Reozone Pty Ltd v Rene Santoro

HIS HONOUR: On 23 June 2015, on the application of the plaintiff, Rein J appointed trustees for sale of two properties owned by the first defendant, Mrs Santoro. His Honour declared that Mrs Santoro had charged the properties in favour of the plaintiff to secure certain obligations owed by her to it. The plaintiff had joined nine defendants. The third defendant, the National Australia Bank, had a registered mortgage over the properties. It was paid out from the proceeds of sale. The fourth, fifth, sixth, seventh, eighth and ninth defendants had lodged caveats in respect of Mrs Santoro’s properties. The fifth defendant and the seventh defendant did not make any application for payment out of the moneys paid into court. The fourth defendant did not press its claim. I have made orders for moneys to be paid out of the funds paid into court to the plaintiff and the sixth defendant. This judgment concerns the claims of the eighth defendant (Sydney Trucks and Machinery Centre Pty Ltd (“Sydney Trucks”)) and the ninth defendant (TCT Management Services Pty Ltd (“TCT Management”)). They filed a notice of motion on 31 August 2016. Sydney Trucks sought an order for payment of $351,528.61, interest and costs from the moneys paid into court. TCT Management applied for an order for payment of $504,630, interest and costs from the moneys paid into court.

In the course of final submissions counsel for the eighth and ninth defendants did not press the claim for interest.

Both defendants claim that Mrs Santoro charged her real property with payment of debts owed to them by a company called Elite Plant Hire Pty Ltd (“Elite Plant Hire”) of which she was a director.

Mrs Santoro, did not appear.

Sydney Trucks commenced trading in April 2012. It hired out vehicles, plant and machinery to Elite Plant Hire and provided maintenance and other services for the vehicles, plant and machinery. As at 30 March 2014 Elite Plant Hire was indebted to Sydney Trucks in the sum of $351,528.61.

TCT Management was also engaged in the business of renting vehicles, plant and machinery. It also hired out vehicles, plant and machinery to Elite Plant Hire. Invoices in the name of TCT Management addressed to Elite Plant Hire showed an outstanding indebtedness as at 10 March 2014 of $504,630.

Both defendants rely upon a document headed “VIP Customer Loan Vehicle Agreement”. The agreement with the eighth defendant carried a logo and the words Sydney Trucks and Machinery and the name and address and contact details of the eighth defendant. Under the heading there was a sub-heading “Terms and Conditions of Use” and then a statement that the borrower of the vehicle agreed to and accepted the terms and conditions listed below. The form signed by Mrs Santoro, with personal details redacted, is set out as an appendix to these reasons.

The ninth defendant relies upon a document in materially the same terms issued by Tri City Trucks Pty Ltd. It is also signed by Mrs Santoro as director of Elite Plant Hire Pty Ltd. Tri City Trucks Pty Ltd is not an applicant, but it is clear that the “VIP Customer Loan Vehicle Agreement” applies to the rental of vehicles and equipment and service and maintenance charges for vehicles, plant and equipment for which invoices were rendered to Elite Plant Hire Pty Ltd under the business name TCT Management. If necessary Tri City Trucks Pty Ltd could be added as an additional applicant.

The VIP Customer Loan Vehicle Agreement for TCT Management was in the same terms and the same format and was signed in the same way as the form used by Sydney Trucks. The same issues arise on both applications. It is convenient to deal with Sydney Trucks’ application first.

The question is whether by her signature Mrs Santoro indicated to a reasonable person in the position of Sydney Trucks that she granted a charge over all her present and future “real estate/property” to secure payment of moneys owed by Elite Plant Hire (Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]; National Australia Bank Ltd v Dionys [2016] NSWCA 242 at [183]).

In Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160 Giles J after referring to the relevant authorities said (at 174) that:

Mrs Santoro did not sign the form in the space available under the words “Guarantor: I Rene Santoro … secure payment by granting a charge over all real estate/property held now and in the future”. Rather she signed against the words “Customer Signature” and above the words “Accepted for and on behalf of Company Name Rene Santoro Director ELITE PLANT HIRE PTY LTD”. That is to say, her signature was attached in her capacity as director of Elite Plant Hire and as an acceptance by the company of the terms and conditions in the form. Those terms did not include an obligation to pay hiring or service charges. Under the heading “VEHICLE DETAILS” against the sub-heading “REASON” reference is made to the rental agreement as per STM invoice. The obligation to pay the hiring and service charges is to be found from the text of the invoices delivered to Elite Plant Hire. The acknowledgment signed by Ms Santoro as a director of Elite Plant Hire is that she had read the “above terms and conditions” and agreed to be bound by them. It is not suggested that any part of the debt owed to Sydney Trucks arises from any of the 12 terms and conditions on the page signed by Ms Santoro. She expressly accepted the terms and conditions on behalf of Elite Plant Hire. The terms did not include any promise by Ms Santoro to guarantee payment of moneys owed by Elite Plant Hire, although the document describes her as “Guarantor”. The question then is whether by signing the acknowledgment of the “above terms and conditions” on behalf of Elite Plant Hire she is to be taken to have indicated her acceptance of the adjacent term that she personally gave a charge over all present and future “real estate/property” to secure payment of moneys owed by Elite Plant Hire.

