Williams Group Australia Pty Ltd v Crocker

Supreme Court of NSW|2015-02-25|Before: McCallum J, Knoll AM

Judgment

HER HONOUR: These are proceedings for the enforcement of a guarantee allegedly given by a director of a company to secure the terms of a trade credit agreement. The plaintiff, Williams Group Australia Pty Ltd, carries on the business of selling building materials. It is convenient to refer to that company by its trading name, JH Williams. The trade debtor was the first defendant, IDH Modular Pty Ltd (in liquidation). The three directors of IDH Modular were Mr Calem Brooks, Mr Lee Crocker and Mr Mark Walsh (the second, third and fourth defendants respectively).
The trading account was opened in July 2012. By July 2013, the debt stood at $889,534.35. The proceedings were commenced against the company to enforce that debt and against each of the three directors to enforce their guarantees. In October 2013 a liquidator was appointed to the company and the proceedings against it are accordingly stayed. Summary judgment was subsequently obtained against the second and fourth defendants. The third defendant, Mr Crocker, was successful in resisting the application for summary judgment. This judgment determines the claim against him.
The sum claimed by JH Williams is $995,059.62 consisting of the principal sum of $889,534.35 together with interest up to the first day of the hearing in the sum of $105,525.27 (as calculated in MFI 2). There was no contest as to the quantum of the amount claimed.

