The plaintiff, Temperzone Australia Pty Ltd, proceeds by way of Amended Summons commencing an appeal filed on 29 March 2016 in respect of the judgment of the Downing Centre Local Court on 5 February 2016. The plaintiff's claim in those proceedings was dismissed and verdict entered in favour of the defendant.
The Amended Summons is supported by the affidavit of Clay Phillip Muir, solicitor, sworn 5 April 2016. The affidavit annexed copies of the transcript of proceedings in the Local Court on 1 February 2016 (Annexure A) and the transcript of the judgment of Local Court Magistrate Favretto of 5 February 2016 (Annexure B). In addition, the affidavit annexed copies of the affidavit evidence read in the proceedings below, being the affidavit of Norma Boutros, Credit Manager, sworn 17 November 2015 (Annexure C) and the affidavit of Stuart Battle, Sales Engineer, sworn 17 November 2015 (Annexure D), both of whom were employed by the plaintiff.
Copies of the defendant's affidavit evidence in the Local Court sworn by him on 4 December 2015, and read in the proceedings, were also attached to Mr Muir's affidavit (Annexure E).
The provisions pertaining to appeals from a judgment or order of the Local Court are to be found in ss 39 and 40 of the Local Court Act 2007.
Set out below are the provisions of ss 39 and 40.
39 Appeals as of right
(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law.
(2) A party to proceedings before the Court sitting in its Small Claims Division who is dissatisfied with a judgment or order of the Court may appeal to the District Court, but only on the ground of lack of jurisdiction or denial of procedural fairness.
40 Appeals requiring leave
(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court.
(2) A party to proceedings before the Court sitting in its General Division who is dissatisfied with any of the following judgments or orders of the Court may appeal to the Supreme Court, but only by leave of the Supreme Court:
(a) an interlocutory judgment or order,
(b) a judgment or order made with the consent of the parties,
(c) an order as to costs.
In the proceedings in this Court the plaintiff does not seek leave to appeal and asserts an error of law under s 39(1) of the Local Court Act.
[3]
Background
The plaintiff and the defendant in this Court were also the plaintiff and defendant to the proceedings before the Local Court.
The plaintiff's claim in the Local Court was for monies payable pursuant to a guarantee which the plaintiff company alleged the defendant had entered with it on 21 August 2009 (the Guarantee). The Guarantee related to the obligations of a company, Twin Air Pty Ltd (Twin Air), of which the defendant was one of two directors/shareholders. The Guarantee was included in a Credit Application made by the defendant to the plaintiff.
The relief sought by the plaintiff in the Statement of Claim filed in the Local Court on 25 May 2015 was in the amount of $38,853.38 plus interest and costs.
The company Twin Air went into liquidation on 5 July 2013 and was deregistered on 9 February 2015. Both the defendant and a Mr Vince Musico were directors/shareholders of Twin Air, each holding a one dollar ordinary share in the company prior to it going into liquidation.
The defendant filed a Defence on 9 July 2015 in which he denied entering into or providing a guarantee of the obligations of Twin Air under the Credit Application made to the plaintiff. Further or by way of alternative defence, the defendant alleged that the plaintiff had engaged in misleading and deceptive conduct, within the meaning of The Australian Consumer Law (ACL) (S 2 to the Competition and Consumer Act 2011 (Cth)) and/or made false or misleading representations as to the nature and terms of the Credit Application and, by virtue of the Guarantee being incorporated therein, the Guarantee. It was claimed that the Guarantee was unenforceable against the defendant.
In the proceedings below, both Ms Boutros and Mr Battle were cross-examined on their affidavits on behalf of the defendant. Mr Amabile was cross-examined on behalf of the plaintiff.
As noted above, the proceedings were heard by the Local Court on 1 February 2016. The Magistrate delivered an ex tempore judgment.
[4]
Credit Application and Purchase Orders by Twin Air
Ms Boutros gave evidence that the defendant completed an Application for Credit Account on behalf of Twin Air on or about 21 August 2009. A copy of the Credit Application was annexed to her affidavit and marked as Annexure A. She stated that it was in the form of a booklet which contained four pages headed as follows:
a. Application for Credit Account;
b. Acknowledgements and Agreement;
c. Guarantee; and
d. General Conditions of Sale.
As Ms Boutros indicated at [5] of her affidavit, the original of Annexure A purports to have been signed by the defendant on the pages headed "Acknowledgement and Agreement" and "Guarantee".
On the basis of the plaintiff's acceptance of the Credit Application, it commenced the supply of goods and services to Twin Air.
During the period May to June 2013, the plaintiff, Temperzone, received orders for goods from Twin Air and provided goods in accordance with the standard procedures set out in para [7] of Ms Boutros' affidavit. Details of the relevant invoices dated 2 May 2013 and subsequent invoices concluding on 26 June 2013 totalling $41,253.14 were set out in para [9] of Ms Bourtos' affidavit.
