Tu v Primary Contracting Services Pty Ltd

CITATION: Tu v Primary Contracting Services Pty Ltd (trading as Australian Contracting Solutions) [2009] NSWCA 7

Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153 Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215 CASES CITED: Hanave Pty Ltd v Lfot Pty Ltd [1999] FCA 357; (1999) 43 IPR 545 Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165 Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531

Whether misleading and deceptive conduct 25 The appellant sought to avoid liability under the guarantee which he signed upon the basis that the respondent had engaged in misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth). The appellant also sought to have the guarantee set aside under s 7 of the Contracts Review Act. 26 Implicit in the submissions made by the appellant in these respects was the correct assumption that unless the appellant could succeed on one or other of these bases, the appellant would be bound by his signature on the written guarantee notwithstanding that, so he claimed, he had not read it prior to signing it (see Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165). 27 The appellant relied upon two items of evidence which he said demonstrated that the respondent had engaged in misleading and deceptive conduct. Both were in the evidence of Mr Parsons, given in the course of cross-examination. Neither was the subject of evidence from the appellant or from Mr Liu. The primary judge described the two items of evidence as follows: "[96] Mr Parsons gave evidence that at the beginning of the meeting at the Paragon Café, Mr Liu said: Ming Tu is the general manager of Poumeaton Enterprises and he has authority to sign the hiring agreement and the guarantee on behalf of the company. [97] In cross examination, Mr Parsons said that he replied That's fine or That's good . " … "[99] In cross examination, Mr Parsons gave evidence that during the course of the meeting he said, Poumeaton will have to give us a guarantee and Ms Morris confirmed this in cross examination." (Red Appeal Book 89N-P, 90C). 28 The evidence to which her Honour referred in [99] of her judgment was in the following terms: "A. It had been done in the promotional - when we spoke about our services, the Odco services. That's how Odco works, we must have a guarantee. Q. And in that promotional material you're saying, are you, that you would have said to Mr Liu and Mr Tu that "if you enter into arrangements with ACS Poumeaton will have to give us a guarantee", is that what you're saying? A. That's correct. Q. You said words to that effect? A. Words to that effect." (Black Appeal Book 76Q-U) 29 Her Honour found that the conduct of the respondent was not misleading or deceptive because it did not "convey in all the circumstances of the case a misrepresentation" (Red Appeal Book 91F). She took into account in this respect the following matters: "The defendants were businessmen. The hiring agreement and guarantee had been forwarded to Poumeaton's solicitors 2 months previously. Whilst I accept that Mr Parsons did not specifically state that the effect of the guarantee was that the defendants were personally liable for the debts of Poumeaton, I do not consider that it was encumbent upon him to do so. The plaintiff draws the court's attention to the fact that the face of the documents indicate that Mr Tu signed the hiring agreement as a director of Poumeaton and, along with Mr Liu, the guarantee as an individual not on behalf of Poumeaton. The plaintiff also relied upon the fact that Mr Liu does not assert that he was misled into believing he was signing the guarantee on behalf of Poumeaton." (Red Appeal Book 90O-W). 30 The reference in the evidence quoted in [31] above to "promotional material" was to promotional materials referred to by Mr Parsons in para 10 of his affidavit of 20 June 2007 where he said: "In or about late September or early October 2005 I sent Poumeaton's lawyer, Andrew Frank (Cumberland Frank Solicitors) a copy of the hiring agreement, the guarantee and other promotional materials. I never heard from Mr Frank after sending him this information." (Blue Appeal Book 5H-J). 31 Bearing in mind that the cross examiner was putting a question about the content of promotional materials (which were not in evidence) supplied to solicitors for Poumeaton together with the proposed hiring agreement and form of guarantee to be provided, the answer given by Mr Parsons as to those promotional materials does not in my view evidence any misleading or deceptive conduct on the part of the respondent. The intended recipients of the communication were solicitors. They would clearly have understood upon receipt of the form of guarantee that it was, as one would expect it to be, a proposed guarantee whereunder the guarantor would assume a personal liability in respect of a principal indebtedness of Poumeaton. 32 Likewise the first referred to item of evidence ([96-7] of the judgment below and [30] above) did not in my view evidence any misleading or deceptive conduct on the part of the respondent. The evidence was of an acceptance by Mr Parsons of a statement of Mr Liu. The appellant contends that Mr Liu's reference to the guarantee constituted a statement that the guarantee was one which would be given by the company of its own liability and was not a document whereunder the appellant would assume any personal liability. However bearing in mind that the form of hiring agreement and guarantee had been provided to Poumeaton's solicitors some time previously and that the appellant was being introduced by Mr Liu as the general manager of Poumeaton, the respondent's acknowledgement was simply an acknowledgement that the guarantee to be provided or procured by Poumeaton was to be signed by the appellant. In my view, the exchange did not involve any suggestion that the appellant was not to be personally liable under the guarantee. 33 A further reason for rejecting the defence based upon misleading and deceptive conduct is that even if it be assumed that what occurred at the meeting was capable of being understood by the appellant as a representation by the respondent that by signing the guarantee the appellant would not incur any personal liability, there was no basis for concluding that the appellant so understood what occurred and relied upon that understanding in signing the guarantee. In particular, the appellant did not give any evidence to this effect. The appellant did not give any evidence at all of a representation by the respondent that he would not incur personal liability. His evidence was that he did not believe that he would incur any such liability but he did not attribute his formation of that belief to conduct of the respondent. 34 The appellant pointed to the fact that reliance upon an inducement by misleading and deceptive conduct may be inferred where the representee does not give direct evidence to that effect. He relied first upon Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215 which supports the general proposition that inducement may be inferred. That does not however appear to have been a case where the representees did not give evidence of inducement. 35 Secondly the appellant relied upon Hanave Pty Ltd v Lfot Pty Ltd [1999] FCA 357; (1999) 43 IPR 545 and in particular the following passage in the judgment of Wilcox J (at 548): "In a case where Mr Burke was thought unworthy of credit because of a tendency to tailor his evidence to suit his company's case, it is ironic that the respondents' best point is that Mr Burke failed to give the standard self-serving evidence of reliance. However, I do not think this matters. I agree with Kiefel J that causation can sometimes (perhaps best) be resolved by the court objectively determining the likely effect of the misleading conduct. This is such a case. All the objective facts point to the conclusion that, if Mr Burke had been given information that caused him to doubt the ability of Barbara's Storehouse reliably to pay its rental over the long period of the lease to May 2003, he would have declined to proceed with the transaction on the negotiated terms." 36 That was a case in which there was non-disclosure to a purchaser of property of an adverse matter relating to a tenant of the property. The tenant had been described to the purchaser by the vendor's agent as a "high quality" tenant. It was not therefore a case like the present where, putting the case at its highest for the appellant, there was a representation which might conceivably have borne a particular meaning (contrary to what I regard as its natural meaning in the circumstances of the case) and the supposed representee has not given evidence that he took the statement in that particular way and relied upon it when deciding to sign the guarantee. In the circumstances of this case, there is in my view no basis for drawing any inferences which would overcome the absence of such evidence from the appellant. The parties might have been otherwise if the natural meaning of the words said to have been used clearly supported the appellant's misrepresentation case.