Actual authority

JH Williams' claim at times blurred the distinction between actual and ostensible authority. Paragraph 16(a) of the further amended statement of claim contends that Mr Crocker "authorised, or held out as authorised" either Mr Brooks, Ms Harrison or an employee of IDH Modular to place his signature on the guarantee electronically "as pleaded at paragraphs 16(b) and 16(c)". Those paragraphs make the following contentions: (b) he did so by leaving [Mr Brooks] with his email address and password so as to enable [Mr Brooks] or any other person to whom [Mr Brooks] gave [Mr Crocker's] email address and password, namely, any Authorised Person, to access the HelloFax/HelloSign system on behalf of [Mr Crocker] and to apply [Mr Crocker's] signature to the guarantee using the HelloFax/HelloSign system; and (c) [Mr Crocker] either: (i) approved an Authorised Person applying the signature to the guarantee; or (ii) left an Authorised Person with his email address and password and thus in a position where he or she could firstly, sign the guarantee, using [Mr Crocker's] signature whether or not given specific authority to do so, and secondly, could transmit the guarantee to [JH Williams] knowing that [JH Williams] would rely upon the guarantee as having been duly signed by [Mr Crocker].
Although the contentions of actual approval and approval by leaving his email address and password with an unidentified person are there pleaded as discrete, alternative contentions, no separate particulars, evidence or submissions were put to establish actual approval (except perhaps in the plaintiff's written submissions in reply, considered below). By the end of the hearing, it was my understanding that the claim based on actual authority had been abandoned. It was not separately addressed orally by Mr Knoll, who appears for the plaintiff, in his closing submissions (and see the exchange at T205.16-33). However, the plaintiff's written submissions in reply (filed with leave after the conclusion of the hearing), under the heading "first basis of liability: ostensible authority/estoppel", specifically directed submissions to the parts of Mr Crocker's submissions addressing both actual and ostensible authority (at least according to the subheading). Further, the submissions in reply appearing under the heading "second basis of liability: ratification" appeared to put an argument of actual authority as opposed to ratification. Specifically, at para 23 of those submissions, it was argued that, from July 2013 (by which time it is clear Mr Crocker knew the guarantee had been signed in his name), Mr Crocker could have pleaded fraud but did not. It was submitted that the Court should infer he did not do so "because he knew Mr Brooks had applied the signature with approval".
Accordingly, it remains unclear whether the plaintiff meant to maintain the allegation that actual authority was given for someone else to apply Mr Crocker's signature to the guarantee on his behalf. For abundance of caution, I will address that issue.
I am not persuaded that Mr Crocker gave his authority to any person, expressly or by implication, to place his signature on the guarantee using the HelloFax system. The contention that he did ultimately rests on the fact that he did not change his password for accessing the system after he received it from another director of the company. That omission, coupled with the fact that he accessed HelloFax himself (on 26 June 2012) and uploaded sample signatures, meant that his signature could be applied by any person holding his access information.
Mr Kerr, who appears for Mr Crocker, acknowledged that a relationship of agency can arise by implication, citing the remarks of Lord Cranworth in Pole v Leask (1863) 8 LT 645 at 648: An intention to create an agency may be manifested … simply by placing another in a situation in which, according to the ordinary rules of law, or … the ordinary usages of mankind, that other is understood to represent and act for the person who has so placed him.
The evidence, however, falls far short of anything revealing any such intention. The evidence was that, in May 2012, Mr Brooks informed Mr Crocker that he had set up the electronic signing system to enable the directors of IDH Modular to sign documents when it was not convenient for them to sign documents physically. Plainly, by reason of the fact that it was Mr Brooks who communicated Mr Crocker's HelloFax username and password to him, Mr Crocker was aware that Mr Brooks had access to that information. However, there was no evidence to suggest that Mr Crocker authorised or expected any other person to operate the system on his behalf at any stage. On the contrary, according to his evidence (which I accept), on the occasions when his signature was applied to documents electronically with his knowledge, that was done by him personally, in response to a request from Ms Harrison. There is no suggestion that he at any stage asked or authorised someone else to apply the signature for him.
Significantly, it appears that the signature applied to the guarantee was not in fact one of the two signatures uploaded by Mr Crocker on 26 June 2012 but a third, uploaded from Murwillumbah on the very day it was applied to the guarantee. That suggests an absence of discussion between Mr Crocker and whoever applied his signature to the guarantee (as acknowledged in oral submissions at T205.16-33).
I do not think the fact that, in his approach to this litigation, Mr Crocker did not immediately raise the issue dictates a different conclusion. Mr Crocker's evidence made plain that, initially, he accepted advice from a different lawyer that there was a viable defence based on the Electronic Transactions Act 2000 (NSW). He frankly acknowledged that, when the claim was first made against him, he was not certain whether he had signed the guarantee. It occurred to him that someone else might have applied his signature, but he was not sure. He said (at T104.20) "Yes. Well it's difficult when you're presented with a document that has your signature that's electronic to know whether you did or didn't". As is now accepted by the plaintiff, it is plain that someone else did apply his signature. I do not think Mr Crocker's initial equivocation on that issue points to an inference that he knew that had been done with his authority. I think he was just being honest as to his recollection (or lack of it) about the document.
As observed in Mr Crocker's written submissions the guarantee is not limited in amount. It is an all monies guarantee of the obligations of IDH Modular under the trade credit agreement. The credit application nominated anticipated purchases of $350,000 per month (that amount was imposed as the credit limit for the account but the limit was not observed, as revealed by the sum outstanding at the conclusion of the dealings). Mr Crocker was not advised by Mr Brooks or Mr Walsh or any other person that he was required to provide a personal guarantee of that liability. The mere failure to change his password between 4 May 2012 and 2 July 2012 does not demonstrate any intention to authorise Mr Brooks to apply his signature to a document incurring such a considerable personal liability. To use Mr Crocker's access details for that purpose without consulting him would not accord with the "ordinary usages of mankind"; it would be regarded as a misuse of those account access details.
For those reasons, the claim based on actual authority (if it was pressed) must fail.