In Ariadne Steamship Company Ltd v James McKelvie & Co [1922] 1 KB 518 a charterparty was signed “for and on behalf of J McK & Co (as agents)”. The charter was expressed to be made between “THS & Co (agents for the owners)” and “J McK & Co, charterers”. The charterparty was expressed to impose various obligations and give various rights to the “charterers”. The question was whether James McKelvie & Co were personally liable on the charterparty which they entered into on behalf of a principal in Italy. The Court of Appeal by majority (Atkin and Bankes LJJ, Scrutton LJ dissenting) held that they were not. An appeal to the House of Lords was dismissed (Universal Steam Navigation Co Ltd v James McKelvie & Co [1923] AC 492). It was held that because James McKelvie & Co signed “as agent” they did not accept personal liability, notwithstanding that in the document itself they were described as charterers. By contrast, in Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909 the question was whether directors of a company gave a personal indemnity for which the agreement provided when their only signatures to the agreement were as witnesses to the affixing of the company’s common seal. The Court of Appeal (Mahoney and McHugh JJA, Kirby P dissenting) held that the directors were bound by the personal indemnity for which the agreement provided. But there the agreement was executed twice. The agreement provided for the appointment of the company as agent of an insurer. The agreement was executed under the common seal of the company and that common seal was attested by the directors. The form of execution appeared on page 6 of the document. Page 7 of the document contained an indemnity that provided that the directors agreed to indemnify the insurer against any loss which it might sustain by reason of any default by the company in payment to the insurer of amounts which might from time to time become due to it under the terms of the agency agreement. That page was executed in the same way, that is, as an acceptance by the company signed under its common seal over the two signed names of the directors. As Giles J was later to observe in Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (at 176) there was no sensible explanation for the separate execution of the indemnity (albeit under the seal of the company) other than an intention of the signatories who attested to the affixing of the common seal to undertake a personal liability for which the indemnity provided.

Mahoney JA said (at 921) that in effecting the signature of the company on page 7 (that contained the indemnity) the directors believed that they were affixing the signature as an act of the company and not their own signature, but believed that in doing so they were rendering the agreement set out on page 7 operative as an indemnity to be given by them and with the object that it should do so. His Honour said (at 922) that:

The question, however, is whether objectively the party has indicated his acceptance of personal liability by the signature placed on the document. McHugh JA said that the contents of the indemnity and the surrounding circumstances overcame the prima facie inference that would be drawn from the setting of the signature and its qualification (at 924). Those surrounding circumstances related to the events which led up to the execution of the agency agreement, including the insurer’s requirement that if the agency were to be conducted in the name of a proprietary company the insurer would require a personal guarantee from each director. The execution of the indemnity clause, albeit with a signature on behalf of the company, would lead the reasonable observer to believe that the directors were assuming a personal liability. McHugh JA said (at 924-925):

Follaccio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067 was an even clearer case. There a company engaged a real estate agent to sell units. The agency agreement provided by clause 5 that “any signatory for a proprietary company vendor will be personally liable for the due performance of the vendor’s obligations as if the signatory was [sic] the vendor.” The agreement was signed by a director next to an execution clause that provided that the signature was “by or for the vendor”. Finkelstein J held that the director was personally liable for the agent’s commission because the terms of the document that the director signed made it clear that although signing on behalf of the vendor, he was signing in two capacities. That was the effect of clause 5.

The same result was reached for similar reasons in Burrell & Family Pty Ltd v Harris [2010] SASC 184. That case concerned the construction of a loan agreement drawn up by a lender who made a loan to a friend who conducted a group of property development companies. The execution clause of the agreement stated that it was executed by the borrowing company by its director. The agreement included a clause 4(d) that “the director of the borrowing entities also acknowledges personal liability for all debt remaining after the loan repayment date inclusive of all interest and recovery costs”. White J held that the use of the word “director” under Mr Harris’ name was a neutral factor. His Honour said (at [37]):

Considering the agreement as a whole and the circumstances in which it came to be entered into, Mr Harris was bound in his personal capacity.

In Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd, McHugh JA said (at 923) that:

Follaccio v Harvard Securities (Aust) Pty Ltd and Burrell & Family Pty Ltd v Harris are examples of this.

McHugh JA went on to refer to some examples given by Atkin LJ in Ariadne Steamship Co Ltd v James McKelvie & Co observing that in the examples given it would usually follow that there was no liability on the part of the person signing 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.” The examples given by Atkin LJ were cases where the signatory expressly signed “as agent”.

Those express words are not used in the present case, but Mrs Santoro’s signature was expressly stated to be an acceptance for and on behalf of Elite Plant Hire which is a statement to the same effect as a statement that she signed as agent of Elite Plant Hire.

Moreover, the form of acknowledgment given by Mrs Santoro as director of and on behalf of Elite Plant Hire expressed its agreement to be bound by the “above terms and conditions” and contained an authority to charge it for the cost of any insurance excess or fee for reduction of excess and costs arising from breaches of the stated conditions of use. It was not an acknowledgment by Elite Plant Hire of other terms and conditions for the hire of equipment, including as to the charges that would be made for the hire of the equipment. Unlike Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd there was no separate execution against the clause providing for Mrs Santoro to grant a charge over her property which would be superfluous if not intended by her to bind her personally.

Mr Barham for Sydney Trucks referred to James Thane Pty Ltd v Conrad International Hotels Corp [1999] QCA 516 where Williams J, with whom McMurdo P and Thomas JA agreed, said (at [60]):

Mr Barham submitted that it was clear from the text of the document that Sydney Trucks was prepared to rent out its equipment to Elite Plant Hire only on the basis that Mrs Santoro gave a charge over her property to secure the debts that Elite Plant Hire would incur. It made commercial sense that the supplier would require a director’s guarantee and charge before allowing Elite Plant Hire to incur the very considerable debts that were incurred. Hence, so counsel submitted, the objective intention of the parties was that Mrs Santoro would give a guarantee and charge, or a charge, to secure Elite Plant Hire’s debt and that was indicated by her signing the form. Mr Barham submitted that Mrs Santoro signed the form in a dual capacity, that is, both on behalf of the company and on her own behalf. The word “director” was a description, not a word of qualification. Although there was space under the sentence that provided for her to grant a charge in which she could have signed, there was no box for her signature. The only box for her signature was on the right hand side of the form under the acknowledgment. Mrs Santoro had the opportunity to strike out the words under the heading “guarantor” if she did not wish to grant a charge, but did not do so.

I do not accept these submissions. As in Clark Equipment Credit of Australia Limited v Kiyose Holdings Pty Ltd, to accept the submission would be to fail to give due recognition to the fact that Mrs Santoro simply did not sign the document in her personal capacity so as to indicate her agreement to be personally bound by it (Clark Equipment Credit of Australia Limited v Kiyose Holdings Pty Ltd at 176). I accept that by proffering the document Sydney Trucks indicated its wish to contract on terms that included the grant of a charge by Mrs Santoro, but having received the document signed by her only on behalf of Elite Plant Hire and not in her personal capacity, it nonetheless proceeded to do business with Elite Plant Hire. In my view, objectively considered, it did so without the benefit of any acceptance by Mrs Santoro of personal liability or other personal obligation.

Mr Barham submitted that because Mrs Santoro did not give evidence or indeed appear at the hearing, it should be inferred that nothing that she could have said would have assisted her case and that in the circumstances the court can more readily draw the inference that she accepted all of the terms on the form, including the term that she gave a charge over her property to secure payments due by Elite Plant Hire. I do not accept this submission. Mrs Santoro’s failure to give evidence might be significant if the question were one of her subjective intention. But the issue is whether her conduct conveyed to a reasonable person in the position of Sydney Trucks that she agreed to grant the charge. Her only conduct established by Sydney Trucks’ evidence was her conduct in signing the form on behalf of Elite Plant Hire. The principle in Jones v Dunkel (1959) 101 CLR 298, to which Mr Barham referred, has no application (see also Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd per Kirby P at 912-913).

For these reasons Sydney Trucks has not established that it is entitled to enforce a charge against Mrs Santoro’s property. There was no relevant difference in the case made by TCT Management. Accordingly, I order that the eighth and ninth defendants’ notices of motion filed on 31 August 2016 be dismissed. As Mrs Santoro did not appear there will be no order as to costs.

All applications for payment out of the funds paid into court have now been dealt with. Of the moneys originally paid into court however, a significant sum remains. I direct the Registrar to attempt to contact the first defendant using the last known email address at which messages can be left for her, informing her that there are moneys in court to which she is entitled and of her right to apply for those moneys to be paid to her. The Registrar is to include with that correspondence a copy of these reasons.