On 12 July 2013 a credit of $2,399.76 was attributed to Twin Air's account, reducing the total amount owing to $38,853.38.
[5]
The Guarantee
A copy of the Acknowledgements and Agreement; and Guarantee were included in the Court Book (CB) at p 135. The Application for Credit Account and General Conditions of Sale are set out at CB 136.
The Guarantee in question records that in consideration of the plaintiff's agreement to supply or to continue supplying the company Twin Air, Mark Amabile (the defendant) and Mr Musico jointly and severally guaranteed immediate payment of all monies for goods and services supplied by the plaintiff. The Guarantee was headed in bold (i.e. "Guarantee") and set out the Terms and Conditions in clauses 1, 2 and 3.
The Guarantee document was dated (in handwriting) 21 August 2009. It was signed by both the defendant and Mr Musico as guarantors and their signatures were witnessed under the signature of Jo Amabile, the wife of the defendant.
The Credit Application was also acknowledged and separately signed by both the defendant and Mr Musico, dated 21 August 2009. Their signatures were witnessed by Ms Amabile.
In the plaintiff's written submissions in the proceedings in this Court it was noted that there was no dispute between the parties that the wording of the Guarantee is clear and unambiguous and that the learned Magistrate so found: Submissions at [7].
The issue before the Local Court did not involve any disputed issues of fact. His Honour identified the issue for determination as being whether the defendant was liable to guarantee the obligations of Twin Air pursuant to the Credit Application.
The Magistrate found that the defendant signed the Credit Application as a director of Twin Air but that he did not intend to, and did not, enter into a contract with the plaintiff by way of the Guarantee sued upon.
Having found that there was no contractual relationship between the plaintiff and the defendant on the Guarantee, his Honour considered that he did not need to determine the grounds of the defendant's defence based on misrepresentation or s 18 of the ACL. However, notwithstanding his conclusion in that respect, the learned Magistrate did proceed to make some findings in respect of Mr Battle and in that regard, to the plaintiff's conduct in respect of those grounds.
[6]
The Evidence
The affidavit evidence of the defendant sworn 4 December 2015 was in fairly brief terms as set out in paragraphs [1]-[10] of the affidavit as follows:
1. I am the first defendant in these proceedings.
2. I was the director of Twin Air Pty Limited.
3. Twin Air Pty Limited entered into a credit agreement in respect of the supply of goods by Temperzone Australia Pty Ltd on 21 August 2009.
4. The plaintiff required both myself and Mr Musico fill out pages one (1) and two (2) of the Temperzone Application for Credit Account form annexed hereto and marked with the letter 'A' is a copy of that form.
5. The Plaintiff's sales representative did not bring to my attention any of the general conditions of sale and in particular clause 4 of the payment terms.
6. After both myself and Mr Musico filled out the application in front of the sales representative of the Plaintiff we returned the form to the Plaintiff's sales representative immediately.
7. I was never afforded the opportunity to seek legal advice in relation to the terms of the said agreement, I was simply told to fill out the form 'just fill it out and we will get your account open'. Accordingly I filled out the form.
8. I was totally unaware that I had a personal obligation to pay should Twin Air Pty Ltd fail to pay. I did not ask any questions about the guarantee as I had no idea there was a guarantee in the form that I had signed.
9. Had I known there was a guarantee in the form I had signed I would have opened a cash on delivery (COD) account.
10. I have had COD accounts with other companies in the past.
The affidavit evidence of Mr Battle was also in comparatively brief terms as follows:
1. I am a Sales Engineer employed by Temperzone Australia Pty Ltd ("Temperzone").
2. On 21 August 2009 I attended the office of Twin Air Pty Limited. I did so for the purpose of providing representatives of Twin Air Pty Limited with the forms required to create a credit account with Temperzone.
3. Although I do not recall the specific words spoken on that day, I say the following in regards to my usual practices and experiences when attending offices in my role as a sales representative of Temperzone:
a. I would present the representatives of the customer with a copy of Temperzone's Credit Application booklet.
b. I would direct the representatives of the customer to read the complete booklet and fill in the required sections of the booklet. I do not read parts of the booklet to the customer or fill any part of the booklet in for the customer.
c. Once completed, I would take the original completed booklet with me and provide it to Temperzone so that the credit account could be established.
d. I would never try to explain the terms and conditions of the Credit Account or the Guarantee to the representatives of the customer. Whenever I am asked such questions, I suggest to the representatives of the customer that they should read them themselves and then seek their own legal advice if they require any explanation.
e. I would not try to pressure any customer into completing the form on the spot. If the representatives of the customer required time to consider the booklet, or to fill it out, I would leave the paperwork with them and arrange to return later for collection.
f. I would not have with me any method of copying or duplicating the completed Credit Application booklet whilst visiting a customer's office, however I would never prevent representatives of the customer from making their own copies of the Credit Application booklet before I took the original with me.