Ostensible authority

The pleading set out above reveals that the claim of estoppel based on ostensible authority rests on the same factual contentions as the claim based on actual authority. It is contended that, by failing to change his HelloFax password, and uploading signatures that could be applied by any person holding that information, Mr Crocker "held out as authorised" either Mr Brooks or Ms Harrison or an unnamed employee of IDH Modular to place his signature on the guarantee electronically. Necessarily, the contention must be that the authority was held out by Mr Crocker to JH Williams. However, as observed by Mr Kerr, Mr Crocker's failure to change his password was not a communication in any form to JH Williams. In that circumstance, it is unsurprising that there was no evidence that JH Williams relied on any "holding out" that Mr Brooks or any other person had authority to apply Mr Crocker's signature to the guarantee. Mr Kerr put the point neatly: That is for the simple reason that JH Williams (relevantly Ms Williams, its credit controller who processed IDH's credit application) had no reason to believe that Mr Crocker had not signed the guarantee. Thus JH Williams did not rely on any representation of Mr Brooks' authority. It simply assumed the genuineness of Mr Crocker's signature on the guarantee.
Mr Knoll submitted that Mr Crocker is liable on much the same basis as BNP Paribas was found to be liable to Pacific Carriers Limited in Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451. Pacific's claim arose out of the sale of a cargo of legumes by an Australian grain trader to a grain trader in Calcutta. Pacific was the time charterer of the vessel carrying the cargo. It requested a "bank letter of indemnity" to enable the cargo to be discharged without the bills of lading. BNP provided two letters of indemnity on which an officer of the bank, Ms Dhiri, signed her name and affixed the bank's stamp or "chop". Ms Dhiri did not in fact have authority within the bank to bind the bank to an indemnity. Pacific assumed otherwise and, acting on that assumption, discharged the cargo without the bills of lading, ultimately incurring substantial loss for that reason.
The High Court held that it would be unjust to permit BNP to depart from Pacific's assumption (at [44]): The assumption made by Pacific, found by the trial judge to have been reasonable, upon which Pacific acted to its detriment, was induced and assisted by the conduct of BNP in placing Ms Dhiri in a position which equipped her to deal with the letters of indemnity as requested by Pacific. It would be unjust to permit BNP to depart from the assumption.
The Court's decision turned on a consideration as to what had been represented to Pacific by BNP (the principal sought to be held liable to indemnify Pacific).
Mr Knoll submitted that Mr Brooks and Mr Dene Crocker (the third defendant's brother) were each in a position analogous to Ms Dhiri. As observed by Mr Kerr in his written submissions, JH Williams has not pleaded any case based on the conduct of Mr Dene Crocker and made no application to do so.
In any event, the argument is that Mr Crocker (in the position of BNP) armed Mr Brooks or someone else (in the position of Ms Dhiri) with the means to hold himself or herself out to DH Williams (in the position of Pacific) as having authority to place Mr Crocker's signature on the guarantee. That is where the analogy falls down. With great respect to its author, the submission fails to grapple with the distinguishing feature of this case that the plaintiff here seeks to impose liability on an individual pursuant to a personal guarantee. BNP Paribas was concerned with the principles concerning the apparent or ostensible authority of an officer of a company dealing with a third party. The representational conduct of an institution such as a bank was the critical consideration. The Court stated the relevant legal principle at [36] (citations omitted; emphasis added): Where an officer is held out by a company as having authority, and the third party relies on that apparent authority, and there is nothing in the company's constitution to the contrary, the company is bound by its representation of authority. "The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract." It is not enough that the representation should come from the officer alone. Whether the representation is general, or related specifically to the particular transaction, it must come from the principal, the company. That does not mean that the conduct of the officer is irrelevant to the representation, but the company's conduct must be the source of the representation. In many cases the representational conduct commonly takes the form of the setting up of an organisational structure consistent with the company's constitution. That structure presents to outsiders a complex of appearances as to authority. The assurance with which outsiders deal with a company is more often than not based, not upon inquiry, or positive statement, but upon an assumption that company officers have the authority that people in their respective positions would ordinarily be expected to have. In the ordinary case, however, it is necessary, in order to decide whether there has been a holding out by a principal, to consider the principal's conduct as a whole.
Mr Knoll relied upon the statement in the judgment at [38] where the Court said: The holding out might result from permitting a person to act in a certain manner without taking proper safeguards against misrepresentation.
He submitted that Mr Crocker's failure to change his password permitted Mr Brooks or some other person to apply his signature electronically to the guarantee. The argument overlooks the critical element of that statement, that is, that the content of the "holding out" is a representation that the agent acts with the authority of the principal.
There was no representational conduct on the part of Mr Crocker directed to DH Williams to suggest that Mr Brooks or some other person was authorised, in effect, to place Mr Crocker's stamp or "chop" on the guarantee. What was represented to DH Williams (by an unknown person) was that Mr Crocker had in fact signed the guarantee; that is the only reasonable inference to be drawn from the representation that Mr Crocker's signature had been witnessed by Ms Harrison. That representation did not come from Mr Crocker.
