Kailis Bros Pty Ltd v Clarke

These proceedings were commenced by Summons filed on 9 June 2020. The plaintiff, Kailis Bros Pty Ltd, a company registered in Western Australia, sought a declaration that it has a caveatable interest in a property at Thornton. The property is owned jointly by the defendant, Justin Clarke, and Mandee Clarke. The plaintiff also sought an order pursuant to s 74K of the Real Property Act 1900 (NSW) extending the operation of a caveat (AP631871) it lodged in October 2019 against the title to the property. The defendant had served a lapsing notice in respect of the caveat on about 25 May 2020.

The interest claimed by the plaintiff in the caveat is a charge said to be by virtue of a Credit Application and Guarantee and Indemnity dated 31 May 2019 between the plaintiff and the defendant. The caveat affects only the defendant’s interest as registered proprietor of the property.

On 12 June 2020 an order was made by consent extending the operation of the caveat until further order. Directions were also made for the defendant to file and serve any affidavits in opposition to the Summons, and for the parties to file and serve written submissions. No evidence was filed by the defendant. Further directions were made in relation to submissions on 10 July 2020, 7 August 2020 and 18 August 2020. In accordance with those directions, the Court has received submissions from the solicitor for the plaintiff, filed on 3 July 2020 and 14 August 2020, and from the solicitor for the defendant, filed on 15 July 2020 and 25 August 2020.

The parties agreed that it was appropriate for the matter to be determined on the papers.

The instrument described in the caveat as a Credit Application and Guarantee and Indemnity dated 31 May 2019 is in fact headed Terms of Trading Agreement. It is a five page standard form of agreement issued by the plaintiff.

On the first page various details of “the Applicant”, Clarke Foods Pty Ltd, have been written in. Beneath that, under a heading “Director’s / Individual’s / Owners / Trustees / Partner’s / Full Name And Address”, the name and address and other details of the defendant have been written in.

The second page contains printed matter including the following:

Beneath the date, 31 May 2019, under the heading “Applicant/Guarantors” there is space for up to four signatories to execute the document and have their signatures witnessed. In the first space, the defendant’s name has been written, and below that he has signed his name. The signature appears to have been witnessed by Renae Morris.

Numerous printed Terms and Conditions appear on pages 3 to 5 of the document, including the following:

There is evidence that in the period from 9 July 2019 to 16 September 2019 the plaintiff issued numerous invoices to Clarke Foods Pty Ltd in respect of goods supplied. The plaintiff claims that the invoices, in the amount of $177,628.90, remain unpaid. It seems that Clarke Foods Pty Ltd went into administration on 31 October 2019 and on 20 December 2019 became subject to a Deed of Company Arrangement.

On 13 January 2020 the plaintiff commenced proceedings against the defendant in the District Court of Western Australia to recover the amount outstanding pursuant to the guarantee said to have been given by the defendant. A Statement of Claim was filed on 20 February 2020. The defendant filed a Defence on 14 April 2020 which did not admit the existence of the guarantee. An Amended Defence was filed on 28 May 2020 which contained the assertions that the defendant did not sign the Credit Application as a guarantor, and only executed the document in his capacity as a director of the Applicant for Credit. The proceedings in the District Court of Western Australia have not yet been determined.

The plaintiff claims that by cl 17 of the Trading Agreement, the defendant granted a charge in favour of the plaintiff over his interest in the Thornton property to secure amounts that are payable to the plaintiff under the agreement. The plaintiff submitted that the defendant signed the document on behalf of Clarke Foods Pty Ltd and also in his capacity as a guarantor. This was said to be clear from the words that appear immediately above the defendant’s signature.

The defendant submitted that the only party that signed the Trading Agreement was Clarke Foods Pty Ltd. It was contended that the defendant signed only in his capacity as sole director of the company. It was stated that the document used the terms Applicant and Guarantors interchangeably, and that under the heading “Applicant/Guarantors” there was no specific panel for the signature of a guarantor. It was submitted that in these circumstances there was at least some ambiguity about the capacity in which the defendant signed the document. Reference was made in this context to Aquawest Pty Ltd v Twynham [2017] NSWSC 652 where Lonergan J referred (at [29]) to Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2004] HCA 28 at [17]-[23]. The defendant further submitted that the document was not a deed, and no consideration was given for any promise given by the defendant.

I am unable to accept the submissions of the defendant. It is clear in my opinion from reading the Trading Agreement as a whole, and in particular the words above the signing section, that the defendant signed not only on behalf of Clarke Foods Pty Ltd but also in his personal capacity as a Guarantor. The words above the signing section make it plain that the defendant warranted that he had the authority to execute the document for and on behalf of the company, and also that he was executing the document contemporaneously in his capacity as a Guarantor. I have not overlooked the reference to “joint and several capacity as Guarantors”, but consider that those words are merely a reflection of the fact that on occasions this standard form of agreement may be signed by more than one person. The words are a further indication that in that situation the Guarantors will have a joint and several liability. The expression “the Guarantors” was earlier defined as “I/we the undersigned signatories”. It was evidently intended that one or more persons may constitute the Guarantors for the purposes of the agreement. I note that the defendant did not suggest that the reference to Guarantors in the plural itself gave rise to any ambiguity.

I do not see this as a case where there are ambiguous contractual provisions that should be construed in favour of a person who is sought to be held liable as a surety (see Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 561; Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 256; Andar Transport v Brambles Ltd (supra) at [17]).

It is also not correct to state that no consideration was given for the defendant’s promise to be a guarantor. The agreement states that the Guarantors guarantee payment to the plaintiff of the price charged by the plaintiff to Clarke Foods Pty Ltd for goods and services, in consideration of the plaintiff “at the request of the undersigned signatories” agreeing to grant the trading facility to Clarke Foods Pty Ltd. It does not matter in these circumstances whether the instrument was executed as a deed.

The defendant’s submissions did not specifically address cl 17 of the Trading Agreement. It is in any event clear that by cl 17 the defendant granted a charge in favour of the plaintiff over his interest in the Thornton property to secure the performance of his obligations under the agreement. It is appropriate for the Court to make a declaration to that effect.

It should be noted that in the most recent submission of the defendant the suggestion was made that it may be appropriate for all issues between the parties to be determined in this Court and for the proceedings in the District Court of Western Australia to be discontinued. It is unfortunate that the parties are litigating in two courts, but I do not see a good reason to defer the determination of the narrow issues (essentially questions of construction) raised on the plaintiff’s Summons. The parties have, by agreement, proceeded towards a hearing of the matter on the papers. The parties will be bound by the decision of this Court, and to that extent the conduct of the proceedings in Western Australia will be affected. However, it will remain open to the defendant to advance whatever defences he has, although not of course any defence inconsistent with the determination of this Court. The District Court in Western Australia will determine the extent of any liability the defendant has under the guarantee he gave to the plaintiff.

The plaintiff should not be criticised for commencing the proceedings in Western Australia. The Trading Agreement is expressed to be governed by the law of Western Australia, and the parties submitted to the jurisdiction of the courts of that State (see cl 24). Those proceedings were well underway before the defendant served the lapsing notice in respect of the caveat. It was that step that brought about the duplication of proceedings.

The plaintiff seeks an order for costs. It is appropriate that such an order be made. In my opinion there is no reason why costs should not follow the event.