4. I deny that I would have ever said anything to the defendant to either:
a. Pressure him into completing or signing a form, or
b. Mislead or deceive him into completing or signing a form.
In the proceedings below, the cross-examination and re-examination of the defendant was also relatively brief. In the plaintiff's written submissions in the proceedings in this Court dated 9 June 2016, the following references were made to the defendant's evidence in cross-examination:
Twin Air (Defendant's company) had 4 employees;
The defendant had some idea what a guarantee was;
Handwriting on the guarantee document is from Defendant's wife who filled out the form in the presence of the Defendant, another guarantor and Mr Battle on behalf of the defendant;
The defendant was content to put forward Ultra Air as a business reference on the application;
The defendant realised that he signed the document a second time;
The defendant knew he signed the application/guarantee document twice and that it was being witnessed twice;
The defendant did not read the document. He knew that he was signing a document for business purposes;
The defendant agreed that Mr Battle did not assert that he was not signing a guarantee; and
The defendant knew that Temperzone was relying upon the document that he signed in order to have the account opened.
[7]
Judgment of the Local Court
In his reasons for judgment the learned Magistrate made a number of preliminary observations. These included that:
1. Through silence, there was misleading and/or deceptive conduct on behalf of the plaintiff (through the conduct of Mr Battle);
2. There was an absence of any deliberate misleading or deceptive conduct by Mr Battle; and
3. In the objective circumstances and the "immediacy of the circumstances", there was "a reasonable expectation" that Mr Battle should have at least alerted the defendant as to the Guarantee and to the fact that the defendant should get legal advice or at least alert him to such a need for obtaining advice (CB 124).
In the course of his decision, his Honour noted that all signatures were separately witnessed by Ms Amabile and that the uncontested evidence from the defendant was that the document was filled out by his wife during general discussions between Mr Battle, Mr Musico and Ms Amabile (CB 125).
His Honour then set out the competing arguments put on behalf of the plaintiff and the defendant at T 3-4 (CB 126-7).
The Magistrate referred in his reasons at T 4 (CB 127), to the defendant's evidence in which he maintained that Mr Battle never mentioned the word "guarantee" and that he simply said "sign here". He stated that he and Mr Musico did no more than sign the agreement believing it was a credit application for the company, without reading it: T 4 (CB 127).
The Magistrate then set out principles stated by Robb J in Druin Pty Ltd v Corbin [2014] NSWSC 510: T 5-6 (CB 128-9).
The operative part of the Magistrate's judgment is recorded at T 6-7 (CB 129-130). The paragraphs extracted below are taken from the judgment:
"However, in the present case that inclination, that is to inclination to favour the guarantor loses much of its weight as the written terms of the agreement here are not ambiguous. Considering the weight of the objective evidence considerably, together with the objective from Mr Amabile points to the defendant not being aware of the guarantee indemnity, the Court concludes on an objective assessment in an analysis of the evidence that it was not - it was the only intention and consideration by Mr Musico in signing the agreement that he was doing so only on behalf of Twin Air Pty Ltd and no more.
Certainly I am satisfied that on the objective assessment of the totality of evidence which I will shortly refer to that that was his only intention. As the axiom goes, context is everything. The Court particularly notes the following: it was the practice of Mr Battle not to expressly refer to the terms and conditions. The uncontradicted evidence of Mr Amabile is that he relied upon the two oral representations. No mention of the word 'guarantee' was made or his attention directed to it in the agreement and his own liability.
The agreement concerns three parties with Twin Air in fact being the applicant, not Mr Amabile. That is one needs to reflect on the circumstances that the main parties to this agreement were in fact the plaintiff in the Twin Air and therefore it could not be said for instance that Mr Amabile knew that whatever rights he was signing up were only his and no one else's or obligations. The agreement was completed by the defendant's wife in the presence of Mr Battle. The defendant with Mr Battle in his presence signed the document without reading it in the immediate circumstances of a general conversation about work and product. No copy of the document was then provided or ever provided to the defendant. The Court having determined there is no indemnity because no contract was entered into by the defendant in the sense that he was aware that not only was he signing on behalf of Twin Air but also in his own right need not determine the misrepresentation or s 18 of Australian Consumer Law offences.
However in passing, the Court shortly concludes that a signing of a guarantee in the immediate circumstances just outlined should have alerted Mr Battle to the reasonable expectation that the defendant was not aware he was also signing a guarantee. And he should have alerted him to that state of knowledge and possibly also the need for - to obtain legal independent advice.