Mr Knoll submitted that it is a misconception of the principles stated in BNP Paribas to look for a separate act of representation by Mr Crocker. He submitted that that was the mistake made by the Court of Appeal in BNP Paribas, whose decision was overturned by the High Court. But the High Court did not say that a principal can be estopped by reason of a representation he did not make. The judgment expressly identifies the critical issue as being whether there has been a holding out by the principal.
It may be accepted that, in BNP Paribas, the bank made no express representation to Pacific that Ms Dhiri was authorised to affix its stamp or chop to the indemnity. That representation was made by Ms Dhiri (by the act itself). The error perceived in the reasoning of the Court of Appeal (at [37] of the judgment of the High Court) was to have overlooked the institutional context in which Ms Dhiri made that representation. The High Court held that there was representational conduct beyond the mere placement of a signature and the bank's stamp or "chop" on the indemnities. The representation of authority came from a combination of features of Ms Dhiri's presentation to the outside world, all attributable to the fact that Pacific was dealing with a bank, with all its institutional trappings. The Court characterised it is as a representation of the kind that flows "from equipping an officer of a company with a certain title, status and facilities": at [38].
Further aspects of the representational conduct evidently considered significant by the Court may be gleaned from the discussion of the issue of reliance at [42] of the judgment: Pacific's reliance upon the letters of indemnity was based upon their form and contents, the signature of a person who appeared to be (and was) an officer of the bank, the stamp or "chop", and the fact that Pacific was sent copies of the documents, directly or indirectly, by BNP. The stamp was probably more significant to Pacific than the signature, which was indecipherable. It was designed for use on letters of credit, and it allowed the person who was authorised to use it to give an appearance of authenticity to documents to which it was applied. The organisational structure of BNP in Sydney at the time was such that Ms Dhiri was the bank officer to whom Pacific's request, would be, and was, communicated by NEAT. She was the person who dealt with the request, and who communicated BNP's response to Pacific. That response, involving her signature of the letters of indemnity and fixing the bank's stamp to them, would signify to a reasonable third party, and signified to Pacific, agreement to what was requested. The stamp was not BNP's common seal, but placing it on a commercial document which named the bank as a party strongly enhanced the appearance that the document was signed on behalf of BNP. Ms Dhiri was given the stamp without any instructions as to how she should use it.
It must be accepted that, in theory at least, a case could fall within the principles applied in BNP Paribas where the representation of authority arose without there being any express communication by the principal (Mr Crocker) to the representee (DH Williams) but there must be some representational conduct on the part of the principal. In BNP Paribas there was an organisational structure which presented to outsiders "a complex of appearances as to authority".
Mr Knoll also relied upon the decision in Heperu Pty Ltd v Morgan Brooks Pty Ltd [2007] NSWSC 1438 at first instance (there was an appeal but Mr Knoll submitted that it was not necessary to go to the decision of the Court of Appeal on this issue). I do not think the decision of Palmer J in Heperu takes the matter any further for the plaintiff in this case. An issue in that case was whether a fraudster had ostensible authority to bind the principal. Palmer J held that he did, primarily on the strength of institutional representation of the kind found in BNP Paribas (at [69]): In the present case, Morgan Brooks caused or permitted Mr Cincotta to act as manager, and to represent himself as manager, of a business which Morgan Brooks authorised to trade using prominently the name "Morgan Brooks Group" and the logos and livery of the "Morgan Brooks Group". On its web site, which Dr Landa saw before making his investments, Morgan Brooks showed the address of Mr Cincotta's offices as its offices, showed Mr Cincotta as "Manager", and gave the e-mail contact address for Mr Cincotta's offices as its own e-mail address. The website contained no statement to the effect that the "offices" were, in fact, independently owned business entities and thus the "managers" were not managers of Morgan Brooks' own business.
As noted by Mr Kerr, Mr Cincotta had actual authority to use the letterheads, business cards and Morgan Brooks' livery; it was by his permitted use of those indicia that Morgan Brooks was held to have made the relevant representation.
So far as the guarantee was concerned in the present case, JH Williams was dealing with an individual. Mr Crocker had not put in place any organisational structure to give the appearance that others had authority to bind him contractually. He did nothing to arm Mr Brooks or any other person with the external appearance of having authority to apply his signature to the guarantee. Ms Harrison was not working out of the office of Mr Lee Crocker; so far as the evidence establishes, she did not present herself to the world as his personal assistant. No such conduct was specified in the pleading; the only particular of the alleged representational conduct was the fact that Mr Crocker left his access details for HelloFax with Mr Brooks.
In the result, I do not think any of the elements of the claim based on ostensible authority is established in the present case. There was no assumption by JH Williams that another person was authorised to place Mr Crocker's signature on the guarantee. There was no evidence that JH Williams acted on the strength of any such assumption. Mr Crocker's failure to change his HelloFax password did not amount to representational conduct such as to place Mr Brooks or any other person in a position to represent to the outside world that he or she had authority to place Mr Crocker's signature on the guarantee.
For those reasons, the claim based on ostensible authority must fail.

