Jaafar v TUF (NSW) Glass Services Pty Ltd

1. [1]

   The defendant, TUF (NSW) Glass Services Pty Ltd commenced proceedings in the Local Court against the plaintiff Abed Jaafar and two other persons claiming $28,129.00, interest of $2,100.00 and costs, in respect of invoices sent to Mr Jaafar and his company Belco Glass Pty Ltd (“Belco Glass”). The two other persons were Mouna Diani (apparently an accountant at Belco Glass) and Belco Glass itself. To avoid confusion, I shall refer to the present plaintiff as Mr Jaafar and to the present defendant as TUF.

2. [2]

   The proceedings were heard in the Local Court on 10 March 2022. On 25 March 2022 Magistrate Seagrave delivered judgment in favour of TUF against Mr Jaafar, the amount of the judgment being $32,054.00. The Magistrate ordered Mr Jaafar to pay TUF’s costs on an indemnity basis.

3. [3]

   By a summons filed 21 April 2022 Mr Jaafar sought that if leave was required, it be granted, and sought that the judgment of the Magistrate be set aside and either that the claim by TUF against him be dismissed, in the alternative, that the amount of the judgment be limited to $12,559.56. By an amended summons filed on the morning of the hearing, the amount of $12,559.56 was reduced to $11,598.25, alternatively to $1,598.25.

4. [4]

   The appeal is brought pursuant to s 39 and/or s 40 of the Local Court Act 2007 (NSW).

5. [5]

   The evidence before the Magistrate disclosed that TUF had been supplying materials to another company run by Mr Jaafar, Belco Aluminium. On 1 May 2020 an employee of Belco Glass, Mouna Diani, forwarded an email to TUF saying (inter alia):

6. [6]

   On 2 May 2020 Mr Naseer Al-Hafedh, a director of TUF, responded by an email as follows:

7. [7]

   The Application was completed by Mr Jaafar on 14 May 2020 and signed by him. The Application was also signed by Mouna Diani, but the Magistrate held that she had done so as a witness only. The claim against Ms Diani was dismissed, and there is no appeal from that part of the judgment.

8. [8]

   Mr Al-Hafedh signed the Application on 12 June 2020 on behalf of TUF, and inserted an amount of $25,000.00. I shall refer to the signed Application as “the Contract”.

9. [9]

   The significant questions before the Magistrate and on the present appeal involve the proper construction of the Contract. It is necessary, therefore, to set out much of what that document contained as follows:

10. [10]

    Proceedings in the Local Court commenced by the filing of a statement of claim on 23 April 2021. The three defendants were Mr Jaafar, Ms Diani and Belco Glass. The pleading asserted that the “plaintiff and defendant” (sic) entered into a credit facility contract. It asserted that it was a term of the contract that the first or the third defendant entered into the contract for provision of glass related products provided by the plaintiff to the third defendant, that the first defendant was to make payment to the plaintiff, and then, somewhat inconsistently, that the first or third defendants must pay all monies due to the plaintiff within 30 days of the statement. The statement of claim further alleged that the second defendant signed the contract as a guarantor.

11. [11]

    A defence was filed by Mr Jaafar on 21 March 2021 which, in substance, pleaded that the first defendant (Mr Jaafar) had only entered into the contract on behalf of the third defendant (Belco Glass).

12. [12]

    On 10 February 2022 TUF filed an amended statement of claim alleging that on 12 June 2020 the “plaintiff and defendants” entered into a credit facility contract. The amended statement of claim pleaded that it was a term of the Contract that the defendants were to make payments to TUF by way of the credit facility. It also alleged that the first and second defendants (Mr Jaafar and Ms Diani) had signed the Contract as guarantors on 14 May 2020. No further defence was filed.

13. [13]

    It appears that shortly after the Contract was signed by Mr Jaafar in May 2020 and by TUF in June 2020, Belco Glass defaulted in paying what was claimed by TUF. On 27 August 2020 TUF issued a statement of claim in the Local Court against Belco Glass seeking $49,964.25. When no defence was filed, a default judgment was given for TUF against Belco Glass on 11 November 2020 for $51,508.56.

14. [14]

    On 22 April 2021 Mr Jaafar, the sole shareholder and director of Belco Glass resolved to wind the company up, and he appointed Danny Vrkic as the liquidator. TUF may not have known about the winding up when it issued its statement of claim on 23 April 2021, but no leave was ever sought to proceed against Belco Glass. At the hearing, TUF abandoned its claim against Belco Glass.