The omission does amount in the present circumstances to misleading or deceptive conduct by silence. See Kimberly NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest), Demagogue Pty Ltd v Ramensky (1992) FCR 31. The effect by inference of Mr Battle's evidence is that he was a cautious man by saying very little apart from handing over the written terms of the agreement and saying that the party should read it, and only if asked about any terms to say that the other party should read the terms themselves and seek legal advice.
Of course the uncontradicted evidence of Mr Amabile is that he did not read the document when he signed it there and then. There was no mention of the word 'guarantee'. His wife filled out all the document, and in those circumstances it must be - uncontradicted - Mr Battle must have been aware or should have been aware that Mr Amabile had not read the agreement. However, given those immediate circumstances and the representations and the signing without reading with no mention of the word 'guarantee', objectively the Court required Mr Battle to be even more cautious by at least informing the defendants he was also signing a guarantee. The Court is not suggesting that Mr Battle was deliberately trying to mislead or deceive the defendant. But there was a reasonable expectation he should have said something of the guarantee …" (CB 129-130)
[8]
Submission on Grounds of Appeal
The plaintiff appeals on four grounds but only makes substantive submissions in respect of Grounds 1 & 2.
Ground 1 to the Amended Summons is framed in the following terms:
Ground 1: As the defendant's state of mind not to be bound by the guarantee was not communicated to the plaintiff, and as the signed guarantee was regular on its face, clear and unambiguous, there was no objective evidence upon which the learned Magistrate could have relied in holding that the signed guarantee was not objectively intended to be a guarantee
[9]
Plaintiff's Submissions
The plaintiff's submission in relation to Ground 1 noted that the Magistrate had been referred to the judgment of Robb J in Druin v Corbin, supra. However the plaintiff submitted that the facts in that case were "diametrically opposed" to the undisputed facts in the present case: at [18].
At [19] it was submitted:
"At the height of the undisputed facts in this case is the fact that Mr Battle on behalf of the plaintiff, did not expressly refer to a guarantee to the defendant, or advise him to seek independent legal advice. But (unlike the case above where there was an express conversation to the fact that the parties were not entering a guarantee) there was no other communication at all as to whether what was being signed was a guarantee or not. All that follows in the undisputed evidence is the un-communicated subjective intention of the defendant that if he had known he was signing a guarantee he would have instead opened a cash-on-delivery or some other kind of account."
It was submitted for the plaintiff that there was no evidence upon which his Honour could properly have found that the signed Guarantee was not objectively intended to be a guarantee: at [22].
It was further noted that although not expressly pleaded, insofar as the defendant claimed that he did not read or understand the document that he had signed, he was essentially arguing a defence of non est factum: at [26] (CB 13).
In that respect it was noted that a defendant relying on such a defence must show that the failure to read or understand the document was not due to carelessness on his part: Petelin v Cullen [1975] HCA 24 at [12]; 132 CLR 355 at 360.
Further, it was submitted that there was no evidence the plaintiff knew or ought to have suspected that there was some misapprehension as to the character of the agreement: per Petelin at 360.
It was submitted that the appeal should be upheld and an order made setting aside the judgment of the Local Court.
[10]
Ground 2
Ground 2 was expressed in the following terms:
Ground 2: As the defendant's state of mind not to be bound by the guarantee was not communicated to the plaintiff, and as the signed guarantee was regular on its face, clear and unambiguous, and as there was no duty to advise the defendant as to the terms of the document before he signed it, there was no basis upon which the learned Magistrate could find that the plaintiff's failure to direct the defendant to read the document or to seek independent legal advice, was a misrepresentation by silence.
In support of the plaintiff's submissions in relation to Ground 2 (at [35]-[37]) reliance was placed upon the decision of the High Court in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31; 241 CLR 357. In that case it was noted that Miller (an insurance broker) had provided BMW with relevant insurance documents without specifically disclosing their nature. The Court nonetheless found there was no misrepresentation by silence for reasons therein set out and summarised at [38] of the plaintiff's written submissions.
It was submitted that the learned Magistrate was in error to infer that there had been a misrepresentation by silence as there was no further duty on Mr Battle upon which his Honour relied.
As to the remaining grounds pleaded in the Amended Summons, they were said to depend upon Grounds 1 and 2 above.
[11]
Defendant's Submissions
The defendant relied upon its primary Written Submissions and Further Outline of Submissions dated 5 and 10 August 2016 respectively.
In the primary written submissions for the defendant summarised the factual findings said to have been made by the Magistrate: [10(i)] to [10(xvi)].
The Magistrate, it was noted, had found, on the evidence, that the defendant in signing the Credit Application, did not intend to and did not enter into a contract with the plaintiff: Written Submissions at [16].
It was submitted that his Honour correctly identified the issue for determination, namely, the liability of the defendant to guarantee the obligations of Twin Air. The objective evidence to which the Magistrate referred was summarised at paragraphs 10(vi) to 10(xiii) of the plaintiff's Written Submissions.