Ratification

JH Williams accepts that, in order for Mr Crocker to be taken to have ratified the guarantee, it must be established that he had full knowledge of all the material circumstances: Petersen v Maloney (1951) 84 CLR 91 at 101. Mr Knoll submitted, however, that it is not necessary for JH Williams to prove that Mr Crocker ever read the guarantee; it would be enough to establish that he was on notice of it and knew that it comprised a credit application and a guarantee "by the directors" of IDH Modular's obligation to pay for goods purchased on credit. I accept that is the correct approach, subject to one qualification. The critical issue is whether Mr Crocker knew that he personally had been committed to the guarantee. Knowledge of the fact that other directors may have would not be enough.
Mr Kerr submitted that the claim based on ratification faces an insuperable hurdle, namely, the principle that a forgery which does not profess to be executed by a person as agent cannot be ratified by the alleged principal: Rowe v B & R Nominees Pty Ltd [1964] VR 477 at 482-3. The point was that, here, the guarantee was not signed by some other person purportedly as agent for Mr Crocker but, rather, was presented as having been in fact signed by him.
Mr Knoll disputed Mr Crocker's entitlement to put that argument, submitting that an allegation of fraud or forgery must be pleaded specifically (invoking r 14.4 of the UCPR). I do not think Mr Crocker's defence falls foul of that rule. As noted by Mr Kerr, Mr Crocker does not sue the alleged forger. In response to the allegation that Mr Crocker signed the guarantee, the defence squarely pleaded that he did not place his signature on the guarantee, that he does not know who did and that he did not authorise any person to do so. In his submissions in reply, Mr Knoll contended that the plaintiff was taken by surprise by Mr Crocker's "admission" that Mr Brooks had told him in July 2013 that he (Mr Brooks) had applied Mr Crocker's signature to the documents. I am not sure whether an admission was made in exactly those terms (the submission did not provide a transcript reference) but I do not think it follows that Mr Crocker was obliged to plead an allegation of fraud on the part of Mr Brooks. Mr Crocker's case is defensive; he denies signing the guarantee.
The decision in Rowe v B & R Nominees is authority for the proposition stated by Mr Kerr. That was a sad case in which a lonely, single man fell prey to the charms of a married nurse. She signed a mortgage (purporting to be him) to secure advances for her benefit. She did that with his knowledge and authority; he gave evidence that she was looking after him at that time and that he was "in such a state of health that he was to have no work and no worry". He completely trusted her then; he later came to believe that she was doping him during that period. The Court held that, as a matter of legal principle, the forged mortgage could not be ratified.
The application of that principle alone would appear to be a sufficient basis for rejecting the plaintiff's ratification argument in the present case. However, the argument was given little attention other than by way of brief reference in the parties' written submissions. Mr Knoll's written submissions in reply responded to it with references to authorities not addressed by Mr Kerr on this point. Accordingly, in case it is wrong to apply the principle contended for by Mr Kerr in the present case, I consider it preferable to determine this issue by reference to the substantive issues raised by JH Williams and, in particular, the question of Mr Crocker's knowledge.
In his affidavit sworn 17 March 2014 (prepared for the purpose of opposing the summary judgment application), Mr Crocker said that he was not involved in any discussions or negotiations concerning the establishment of a trading account or the provision of a personal guarantee for the debts of IDH Modular with any officer of JH Williams; that he was not advised by Mr Brooks, Mr Walsh or any other person that he would be required to provide such a guarantee and that he had not read the credit application or guarantee prior to the institution of these proceedings. He said that he did not place his signatures on the credit application and guarantee and did not know how that occurred.
