] (Rares J); JD Heydon, Cross on Evidence (10tyh Aust ed 2015) at [3165]; Urquhart v Butterfield (1887) 37 Ch D 357 at 369 (Cotton LJ, Sir J Hannen and Lopes LJ agreeing); Dunn v Brown (1911) 12 SR (NSW) 22 at 41 (Cullen CJ, Gordon J agreeing). It may have been open to Gurmeet's counsel to seek to withdraw the admission, but no such application was made.
(1989) 21 NSWLR 160 at 174.
[2010] SASCFC 12 at [20] (Doyle CJ, Bleby and Sulan JJ agreeing).
(1985) 9 ACLR 909 at 923-924.
Corporations Act 2001 (Cth), s 127(1).
(1985) NSW ConvR 55-240 at 56,281.
Primary Judgment at [53].
Primary Judgment at [66].
Primary Judgment at [71].
Primary Judgment at [76], [78].
Primary Judgment at [79]-[81].
Primary Judgment at [83].
Primary Judgment at [85].
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [25] (Gleeson CJ, Gummow and Kirby JJ).
Fox v Percy at [28]-[29].
Primary Judgment at [48].
Primary judgment at [60], [63].
Primary judgment at [65].
See at [48] above.
Primary Judgment at [86]-[87].
Mack v Lenton (1993) 32 NSWLR 259 (Young J).
Primary Judgment at [89].
Primary Judgment at [90].
Primary Judgment at [44], [46], [53].
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Decision last updated: 22 September 2017
Matter No. 2016/287642
Burston, Cole & Associates (Appellant)
McLachlan Thorpe Partners (Respondents)
File Number(s): 2016/277163; 2016/285497; 2016/287642
Decision under appeal Court or tribunal: District Court of New South Wales
Jurisdiction: Civil
Citation: [2016] NSWDC 246
Date of Decision: 1 September 2016
Before: Montgomery DCJ
File Number(s): 2014/279025
The circumstances relied on by Mr Dean fall well short of demonstrating objectively that Gurmeet signed the Loan Agreement solely in his capacity as a director of the Borrower. The fact that Gurmeet was not involved with Shah is of little significance. The Loan Agreement concerned a loan to the Borrower, not Shah. Gurmeet had an interest in the Borrower, both as a director and as an investor. He plainly had a commercial interest in the Borrower obtaining the funds advanced by the Lenders.
The fact that Gurmeet did not know the Lenders and may not have been involved in the negotiations for the loan does not materially assist his case. Many persons who guarantee the due performance by a borrower of obligations under a loan agreement leave the negotiations to the borrower or other persons and have no direct dealings with the lender.
It should be noted for the sake of completeness that Mr Dean did not rely on Gurmeet's claim in the paragraphs of his affidavit admitted into evidence that if he did sign any loan agreement he would not have appreciated that it contained a guarantee. Mr Dean was correct not to do so. There was no finding that Gurmeet did not appreciate what he was signing. He did not give evidence of his knowledge or understanding at the time he signed the Loan Agreement and disclaimed any recollection of signing the document.
For these reasons, the primary Judge was correct to conclude that Gurmeet signed the Loan Agreement in his personal capacity as a guarantor.