The judgment of the Local Court

1. [15]

   The learned Magistrate identified the issues for determination as these:

2. [16]

   In relation to the first issue, whether the guarantee was operative, the learned Magistrate noted a submission on behalf of Mr Jaafar that he did not understand the document to include the guarantee and he did not intend to enter into one. The Magistrate said that that submission relied on Mr Jaafar’s evidence; however, her Honour did not accept Mr Jaafar’s evidence. Her Honour said his evidence did not have a ring of truth about it, and it was difficult to reconcile with his other evidence that he did not read the document. Her Honour detailed a number of surrounding circumstances involving the way Mr Jaafar and his companies had done business with TUF prior to the entry into the present contract.

3. [17]

   Her Honour concluded:

4. [18]

   In relation to the second issue, the Magistrate held that the guarantee itself was adequate consideration, that a credit facility was provided and that there was a guarantee as to its performance in the repayment of monies.

5. [19]

   In relation to whether the guarantee was limited to $25,000.00, her Honour said:

6. [20]

   On the fourth issue of whether the guarantee covered repayments of accounts invoiced to Belco Glass before 12 June 2020, the Magistrate said:

7. [21]

   The fifth issue does not arise on the appeal.

8. [22]

   On the sixth issue concerning Anshun estoppel, the learned Magistrate noted that Anshun estoppel had not been expressly pleaded, but that the major thrust of the submissions made by by Mr Jaafar was that TUF was prevented from proceeding with its claim because of the operation of Anshun estoppel. This was because of the failure to join Mr Jaafar to the earlier proceedings.

9. [23]

   The Magistrate said:

10. [24]

    The Magistrate also noted that Mr Al-Hafedh had acted for himself in suing Belco Glass in the first proceedings. Mr Al-Hafedh had said that he thought he had “to go against the company first”. The Magistrate accepted his evidence in that regard. She concluded:

11. [25]

    The seventh issue does not arise on the appeal.

Grounds of appeal

1. [26]

   Mr Jaafar’s appeal grounds are as follows:

2. [27]

   Mr Jaafar identified the following as the issues to be determined on the appeal:

Submissions

1. [28]

   Mr Jaafar submitted that the learned Magistrate was in error in construing what Mr Jaafar had signed as a personal guarantee. He pointed to the fact that the Contract was called “Application for Credit Account” and that there was no separate document amounting to a guarantee. He submitted that the document did not contain definitions to describe what performance was being guaranteed by him, and that the document was ambiguous and vague. He submitted that there was only one section permitting a signature by a customer, and that followed cl 3) at the end of the document. He submitted that there was an absence of consideration for the personal guarantee and the document did not constitute a deed to provide its own consideration.

2. [29]

   Mr Jaafar submitted that if the Contract constituted a personal guarantee it could only have been a guarantee for the debts of Belco Glass and not any other party including Belco Aluminium. Mr Jaafar submitted that the learned Magistrate appears to have included amounts carried forward from Belco Aluminium’s liability to TUF in the amount she included in the judgment. Mr Jaafar submitted that there was no evidence that any other guarantee of credit facility with Belco Aluminium had been extinguished or terminated. He submitted that all of the evidence pointed to this credit facility for Belco Glass being a fresh application and not a novation or assignment of any prior credit facility.

3. [30]

   Mr Jaafar contended that the legal rights and responsibilities flowing from the agreement commenced on 12 June 2020, being the date the agreement was accepted by TUF.

4. [31]

   Mr Jaafar submitted that the Magistrate’s finding that Mr Al-Hafedh’s evidence, that the guarantee was intended to provide for repayment of all invoices rendered to Belco, was unsound. That was because it was unclear which Belco corporation was being referred to, that the guarantee sued upon was one in relation to Belco Glass, and Mr Al-Hafedh’s evidence was only evidence of his subjective intention.

5. [32]

   In relation to the claim of estoppel, Mr Jaafar submitted that the earlier action was effectively identical to the present claim because it was premised on the credit application provided by Belco Glass. That credit application was the foundation of both the earlier proceedings and the present proceedings, Belco Glass was named as a defendant in both proceedings. Mr Jaafar submitted that that was sufficient to constitute an Anshun estoppel.

6. [33]

   I did not gain a great deal of assistance from the written submissions relied upon by TUF. Rather than address the substance of Mr Jaafar’s submissions, TUF’s submissions contained personal invective such as “the submissions made by the Appellant … are so absurd, they hardly require a response”, and that the appeal was vexatious and abuse of process. Ms Marnani for TUF also made personal attacks on Mr Jaafar’s integrity and business practices in her oral submissions. These were neither helpful nor appropriate.

7. [34]

   In oral submissions, TUF accepted that the issue of construction of the Contract was a question of law, but submitted that other issues were questions involving mixed fact and law, in respect of which leave should not be given under s 40 of the Act. No reason was offered for why leave should not be granted.