The matters relied upon to establish ratification are pleaded in para 17 of the further amended statement of claim. Mr Knoll cross-examined Mr Crocker for more than a day, exploring many aspects of those contentions. Nothing in the cross-examination or the lengthy written and oral submissions put by JH Williams on this issue has persuaded me that Mr Crocker became aware of the guarantee ostensibly given by him at any point during the trade relationship between JH Williams and IDH Modular. On the contrary, as submitted by Mr Kerr, the exhaustive cross-examination only tended to confirm the unlikelihood of Mr Crocker's having had any knowledge of the fact that someone had purported to commit him to guarantee such a substantial trade debt.
A considerable amount of time and detail in the evidence was directed to exploring possible communications with Mr Crocker about the guarantee. First, it was submitted that I should find that Ms Harrison called Mr Crocker and requested him to sign the document. JH Williams adduced no evidence that she did so; it was put, in effect, as an inference I should draw from the fact that she had made similar calls on other occasions in relation to different documents. I do not think the evidence supports the inference contended for.
Next, it was submitted that I should find that Mr Crocker received emails from HelloFax notifying him that a document had been posted for his signature and asking him to sign it. Pages and pages of written submissions were directed to that issue. It was further submitted that I should find that Mr Crocker probably later received an email telling him that he had signed the document.
Mr Crocker did not recall ever receiving any such emails. As submitted by Mr Kerr, the evidence ultimately did not establish that, as at 2 July 2012, the HelloFax system did send emails to the signatory confirming the signature of a document. The evidence also did not establish that Mr Crocker in fact received emails sent earlier than 2 July 2012 (the first date on which he synchronised his iPad to receive emails from his Google account).
I am prepared to proceed on the assumption that the emails referred to were sent to Mr Crocker's email address. Even if they were, I accept Mr Crocker's evidence that he did not in fact ever see any such email (T117). On this question of knowledge for the purpose of ratification, that is critical.
It would not be enough for DH Williams merely to establish that an email was sent to Mr Crocker's email address (and did not go to the spam folder). In order for him to be taken to have ratified a guarantee committing him to substantial personal liability, it would be necessary to establish that he read the email, opened the attachment, absorbed its contents and made himself aware of the terms of the salient features of the contract to which he had been committed without his actual authority. Significantly, if Mr Crocker received such emails, they may well have described the document to be signed as a "credit application" without reference to any guarantee (see RAK-8 pages 63 and 64). The receipt of such emails is a slender basis for a conclusion that they must have put Mr Crocker on notice such as to fix him with ratification of a substantial liability. Ultimately, my acceptance of Mr Crocker's evidence on this issue is fatal to those contentions.
A similar argument was put on the strength of the fact that Mr Crocker could, when he logged into HelloFax, see a list of documents previously executed using his access details. Mr Knoll went so far as to submit that an inference could be drawn, from the fact that Mr Crocker spent a considerable amount of time on his computer, that he must have read the guarantee. Mr Crocker was during that time a builder with interests in a number of projects. He is not a lawyer.
Mr Crocker accepted that a list of the documents he had signed was available at some point but could not recall when. There was no evidence to establish that he accessed that list prior to the conclusion of the trade credit agreement with JH Williams in May 2013. The probability of his poring over the list of executed documents on HelloFax before then is not so compelling as to prompt me to reject his evidence that he did not become aware of the terms of the guarantee until the commencement of these proceedings. In fact, as submitted by Mr Kerr, a consideration of the times when Mr Crocker accessed the HelloFax account suggests rather that the time when he became most interested in HelloFax was around the time JH Williams made demand on the guarantee, shortly before the commencement of these proceedings. That was not explored in cross-examination and is, to a degree, speculation on my part but it tends against a conclusion that the guarantee was discovered by Mr Crocker any earlier than after the conclusion of the trade credit agreement.
