Technology Leasing Limited v Le Guarde Food Services Pty Limited & Joseph Miro Vucetic

Judgment 1These are appeals from judgments of the Local Court in favour of the first defendant (Mr Vucetic) and second defendant (Le Guarde) in respect of a statement of claim for debt arising out of an agreement to rent certain equipment and in favour of the cross-defendant (Technology Leasing) and a counterclaim brought under the Contracts Review Act 1980 and the Trade Practices Act 1974 . The background to this litigation may be briefly stated. Technology Leasing allegedly leased certain items to Le Guarde for a monthly rental. Mr Vucetic, who for all practical purposes was Le Guarde's owner, signed the rental agreement for Le Guarde and on his own behalf as guarantor. All negotiations culminating in the agreement were carried out by Mr Vucetic. Mr Vucetic (whose evidence was accepted by the Magistrate) testified that he did not read the agreement and did not realise he was giving a guarantee. He said that he relied on what the had been told by a Mr Smith from Axis Telcom Pty Limited (Axis) about the terms of the agreement. In brief, this was that, providing he continued to use Axis to provide telephone services for five years, no rent charge would be made for the equipment leased by Le Guarde. 2The agreement provided that payments of rent were to be made by direct debit from Le Guarde's bank account. In the event of default, Technology Leasing could terminate the agreement and claim the amount owing and a sum for future rental calculated in a specified way. Some payments had been made (two by Le Guarde and a number of others by an unidentified party) but Technology Leasing had not utilized the authority. When payments stopped it terminated for non-payment and commenced action under the agreement for debt to enforce the guarantee even though the authority was still current and sufficient funds were in the account to cover the agreed deductions. The financial records of the plaintiff were in some disarray and the question of the extent of payments actually made and hence the amount of debt outstanding was a live issue in the trial. 3The defendants' case was that the agreement was a sham, since the genuine agreement was that negotiated by Mr Smith, that at all events its acceptance by Technology Leasing had never been notified, and that the financial records of Technology Leasing were in such disarray that, it having the onus of proving non-payment, it could not prove the debt. In respect of the last matter, the learned Magistrate said in giving judgment for the defendants - "17. In view of the matters raised above, being the inaccuracies, inadequacies and calculations that are not substantiated, the court can have no confidence in the material TLL is relying on to substantiate the amount owing, (if any) under the agreement between TLL and LG and JV. Accordingly the plaintiff's claims in quantum must fail." 4It is evident that his Honour acted on the basis that the onus was on Technology Leasing to establish the amount of the outstanding debt. However, as the Magistrate found, it had established (subject to the issues of Mr Smith's agency, communication of acceptance and justified termination) the existence of a contract giving rise to a debt, it was for the defendants to prove payment: Young v Queensland Trustees Limited (1956) 99 CLR 560 especially at 562, 569-570. This is an error of law and, thus, the judgment cannot stand. 5It is not strictly necessary to deal with the other issues raised by Technology Leasing. However, as the matter must be remitted to the Local Court for hearing, I think it would be helpful to deal with them, at least to some degree. In respect of the question whether Mr Smith acted as the agent of Technology Leasing as well as his employer AXIS. His Honour held nevertheless that he was - "not satisfied... on the evidence before me, that on a balance of probabilities, an agency existed between [Technology Leasing] and/or [Axis] and [Mr Smith]." This conclusion does not, even summarily, expose the reasoning upon which it is based. This would provide the defendants with a ground of appeal were the judgment to otherwise stand. 6Dealing with the cognate arguments that the defendants should not be bound by the agreement and that it was a sham, his Honour, in substance, (correctly) accepted the submissions of Technology Leasing that the onus of proving that the defendants should not be bound by the document that they signed lay upon them. His Honour applied the test articulated in Petelin v Cullen (1975) 132 CLR 355 at [359] - "To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence." 7He concluded that there was no cogent evidence "nor any evidence at all from the defendants such that the Court ought to be satisfied that [they] ought not to be bound to the terms and conditions of the rental agreement they entered into with" Technology Leasing. 8Although the Magistrate failed to outline the basis upon which he came to this conclusion except in very general language, it seems clear enough from the authorities he cited that he was unpersuaded that Mr Vucetic's failure to read the documents was not due to carelessness and, furthermore, that the representations upon which he acted as to the terms of the contract were made by a person who was not acting on behalf of the Technology Leasing (for this purpose, an "innocent person"). Although his Honour did not say so, it is implicit that the representations were, at all events, not known and not instigated by Technology Leasing. Despite omitting any discussion of the evidence in this respect, I do not consider that that his Honour's reasons were so inadequate as to amount to an error of law, although they were undesirably brief. 9As I have mentioned, another issue in the case was whether Technology Leasing's acceptance of the contract was communicated to the defendants. There is strong evidence that this was so. However, his Honour's judgment does not refer to this argument at all and, although to my mind it would seem to be susceptible of ready disposition in favour of Technology Leasing, it was an important question requiring both consideration and determination. The omission to do so must be an error of law, since, of course, in the absence of communication of acceptance, no contract was entered into and, hence, no debt arose. The fact that it could have readily been determined and almost certainly in Technology Leasing's favour, does not prevent it now being relied on, since it was fairly and squarely in issue. 10I should mention another important issue, related to that of payment. Since a debit authority was provided in accordance with the agreement and funds were available to honour it, the defendants were not in default at any material time and, consequently, Technology Leasing was not entitled to terminate the contract. Accordingly, at the highest, its debt could comprise no more than the amounts owing up to acceptance (if this occurred - about which I make no finding) by Mr Vucetic of what amounted to a repudiation of the contract. Thus, on any case, Technology Leasing could make no claim for future loss of rent. 11I had mentioned that there was a counter claim. Essentially, it relied upon the Contracts Review Act 1980 and the Trade Practices Act 1974 alleging, broadly speaking, misleading, deceptive and unconscionable conduct. The learned Magistrate found that such conduct "which may have occurred, is clearly attributable to [Mr Smith] and [Axis] who were not parties to these proceedings" and, because there was no agency between Technology Leasing and those parties, any such case under that legislation necessarily failed. However, although it would dispose of some, perhaps even the main, arguments capable of being raised, it does not dispose of all arguments. It may be that, on the facts, his Honour thought that those other possible arguments would be found against the cross-claimants. However he does not advert to this and makes no findings about them. 12It follows that the dismissal of the counter claim is vitiated by error of law. Conclusion (1)The judgment on the statement of claim is quashed and the matter is remitted to the Local Court for rehearing. (2)The judgment on the cross-claim is quashed and the matter is remitted to the Local Court for rehearing. (3)There is no reason why both matters ought not be reheard by his Honour, Magistrate Mijovich. (4)In light of the fact that each party has succeeded it seems to me that the appropriate order is that each party will pay their own costs of their respective summonses. (5)In light of the disposition of the substantive appeals, there is no need to deal with the costs orders below. However, it is fair to observe that the case for Technology Leasing did not appear to disclose any exceptional feature that would justify an indemnity costs order against it. This is not to say, however, that some adjustment of the conventional order as to costs was not appropriate.