It was noted that the question as to whether the evidence justifies a finding that a party objectively intended to be bound by the terms of an alleged contract is one of fact, not law: Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909 at 924.
It was submitted that the only evidence that the plaintiff could point to that there was an intention by the defendant to enter into a legal contract with the plaintiff was the fact that the page which included the terms of the Guarantee was signed by the defendant: at [24].
The defendant submitted that there could be no complaint or dispute as to the circumstances in which the Credit Application was signed. Additionally, the Magistrate had made factual findings as to the objective intention of the defendant to be bound by the terms of an alleged contract and if there was any error it was only an error of fact, not one of law: at [25].
In answer to the plaintiff's submissions, it was stated that the defendant did not argue a defence of non est factum and the Magistrate made no findings in the proceedings on that basis. It was further contended that in any event the plaintiff was not "an innocent" person as referred to in Petelin v Cullen, supra, at 360.
The defendant concluded by submitting that the plaintiff was aware of the circumstances in which the defendant signed the Credit Application and did nothing to alert or bring to the defendant's attention the fact that the document contained a guarantee that created personal liabilities and that he should read the document: at [28].
In respect of Ground 2 it was noted that if the plaintiff does not succeed on Ground 1 then the Court does not need to consider Ground 2. The Magistrate dismissed the plaintiff's claim on the basis that there was no legal (and enforceable) contract.
In the event that Ground 1 was successful, the Magistrate did not in the circumstances specifically grant any relief as a consequence of any finding as to misleading or deceptive conduct.
It was noted that the Magistrate had concluded that Mr Battle's conduct, and specifically his omission to inform the defendant that he was signing a guarantee and to obtain legal advice amounted to misleading or deceptive conduct by silence. The defendant repeated its submission that this was a factual finding made by the Magistrate that the plaintiff has not sought leave to appeal pursuant to s 40 of the Local Court Act.
The defendant contends that the plaintiff misstated the evidence. In that respect, it was noted that the plaintiff did not hand the defendant the "Guarantee" but rather handed the Credit Application and "more significantly" did not direct him to read the document before signing it.
It was submitted that the Magistrate did not, in effect, impose a duty on or require the plaintiff (or Mr Battle) to read out the Guarantee document.
The defendant disputed that the decision of the High Court in Miller & Associates Insurance Broking Pty Ltd v BMW precluded the possibility that there could be misleading or deceptive conduct by silence but that in the factual circumstances of that case the conduct was not sufficient for such a finding to be made.
It was submitted that no error of law had been established by the plaintiff in respect of Ground 2.
In the defendant's Further Outline of Submissions, it was submitted that as this appeal is not a hearing de novo, this Court cannot make findings of fact for the purpose of determining what orders should be made: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; 74 NSWLR 481.
It was argued that wrong or perverse findings of fact, or findings of fact made as the result of an unsound or illogical reasoning process do not amount to errors of law unless there is "no evidence" to support the finding.
The defendant relies upon the observations of Brereton J in Jaksic v Yim [2011] NSWSC 962 at [13] where his Honour stated that what needs to be demonstrated is:
"…that the judgment is unsupportable on the facts incontrovertibly established by the evidence, or that no judge acting judicially and having regard to the whole of the evidence could have reached the conclusion that the primary judge did. Put slightly differently, there will be an error of law, or at least one of mixed fact and law, if the judgment given is one that was simply not open on the evidence".
[12]
Consideration
The issues in the present case are essentially twofold: was it was open to the Magistrate to find that the defendant was not bound by the terms of the Guarantee signed by him on 21 August 2009? Having regard to the signed Guarantee and the surrounding circumstances in which the defendant signed it, whether the Magistrate ought to have concluded that the defendant intended to enter into the contract of Guarantee?
The principles to be applied to resolving such questions are well established.
It has been held that it is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. The search for the intention sufficient to create contractual relations call for an assessment of the relevant objective circumstances including the external conduct of the parties which includes any uncommunicated subjective reservation or intention: Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; 209 CLR 95 per Gaudron, McHugh, Hayne and Callinan JJ at [24]-[25].
In Scottish Amicable Life Assurance Society, supra, McHugh JA observed (at pp 11-12):
"The formation of a contract does not depend upon the actual intention of the parties. A contract exists because the law attaches rights and obligations to the external conduct of the parties, one at least of whom has expressly or impliedly made a promise… The meaning which a party intends that his words or conduct should have is irrelevant. Words and conduct are interpreted according to what was said and not according to what was meant: IRC v Raphael & Ors [1935] AC 96 at 142-43. A court does not enquire whether 'both parties really meant the same precise thing, but only that both actually gave their assent to that proposition which, be what it may, de facto arises out of the terms' of their conversation or correspondence: Kennedy v Lee (1871) 3 Mer 441 at 451… In some cases what appears to be a contract may be vitiated by mistake duress or fraud. But these are exceptions to the general rule that a contract depends on external phenomena. No question of mistake arises in this case - at least at this stage."
His Honour also stated:
"…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. 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. (p 12)
The inquiry into whether the necessary intention to contract existed is, accordingly one that is not confined to the written document: Druin Pty Ltd v Corbin, supra, at [32] per Robb J. As his Honour stated, in an inquiry as to whether there is a contract at all it is logically necessary for there to be reference to all objective circumstances that bear upon the existence of the necessary intention.
Accordingly, in the present case the issue directs attention as to whether or not there was evidence of objective circumstances from which the learned Magistrate could reach the conclusion that the defendant did not intend to enter into a contract of Guarantee. That in turn requires consideration of the matters regarded and adopted by the Magistrate as "objective circumstances" which enabled him to reach that conclusion.
The relevant objective circumstances, in my opinion, would include:
1. The application for a credit facility, in particular the terms and conditions set out in the document, including that part of it subtitled Guarantee;
2. The fact that the defendant signed the Guarantee as one of two guarantors, his wife having previously inserted relevant personal details in the Application form with his signature then being witnessed by his wife;
3. The structure and content of the terms and conditions in two parts each submitted in bold print "Acknowledgements and Agreement" and "Guarantee" which each made provision for the defendant's signature respectively as director and guarantor.
4. The commercial or business nature of the alleged contract, between the plaintiff as supplier of air conditioning equipment and the defendant as a director/guarantor of a company (Twin Air) described in the Application as in the business of "Air Conditioning Installations" and who the Magistrate found to be:
"…a sophisticated defendant, at the very least I find he had experience in business, in the air conditioning business, and could not be said to be an unsophisticated defendant, knew that he and Twin Air were getting goods on credit as part of a common business transaction…": (T 5 February 2016 at p 2, (CB 125)
The defendant's case was, as the Magistrate noted, that he did not know that there was a guarantee on the form signed by him: T 3:45-50.
The Magistrate concluded that, "the weight of the objective evidence…" pointed to "…the defendant not being aware of the guarantee indemnity": T 6:16-18. On that basis his Honour concluded "… on an objective assessment in an analysis of the evidence" that the only intention that the defendant had was to act only on behalf of Twin Air and no more: T 6:20-21.
The learned Magistrate stated that he would refer in his reasons to what he termed "the objective assessment of the totality of evidence": T 6:23-24. However, he proceeded to note:
That it was the practice of Mr Battle not to expressly refer to the terms and conditions: T 6:25-27.
The "uncontradicted" evidence of the defendant that he relied upon "the two oral representations": T 6:27:30. I note that such "evidence" necessarily raised issues as to the precise nature of the statements said to have amounted to "representations" and to the defendant's alleged state of mind.
That no mention of the word "guarantee" was made or the defendant's attention directed to it in the agreement, and as to his own liability: T 6:28-29.
The Magistrate then adverted to the fact that "the main parties" to the agreement were the plaintiff and Twin Air and that "…therefore it could not be said for instance that Mr Amabile knew that whatever rights he was signing up (to) were only his and no one else's or obligations": T 6:20-25.
After noting that the agreement had been completed by the defendant's wife the Magistrate stated that the defendant, in the presence of Mr Battle "…signed the document without reading it". This was said to be in "the immediate circumstances of a general conversation about work and product": T 6:37:39.
A little later the Magistrate stated that in the circumstances outlined by him he concluded that they "…should have alerted Mr Battle to the reasonable expectation that the defendant was not aware he was signing a guarantee": T 6:47-49.
The Magistrate concluded that "he" (i.e. Mr Battle) "…should have alerted him to that state of knowledge and possibly also the need for - to obtain legal independent advice": T 6:49-50.
The Magistrate stated that "The omission [an apparent reference to Mr Battle] does amount in the present circumstances to misleading or deceptive conduct by silence". He again referred to what was described as the "uncontradicted evidence" of Mr Amabile that he did not read the document when he signed it there and then" and that Mr Battle "…must have been aware or should have been aware that Mr Amabile had not read the agreement": T 7:10-14, CB130.
The Magistrate's reasoning proceeded upon the basis of an acceptance of the defendant's account that he did not read the Guarantee with the proposition that that would have been apparent to Mr Battle. That proposition was not in terms put to Mr Battle. His Honour then concluded that on those bases Mr Battle became subject to a duty or an obligation to alert the defendant to the fact that he was signing or entering into a guarantee and also to a possible duty to advise the defendant to obtain legal advice.
In my opinion, with respect, this form of reasoning does not reflect or accord with accepted principles for determining whether a person intended to enter into a legally binding contractual relationship. The learned Magistrate was required to look both at the agreement and to "all objective circumstances" as discussed in the caselaw authorities.