In his submissions in reply, Mr Knoll addressed at length the question of memory, suggesting (in effect) that I should find that Mr Crocker was not being truthful as to his absence of recollection. Mr Knoll submitted that the Court "should reject [Mr Crocker's] decision not to recollect whether he saw the list of documents". I do not accept that Mr Crocker made a "decision" not to recollect the list. On the contrary, I found him to be a frank and careful witness, forthcoming as to those things he could recall and those he could not.
Next, an elaborate argument was put based on the fact that Mr Croker signed a number of credit applications to other suppliers in which JH Williams was named as a trade reference for IDH Modular and in which it was stated that the directors had provided other personal guarantees. An aspect of that submission was that Mr Crocker ought, at the same time, to have brought to mind the fact that he had signed a guarantee in favour of JH Williams in 2010 for a different company, Image Designer Homes (with a limit of $80,000). It was put on that basis that Mr Crocker knew or ought to have known that JH Williams would not have granted trade credit without a guarantee from each of the three directors and, accordingly, that Mr Crocker should have known (when he saw JH Williams named as a trade reference) that a guarantee must have been signed by all three directors including himself.
Mr Crocker denied knowing that personal guarantees had been given to other suppliers by the directors of IDH Modular (T72.28). As noted by Mr Kerr, not only was there no evidence of a general practice of requiring all directors to give guarantees but the evidence was to the contrary. In the number of instances, trade suppliers accepted credit applications from IDH Modular notwithstanding the fact that Mr Crocker had not signed a guarantee. A schedule provided by Mr Kerr summarised 11 credit applications signed by Mr Crocker between June and December 2012; he provided guarantees in only three.
Finally, JH Williams relied on the fact that Mr Crocker placed purchase orders with JH Williams on behalf of IDH Modular. He denied doing so but, even if he did, that would not constitute ratification of the guarantee if Mr Crocker was not aware of it. Mr Knoll sought to invoke the principle that the adoption of part of a transaction operates as ratification of the whole, citing Suncorp v Milano [1993] 2 Lloyd's Rep 225 at 235. I do not think that principle can have any application in the present case. If Mr Crocker knew about the trade credit agreement, and obtained goods on credit for IDH Modular in accordance with that agreement, that would say nothing to ratify a personal guarantee.
JH Williams submitted that the Court should draw an inference from Mr Crocker's failure to call Mr Brooks as a witness. No questions were put to Mr Crocker on that issue. I am not persuaded that Mr Brooks is to be regarded as being in Mr Crocker's camp; as submitted by Mr Kerr, the circumstances suggest the possibility of a falling out between the former directors. It would equally have been open to JH Williams to call Mr Brooks. Further, I do not think any inference that could be drawn would go so far as to establish the plaintiff's claim.
The matters relied upon by JH Williams must be assessed in the context that the contention that Mr Crocker applied his own signature to the guarantee was abandoned during the hearing. Paraphrasing what was submitted by Mr Kerr, what is sought, therefore, is a finding of knowledge based on emails probably not read (and possibly never received), documents unlikely to have been looked at by a busy builder and the inferences to be drawn from documents naming JH Williams as a trade creditor in a different context which Mr Crocker signed largely as a matter of form.
I am not satisfied that there was any ratification of the guarantee by Mr Crocker.

Conclusion

For those reasons, JH Williams' claim against Mr Crocker must be dismissed. I make the following orders: 1. that the proceedings as against the third defendant be dismissed. 2. that the plaintiff pay the third defendant's costs of the proceedings.

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: 22 January 2016

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