Contracts Review Act 37 The appellant contended that the guarantee was unjust within the meaning of s 7 of the Contracts Review Act and was for that reason liable to be set aside. 38 The appellant's defence contained the following particulars of this contention: "(a) The Second Defendant was not reasonably able to protect his interests by reason of the fact that: (i) he was born in China in 1957, and his native language is Mandarin; (ii) he has only been living in Australia since 2001; (iii) his English was poor when he signed the Guarantee; and (iv) he has trouble reading and understanding written English; (b) there was a material inequality in bargaining power between the Plaintiff and the Second Defendant at the time the Guarantee was signed; (c) prior to the time the Guarantee was signed, its provisions were not the subject of negotiation by the Second Defendant; (d) it was not reasonably practicable for the Second Defendant to negotiate for the alteration of or to reject any of the provisions of the Guarantee; (e) the Plaintiff constituted the First Defendant its agent for the purposes of having the Second Defendant sign the Guarantee; (f) the First Defendant led the Second defendant to believe he was signing an overdraft contract on behalf of the Company; (g) the First Defendant failed to advise the Second Defendant that he was signing a guarantee; (h) the Second Defendant did not read the Guarantee before he signed it; (i) no independent legal advice was obtained by the Second Defendant in relation to the Guarantee, and neither the Plaintiff nor the First Defendant verbally advised him to obtain such legal advice; (j) the provisions of the Guarantee and its legal and practical effect were not explained by any person to the Second Defendant; and (k) the First Defendant told the Second Defendant that he had to sign the Guarantee because he was a director of the Company. (Red Appeal Book 39G -40I). 39 The primary judge considered each of these sub-paragraphs other than sub-paragraph (k). That sub-paragraph was presumably not considered upon the basis that it was not ultimately pressed but in any event no complaint is made about the matter on appeal. 40 The primary judge's conclusion that the contract was not unjust is open to review on appeal. This Court must form its own view as to that issue and give effect to it if it differs from that of the primary judge (Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [100, 107] and see [40]; Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531). I do not however consider that there was any error in the primary judge's reasoning or conclusion as to the Contracts Review Act defence. 41 For good reason, the appellant's argument on appeal (and before her Honour) focused on the alleged misrepresentations made to the appellant concerning the nature of the guarantee document. The finding at first instance (with which I agree) that there were no such misrepresentations, although not fatal to the Contracts Review Act defence, left little room for it. The defence was in my view bound to fail in circumstances where it was found that: * The appellant was introduced as, and presumably was, the general manager of the principal debtor company. * The guarantee was entered into as part of commercial arrangements between parties of apparently equal bargaining power, the appellant and his brother having negotiated the purchase of a substantial business. * The forms of hiring agreement and guarantee were supplied to the solicitors for the principal debtor some time before the occasion arrived for signature of the forms. The principal debtor company was owned and operated by the appellant and his brother, Mr Liu. * The guarantee document signed by the appellant used the word "guarantee" in a prominent fashion. * No misrepresentation about the nature of the document was made by the respondent. 42 In essence, the position was, as the primary judge found, that in the context of commercial dealings in which he was involved, the appellant signed a guarantee in circumstances where no misrepresentation about the nature of the document was made to him and he had every opportunity to apprise himself of its contents and to decline to sign it.

(1985) 157 CLR 215

(1999) 43 IPR 545

(1979) 142 CLR 531

[1979] HCA 9

[1985] HCA 75

[1999] FCA 357