The defendant's evidence did not indicate why he signed the Guarantee. If it had been the case, as the defendant said, that he did not read the Guarantee that cannot in itself be determinative of the question as to whether he had an intention to enter into binding contractual relations with the plaintiff. In some circumstances the failure to read a contractual document may be explained by a number of circumstances. The defendant may not have taken time to read the Guarantee conditions simply because he was not prepared to make the effort to do so. Alternatively, he may, in the course of business, have become familiar with guarantees and for that reason concluded that he did not need to read the conditions.
As noted above, the defendant placed his signature on the two parts of the Agreement and Guarantee document. He made no attempt to explain how or why he signed as director and guarantor.
Additionally, the Magistrate's ultimate finding as to there not having been a guarantee by the defendant, was, at least in part, premised upon the ground that some duty or obligation fell upon Mr Battle to draw the defendant's attention to the terms and conditions of the Guarantee notwithstanding that they were set out and presented to the defendant in writing. The Magistrate did not identify any principle or legal basis for the proposition that Mr Battle was subject to a duty to inform, warn and/or advise the defendant, a "sophisticated" defendant experienced in the relevant field of business.
This was not a case in which there was any suggestion that Mr Battle engaged in any form of sharp practice. Indeed the finding of the Magistrate indicates that the contrary was the position. Mr Battle, though unable to specifically recall the circumstances of the transaction, gave his evidence based upon, as he stated, his usual practice and experience in dealing with such matters.
[13]
Conclusions
On an examination of the Magistrate's reasons for judgment, and the submissions of the parties, I record the following conclusions:
1. The signature of the defendant, as guarantor, objectively manifested the fact that the defendant had understood and intended to be bound by the terms and conditions of the Guarantee as part of the transaction for a credit facility to be provided by the plaintiff;
2. There was no statement made by Mr Battle that disavowed that the parties were intending to enter into a binding contract of Guarantee;
3. A primary basis relied upon by the defendant in the proceedings was an alleged subjective state of mind. This was expressed in the submission on his behalf that had he known he was signing a guarantee then he would instead have opened a cash-on-delivery account or some other type of account;
4. The defendant admitted in cross-examination to knowing what a guarantee was: T 61:5-20;
5. The defendant knew that he had signed the Acknowledgement and Agreement and the Guarantee and that the signature on both documents was witnessed: T 68;
6. The fact that the defendant gave evidence that he did not read the terms and conditions of the Guarantee, if accepted, is a fact that is explicable on a number of possible bases. They include the fact that he did not care to take time to read the document or that he understood what a guarantee was and decided that he did not need to read it. The defendant did not explain why he did not read the Guarantee document;
7. The relevant objective circumstances in determining whether a binding contract was made include what the contracting parties said and did. In this case, the defendant, by his application to the plaintiff, was seeking a credit facility. He was handed the contractual documents. Whether he chose to read the terms and conditions of it was a matter for him. If, as he said in evidence, he did not read the document handed to him by Mr Battle, the failure to do so did not arise from anything said or done by Mr Battle;
8. The defendant was in fact given notice of the proposed contractual terms and conditions of the Guarantee by means of the document which set them out. The contract was expressed in clear and unambiguous terms. It was handed directly to him by Mr Battle;
9. There was in fact no evidence of objective circumstances that supported the contention that the defendant did not intend to enter into a contract of guarantee. Whilst the Magistrate referred at p 15-25 to "Objective evidence", he did not in fact identify factual matters that constituted objective circumstances capable of supporting the defendant's denial that he intended to contract by way of guaranteeing Twin Air's contractual obligations;
10. The defendant does not have a defence of non est factum, on his evidence, as he was a party who failed to exercise care and read the document: Petelin v Cullin, supra, at 360.