8. [35]

   TUF said that Mr Jaafar was obliged under the guarantee to pay all of what was outstanding under the invoices, and not just for those which post-dated the entry into the Contract. This was because of the default judgment which Belco Glass never sought to set aside. It was submitted that this bound Mr Jaafar because he was the sole director of Belco Glass.

9. [36]

   TUF submitted that cl 3) of the acknowledgements in the Contract required payment of “all and any debts”, and that this clause “easily encompasses” any debts already owing. TUF pointed to the existing business arrangements between TUF and Mr Jaafar and his companies to submit that it was the parties’ intention that all the prior debts were covered by the guarantee.

10. [37]

    TUF submitted that no estoppel arose from the earlier proceedings and judgment against Belco Glass. TUF submitted that a significant issue in considering whether an Anshun estoppel arises is the possibility of inconsistency of verdicts. TUF submitted that no such issue arose in the present case.

Consideration

1. [38]

   A number of things should be noted about the grounds of appeal. First, Mr Jaafar effectively abandoned ground 3 because he was not able to point to the alleged characterisation of TUF’s claim by the Magistrate as a warranty claim. However, even had her Honour found to that effect, nothing flows from it in circumstances where her Honour found that Mr Jaafar had given a personal guarantee and was liable in that guarantee.

2. [39]

   Secondly, no ground of appeal challenges her Honour’s determination on the issue of Anshun estoppel. Nevertheless, written and oral submissions were made at the hearing of the appeal by both parties in relation to that issue, and it will be considered in due course.

3. [40]

   Thirdly, whilst ground 1 only, on its face, raises the issue of the retrospectivity of the guarantee, Mr Jaafar’s submissions challenged the determination by the learned Magistrate that he had given a personal guarantee (and see the issues identified by Mr Jaafar at [26] above). Submissions were made by both parties about whether a guarantee was provided by Mr Jaafar, and that issue will be dealt with.

4. [41]

   Fourthly, whilst ground 1 arguably involves a question of law, grounds 2 and 4 at best raise a mixed question of fact and law. However, because those matters are intimately connected with the issue raised in ground 1, I consider that leave should be granted under s 40 of the Act.

5. [42]

   In my opinion, no error is demonstrated in relation to the learned Magistrate’s determination (at [17] above) that Mr Jaafar had given a personal guarantee in the Contract. The terms of that portion of the Contract are clear. They relevantly say:

6. [43]

   The submission that there was no separate document amounting to a guarantee, or that the promise was ambiguous and vague should be rejected. Consideration was provided by TUF in that it agreed to supply glass related products to Belco Glass, with that company (or, strictly Mr Jaafar, since he described himself as the applicant when competing the Contract) utilising a credit facility.

7. [44]

   Mr Jaafar’s principal submission in relation to this matter is that cl 4) of the opening clauses of the Contract provided:

8. [45]

   In construing this provision, consideration will normally have to be given not only to the text but also to the surrounding circumstances known to the parties and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [22]; Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165; [2004] HCA 52 at [40]; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352.

9. [46]

   The evidence discloses that TUF had supplied glass products to Belco Aluminium, another company controlled by Mr Jaafar. Belco Aluminium was deregistered, and that resulted in the email from Ms Diani of 1 May 2020 asking for all future invoices to be made out to Belco Glass. While there is no direct evidence that there was a credit application contract and/or guarantee in place in respect of Belco Aluminium, a reasonable inference from Mr Al-Hafedh’s email in response of 2 May 2020 is that there was such an agreement. Clearly, a new contract needed to be signed now that Belco Glass was to have the principal liability for paying TUF for the products supplied.

10. [47]

    However, the evidence discloses that following the email from Ms Diani of 1 May 2020, product continued to be supplied and Belco Glass was invoiced for that supply. At least from 14 May 2020 Mr Jaafar was undertaking to guarantee the repayment of all the debts from the new agreement which he had sought to be put in place.

11. [48]

    There is no basis, as TUF submitted, for a finding that the agreement signed by Mr Jaafar on 14 May 2020 would operate retrospectively for debts incurred by Belco Aluminium. There is nothing in the Contract which mentions Belco Aluminium, and cl 3) of the acknowledgements speaks only of “debts arising from this agreement”. If TUF sought to bind Mr Jaafar for debts incurred prior to the notification of the change of companies and invoicing, it would need to do so expressly.

12. [49]

    As it happens, no invoices were issued to Belco Glass between 14 May 2020 and 16 June 2020. It is not necessary, therefore, to decide if Mr Jaafar would have been liable for invoices issued in that period.

13. [50]

    The Magistrate accepted Mr Al-Hafedh’s evidence that the guarantee was intended to provide for repayment of all invoices rendered to “Belco” (her Honour did not specify if that was confined to Belco Glass), because his evidence was plausible and satisfactory. In my opinion that was an error because Mr Al-Hafedh’s subjective intentions about the guarantee were not relevant to a consideration of the proper construction of the agreement: Toll v Alphapharm at [40].