11. In circumstances in which the document containing the Guarantee was handed to the defendant for him to read and sign, there was no evidence that he was deceived or tricked into believing that the document was other than as stated by its terms under the heading in bold "Guarantee";
12. The Magistrate's reliance upon Mr Battle's silence as a basis for constructing or imputing a misrepresentation was without support either in evidence or in legal principle. In particular, there was no evidence of circumstances (and none identified by the Magistrate in his decision) that gave rise to a duty in Mr Battle to inform or advise the defendant. This was especially so given the defendant's experience in business matters;
13. Further, there was no evidence identified, or that was capable of giving rise to a reasonable expectation that Mr Battle would inform him or advise him as to the proposed guarantee: Kimberley NZI Finance Limited v Torero Pty Ltd (1989) ATPR 46-054 at 53,195. There existed no contractual or fiduciary relationship between the defendant and the plaintiff or between the defendant and Mr Battle. There were no circumstances proved that were capable of establishing a duty based upon a relationship of proximity or a relationship otherwise attracting a duty upon the defendant or upon Mr Battle;
14. The Magistrate's statements:
15. "…Mr Battle failed to bring to his attention…p 4 of the agreement…"
16. "Mr Battle failed to highlight or draw the defendant's attention to any terms and conditions in the general conditions…"
17. "Mr Battle's failure to highlight and draw the defendant's attention…"
18. are all statements that assume a duty in Mr Battle and, upon that erroneous assumption, the Magistrate proceeded to find breaches or failures on Mr Battle's part to fulfil the (assumed) duty. This line of reasoning as to the alleged "breaches" or "failures" of Mr Battle were without support or foundation in the evidence; and
19. The two statements attributed by the defendant to Mr Battle which were said to be representations, namely, "here is a credit application" and "just fill it out, this form, and we'll get your account opened", even if capable of amounting to some form of "representation" could not in terms be construed as "misrepresentations" in circumstances in which:
1. The document containing the terms and conditions of the Guarantee were, as found by the Magistrate "clear and unambiguous";
2. The document which contained all terms and conditions of the proposed Guarantee was in fact handed to the defendant;
3. A reasonable expectation in those circumstances is that a person who proposes to enter into a commercial arrangement, and who is handed a written document, will read it. If the defendant had read at the document he would have seen the word in bold "Guarantee";
4. There was no evidence, suggestion or submission made that the defendant was in any way being pressured or hurried to sign the document;
5. The defendant, the Magistrate stated, was a "sophisticated defendant" who "had experience in business, in the air conditioning business"; and
6. Mr Battle did not say or do anything to disavow the written contractual terms and conditions.
For the reasons stated above, I have concluded that the Magistrate in finding, in effect, that the defendant did not intend to enter into a legal contract, namely a contract of guarantee, with the plaintiff, erred in law in making that finding.
The decision of the Magistrate was vitiated by legal error in that:
1. His Honour failed to apply the proper test for determining whether the parties intended to create a binding and legally enforceable contract. Namely, to identify all objective circumstances that bear upon the existence of the necessary intention to contract.
2. His Honour did not identify any relevant objective surrounding circumstances referred to in (1) above.
3. There was no evidence that established objective surrounding circumstances (such as words or acts) that the defendant did not intend to be bound by the terms of the Guarantee signed by him.
I am of the further opinion that, on the evidence, and for the reasons stated above, the plaintiff and the defendant did intend to enter into a legal contract, being a contract of Guarantee in the terms set out on page 4 of the Application, a copy of which was marked A to the affidavit of Ms Boutros.
[14]
Orders
I make the following orders:
1. The verdict entered for the defendant in Local Court proceedings 2015/156001 on 5 February 2016, is set aside.
2. The order for costs in favour of the defendant made by the Local Court on 5 February 2016 is set aside.
3. Judgment is entered in favour of the plaintiff against the defendant in the amount of $38,853.38 together with interest at the rate prescribed by the Uniform Civil Procedure Rules 2005 from 12 August 2013.
As the plaintiff is the successful party in the proceedings, in accordance with the rules of court, costs would normally follow the event. In the event that the defendant wishes to make submissions to a contrary form of costs order, then written submissions should be lodged with my Associate and served, within 14 days of the date of this judgment. In the event that the defendant does not wish to make an application to argue any other costs order, then costs are awarded to the plaintiff against the defendant on the ordinary basis.
[15]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 30 August 2016
In Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd, supra, French CJ (dissenting but not on this point) observed at [22]:
"However, as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. Yet that appears to have been, in practical effect, the character of the obligation said to have rested upon Miller in this case."
In the present case, the defendant, as earlier stated, specifically signed the contractual documents in two capacities. The factual circumstances in Druin Pty Ltd v Corbin, supra, are very different to those in the present case. In Druin, the defendant was alleged to have entered a guarantee about which there was "confusion" by reason of the fact that the defendant did not sign the document as guarantor but signed it in that part of the document which related to "signature of witness". The Court did not in that case accept that the affixation of the defendant's signature on the guarantee within the application was a clear manifestation of an intention to be legally bound by the terms of the guarantee. In deciding that case, Robb J identified three specific factors which had created considerable uncertainty. They included the fact that the defendant did not sign in the space provided for the signature of the intended guarantor. His Honour noted that if he had signed "as guarantor":
"…that would have been a significant step towards a proper finding that he intended to bind himself as guarantor, irrespective of other omissions from the terms of the document. As he signed as a witness, the issue is entirely open as to what the obligation was that the defendant was witnessing." (at [38])
Robb J also observed that that conclusion was reinforced by the fact that "no one signed in the place provided for the guarantor": at [39].
Further, his Honour observed, "…the name of the proposed guarantor was not inserted in the space provided in the imbedded guarantee…": at [40].