14. [51]

    Grounds of Appeal 1 and 2 should be upheld.

15. [52]

    The evidence discloses that the following invoices were issued to Belco Glass from the date Mr Jaafar signed the Contract (14 May 2020):

16. [53]

    None of these invoices was paid. Mr Jaafar is liable for them under the terms of the guarantee.

17. [54]

    It is apparent that the Magistrate accepted the evidence of Mr Al-Hafedh, that the amount outstanding to TUF was $28,129. This was said to be what was outstanding, presumably, after payments made by Belco Glass subsequent to the default judgment entered against it. From an examination of the Statement issued on 19 May 2021, it seems that it is made up of the invoices and interest charges in the above table, together with an unpaid invoice dated 4 May 2020 in the sum of $15,569.46. The invoice of 4 May 2020 pre-dates the date the Contract was signed by TUF, but more significantly it pre-dates the date Mr Jaafar signed the Contract, undertaking the personal guarantee. For the reasons given when considering the issue of retrospectivity above, Mr Jaafar does not have a liability for that invoice.

18. [55]

    The Statement of 19 May 2021 discloses that on 10 March 2021 the sum of $10,065.63 was paid to TUF. That is the amount described as $10,000 by Mr Al-Hafedh. It was said to be the amount paid pursuant to an agreement with Belco Glass for monthly instalments and the vacation of an examination hearing, presumably of Mr Jaafar and/or Ms Diani.

19. [56]

    Mr Jaafar submitted that this amount should be deducted from the total of the invoices and interest charges in the table above. However, that is to overlook the fact that it has already been accounted for on the Statement to reach what was said to be the amount outstanding to TUF. All that is to be excluded from that amount is the invoice of $15,569.46. Mr Jaafar would receive a double benefit if the amount of $10,065.63 was again deducted.

20. [57]

    Before the Magistrate it was submitted that the guarantee was limited to the sum of $25,000.00.

21. [58]

    Mr Al-Hafedh gave this evidence in cross-examination:

22. [59]

    The questions about what the agreement meant by the figure of “$25,000” were probably inadmissible but no objection was taken to them. The Magistrate said in relation to this evidence and whether the guarantee was limited to $25,000:

23. [60]

    In my opinion, the Magistrate was in error in accepting Mr Al-Hafedh’s evidence about the meaning of $25,000.00. In any event, the acceptance of that evidence does not lead to the conclusion that Mr Jaafar was liable for “all amounts charged”. On a proper construction of the Contract, and having regard to the circumstances in which it was made, the credit limit under the contract was $25,000.00. If TUF was prepared to allow the amount outstanding to exceed that limit, that was a risk it took in terms of being able to enforce payment against Belco Glass. Mr Jaafar had not undertaken pursuant to the contract to be personally guaranteeing more than $25,000.00.

24. [61]

    As is apparent from the discussion of quantum above, this limit has not, in any event, been exceeded. TUF is entitled only to the amount of $12,559.56 together with interest.

25. [62]

    In Timbercorp Finance Pty Ltd (in liq) v Collins (2016) 259 CLR 212; [2016] HCA 44, the joint judgment of French CJ, Kiefel, Keane and Nettle JJ said:

26. [63]

    Further, the significant matter in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 was that what was sought to be done in the second proceeding was inconsistent with the judgment which had been obtained in the earlier proceedings. The party that was seeking to do so, the Authority, was claiming against a party against whom it had made a claim in the earlier proceedings, but had not raised the further matter in the earlier proceedings.

27. [64]

    The position in the present matter is significantly different. Mr Jaafar was not in the earlier proceedings, and the judgment against Belco Glass was not concerned with the personal guarantee given by Mr Jaafar. A creditor is not, as a result of the decision in Anshun, obliged always to join all guarantors in an action against a principal debtor. It will frequently be the case that guarantors will never need to be sued because matters will be resolved between the creditor and the principal debtor as a result of judgment and satisfaction of that judgment. It cannot be said that the claim made against Mr Jaafar was so relevant to the subject matter of the first action that it would have been unreasonable not to make it in that first action.

28. [65]

    The joint judgment of Gibbs CJ, Mason and Aickin JJ in Anshun, having stated the principle that no estoppel arises unless the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it, the judgment went on to say (at 602):

29. [66]

    The Magistrate did not err in rejecting a defence based on Anshun estoppel.

Conclusion

1. [67]

   The appeal should be upheld in part. The amount of the judgment should be varied to be $12,559.56 together with interest up to the date of this judgment of $992.62. The order for costs made by the Magistrate should not be disturbed.

2. [68]

   I make the following orders: