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Howhua Steel v O'Leary [2008] NSWSC 1185 (14 November 2008)

Last Updated: 18 November 2008

NEW SOUTH WALES SUPREME COURT

CITATION:
Howhua Steel v O'Leary [2008] NSWSC 1185


JURISDICTION:
Common Law

FILE NUMBER(S):
10601/2008

HEARING DATE(S):
22 September 2008

JUDGMENT DATE:
14 November 2008

PARTIES:
Howhua Steel Door Frames Pty Limited ( Plainitff)
David Ross O'Leary (Defendant)

JUDGMENT OF:
Harrison AsJ

LOWER COURT JURISDICTION:
Local Court

LOWER COURT FILE NUMBER(S):
645/2007

LOWER COURT JUDICIAL OFFICER:
Garbutt LCM

LOWER COURT DATE OF DECISION:
15 January 2008


COUNSEL:
I Davidson (Plaintiff)
D W Rayment (Defendant)

SOLICITORS:
Cumberland Frank Commercial and Litigation Lawyers (Plaintiff)
Thurlow Fisher Lawyers (Defendant)


CATCHWORDS:
APPEAL - Local Court Magistrate - whether guarantee was a personal one

LEGISLATION CITED:
Local Courts Act 1982

CATEGORY:
Principal judgment

CASES CITED:
Allen v Kerr & Anor [1995] Aust Torts Reports 81-354
Ariadne Steamship Co Ltd v James McKelvie & Co [1922] 1 KB 518
Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139
Carr v Neill  [1999] NSWSC 1263 
Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160
County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193
Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472
Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067
Gardiner v Agricultural and Rurala Finance Pty Ltd [2007] NSWCA 235
NEC Information Systems Australia Pty Ltd v Lindon (Wood J, 17 April 1985, unreported)
Rava v Logan Wines Pty Ltd [2007] NSWCA 62 stated
Rawcliffe v Bianco Hiring Service Pty Ltd [2002] SASA 430
R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) [1999] HCA 3; (1999) 160 ALR 588
Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517
Young v Schuler (1883) 11 QBD 651
Tudor Marine Ltd v Tradax Export Sa [1976] 2 Lloyd’s Rep 135

TEXTS CITED:
Interpretation of Contracts, Sweet & Maxwell [2007]

DECISION:
(1) Leave to appeal is granted.
(2) The appeal is upheld.
(3) The decision of his Honour Magistrate Garbutt dated 15 January 2008 is set aside.
(4) The matter is remitted to the Local Court to be determined according to law.
(5) The defendant is to pay the plaintiff's costs as agreed or assessed.
(6) The defendant is to have a Certificate pursuant to the Suitor's Fund Act, if applicable.



JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

ASSOCIATE JUSTICE HARRISON

FRIDAY, 14 NOVEMBER 2008

10601/2008 - HOWHUA STEEL DOOR FRAMES PTY

LIMITED v DAVID ROSS O’LEARY

JUDGMENT (Appeal decision of Local Court Magistrate

- whether the guarantee was a personal one)

1 HER HONOUR: By further amended summons filed 22 September 2008, the plaintiff seeks an order that the judgment and all orders of his Honour Magistrate Garbutt made on 15 January 2008 in proceedings 645/2007 be set aside and in lieu thereof there be firstly, verdict and judgment for the plaintiff; secondly, that judgment for the plaintiff, inclusive of interest to 15 January 2008, be quantified in the sum of $43,833.70; and thirdly, an order that the defendant pay the costs of the plaintiff and of the proceedings on the ordinary basis as agreed or assessed.

2 The plaintiff in these proceedings is Howhua Steel Door Frames Pty Limited (“Howhua Steel”). The defendant in these proceedings is David Ross O’Leary (“Mr O’Leary”). Howhua Steel was the plaintiff in the Local Court proceedings and Mr O’Leary was the defendant. Howhua Steel relied on the affidavit of Leslie John Howarth affirmed 26 June 2008.

3 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73 of the Local Courts Act 1982 permits a party who is dissatisfied with a judgment as being erroneous on a point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered in Allen v Kerr & Anor [1995] Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill  [1999] NSWSC 1263  and R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479. The judicial officer cannot act on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) [1999] HCA 3; (1999) 160 ALR 588.

4 Howhua Steel also sought leave pursuant s 74 of the Local Court Act. The onus lies with Howhua Steel to demonstrate that there has been an error of law or that leave should be granted on a mixed question of law and fact.

5 Section 75 of the Local Courts Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court’s directions, or (d) by dismissing the appeal.

6 In Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517, the Chief Justice (at [2]) reiterated that in the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal.

Grounds of Appeal

7 Howhua Steel appeals from the whole of the decision of his Honour Magistrate Garbutt dated 15 January 2008. The grounds of appeal are long and convoluted. They read firstly, that the Magistrate erred in law in holding that, on the proper construction of the undated letter prepared and signed by the defendant and delivered to the plaintiff on or about 16 August 2006 (“the letter”), the letter was only signed by the defendant in his capacity as general manager of Light Visions Pty Ltd (Light Visions) and was not a contract binding the defendant in his personal capacity; secondly, the Magistrate ought to have held that, on the proper construction of the letter, the defendant was liable as a guarantor in his personal capacity, including because of the paragraph of the letter signed by the defendant stating “Should there be a shortfall from Light Visions on the amount payable I David O’Leary personally guarantee repayment on a consistent basis until monies due are paid in full”; thirdly, the Magistrate erred in finding that any subjective intention of the defendant not to be personally liable as a guarantor under the letter could have any relevance to the proper construction of the letter, when the Magistrate was requited to resolve the proper construction of the letter by determining what a reasonable person in the position of the plaintiff would understand the letter to mean in light of the text of the letter and the surrounding circumstances known to the defendant and the plaintiff and the purpose and object of the transaction, fourthly the Magistrate erred in law in holding that the letter was to be “strictly construed” in favour of the defendant, when the defendant rather than the plaintiff had drafted the letter; fifthly, the magistrate erred in law in holding that the letter was not a personal guarantee “because one party, and here the [defendant], believes it to be a personal guarantee” when the fact that both parties believed that the letter was a personal guarantee was a relevant surrounding circumstance supporting that on the proper construction of the letter the defendant was liable as a guarantor in his personal capacity; sixthly, the Magistrate erred in law in holding that, on the proper construction of the letter, it did not include debts owed by Light Visions before delivery by the defendant to the plaintiff of the letter and related only to prospective purchases; seventhly, the Magistrate ought to have held that the defendant was contractually liable under the letter to pay the plaintiff the sum of $43,833.70 (being the amount agreed between the parties at the hearing to be then owing by Light Visions to the plaintiff); eighthly, in the alternative, the Magistrate ought to have held that the defendant was contractually liable under the letter to pay the plaintiff at least the amount of invoice 62809 rendered on 18 August 2006 in the sum of $76029 (together with interest) for goods delivered by the plaintiff to Light Visions in accordance with an order provided by the defendant after delivery by the defendant to the plaintiff of the letter; ninthly, the Magistrate further erred in law to the extent, if any, that his reasons, including his statements that the letter was “not a guarantee which has actually been signed by the defendant” and that “the fact is that he did not sign it...” were finding that the letter did not contain the physical signature of the defendant when the undisputed evidence before the Magistrate was that the letter had been signed by the defendant and the issue was whether the letter on its proper construction had only been signed by the defendant in his capacity as general manager of Light Visions and therefore did not bind the defendant personally; tenthly, in the alternative, if the Magistrate held that the defendant was not liable because the letter did not contain the physical signature of the defendant and if that finding involved a question of mixed law and fact requiring the leave of the Supreme Court for that erroneous finding to be overturned by reason of s 74 of the Local Courts Act, then the plaintiff seeks that leave of this Court pursuant to s 74 of the Local Courts Act; and finally, alternatively, to ground one, if the issue of whether, on the proper construction of the letter, the defendant was liable as a guarantor in his personal capacity is not a “point of law” which the plaintiff is entitled as of right to appeal under s 73 of the Local Courts Act (which the plaintiff does not admit) then the issue of whether the defendant was liable as a guarantor in his personal capacity involves a question of mixed law and fact under s 74 of the Local Courts Act and the plaintiff seeks leave of this Court pursuant to s 74 of the Local Court Act to appeal against the judgment and orders below on grounds 1 and 2.

Proceedings in the Local Court

8 The agreed facts were that firstly, Howhua Steel provides steel door frames, relevant parts and services to the public; secondly, Light Visions Pty Ltd was a client of Howhua Steel; thirdly, Howhua Steel, Light Visions and Mr David Ross O’Leary entered into a trading relationship from 20 April 2004; and fourthly, Mr O’Leary was the Company Director of Light Visions.

9 The critical document that Howhua Steel asserted constituted a personal guarantee is reproduced below. It was provided to Howhua Steel on or about 16 August 2006. It reads:

_____________________________________________________________

“Light Visions Pty Ltd

A.B.N. 88 683 169 498

Office: XX XXXX XX, Revesby, NSW, 2212

Postal: P.O. Box XXX, Padstow, NSW, 2211

Phone: xxxxxxxxxx

Fax: xxxxxxxxxx

E-mail: xxxx@lightvisions.com.au

TO: Howhua Steel Door Frames Pty Ltd

ATT: Linda Howarth

FROM: DAVID O’LEARY

Re: Pmt of Account

__________________________________________________

Dear Linda,

Light Visions Pty Ltd guarantees to Howhua Steel Door Frames Pty Ltd to pay monies outstanding as a result of purchases from Light Visions to Howhua and will repay on a consistent basis until monies due are paid in full.

Should there be a shortfall from Light Visions on the amount payable I David O’Leary personally guarantee repayment on a consistent basis until monies due are paid in full.

Monies due are subject to accurately charged invoices. Credits to these invoices if applicable will be deducted.

Regards,

Signature

David O’Leary

General Manager

Mobile: xxxxxxxxxx

e-mail: xxxxxxxxxx@lightvisions.com.au”

_____________________________________________________________

10 In mid September 2006, Light Visions made a payment of $2000 to Howhua Steel for goods supplied. On 22 January 2007, an Administrator was appointed to Light Visions. On 23 February 2007, a Notice under s 446A of Special Resolution to Wind up the Company was filed with ASIC and resolved that company be wound up under s 439C. On around 14 April 2007, Howhua Steel served a statement of claim seeking the amount of $55,746.9. Mr O’Leary has failed to pay Howhua Steel the amount of $55,746.92.

The issues raised on appeal

11 By statement of claimed filed in the Local Court, Howhua Steel sought the enforcement of a guarantee which it alleged was given to it by Mr O’Leary on about 16 August 2006. The amount claimed in the statement of claim was $51,935 plus interest. On 15 January 2008, the Magistrate entered judgment in favour of the defendant.

12 The first issue to be determined is whether this appeal involves a question of law or involves a finding of fact. If the appeal involves a mixed question of fact and law, the plaintiff has sought leave under s 74 to determine this issue. A number of cases need to be considered and will be referred to shortly.

13 Counsel for Mr O’Leary submitted that the Magistrate’s findings that the defendant was not objectively intended to be personally bound to the guarantee is a question of fact, not law – see Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909. Counsel for Mr O’Leary further submitted that there was evidence before the Magistrate that suggested the guarantee was not personal in nature, namely the fact that the guarantee was given on the letterhead of the company and qualified by Mr O’Leary’s execution of it as “General Manager”. According to Mr O’Leary, it was therefore open to the Magistrate to find as he did, and there was no error of law or mixed fact and law in his finding.

14 In addition to Scottish Amicable, the parties referred to Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160; NEC Information Systems Australia Pty Ltd v Linton (Supreme Court of New South Wales, Wood J, 17 April 1985, unreported); Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067, Rawcliffe v Bianco Hiring Service Pty Ltd [2002] SASC 430 and County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193.

15 In Scottish Amicable, McHugh JA (as he then was) (at 923-924) stated:

“The formation of a contract does not depend upon the actual intention of the parties. A contract exists because the law attaches rights and obligations to the external conduct of the parties, one at least of whom has expressly or impliedly made a promise...

The present case, therefore, depends on what the parties did and not what they intended to do when they signed the Indemnity and the Agency Agreement. And what they did depends on the construction to be placed on the documents which they signed. A commercial document, however, must be construed in its commercial setting – in accordance with the surrounding circumstances known to the parties: Codefla Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at pp. 352-353. This is so whether the issue concerns construction in the strict sense or whether, as here, the issue concerns the capacity in which a person signs a document. There is, however, a dictum of Atkin LJ in Ariadne Steamship Co Ltd v James McKelvie & Co [1922] 1 KB 518 at 536 to the effect that, if a person signs a document “'B by C his attorney’, or ‘C on behalf of B’, it would seem irrelevant that the body of the contract expressed the contract to be made between A and C”. The respondents rely on this dictum to circumscribe the inquiry before the court. You cannot go, they say, beyond the words “on behalf of” of Reg Austin Insurances Pty Ltd. when the Ariadne case went to the House of Lords, Lord Sumner and the Earl of Birkenhead had reservations about the accuracy of Atkin LJ's dictum: Universal Steam Navigation Co v James Mckelvie & Co [1923] AC 492 at 497 and 499. But if that dictum is correct I think that it should be confined to the special case of the agent who signs for an undisclosed principal. It cannot be accepted as applicable in all cases. In some cases the contents of a document may indicate that the signatory is bound even though a qualification attaches to his signature. Expressly or by implication the body of the document may make it plain that the signatory is a party to the contract. In the examples given by Atkin LJ, it would usually follow that there was no liability on the part of the person signing. But this is 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. In other cases, however, the qualification to the signature may be overcome by the terms of the document and the surrounding circumstances. In the end the decision must depend upon the terms of the document including the qualification attaching to the signature together with the surrounding circumstances. This is a question of fact, not of law.”

16 Mr O’Leary relied on the last statement in support of its proposition that this appeal involves only a question of fact.

17 In Clark Equipment, Giles J (as he then was) referred to Scottish Amicable and concluded (at 174):

“In the result, I conclude that the proper approach is to inquire whether there is to be found an intention that the signatory be personally bound to the contract evidenced in the document, meaning thereby not a subjective intention but an intention to be found objectively, nothwithstanding a qualification attached to the signature. That intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in the light of the surrounding circumstances to the extent to which evidence thereof is permissible. The inquiry is not limited to consideration of the signature and its qualification in order to determine whether or not the signature indicates an assent to be personally bound.”

18 In Follacchio, Finkelstein J adopted and agreed with the above approach of Giles JA in Clark Equipment his Honour also stated (at [9]):

“Mr Simon for the appellant sought to avoid this result by arguing that it is not permissible for a person to affix one signature to a contract and have that signature operate in, say, two capacities: one as agent for a principal and another to assume personal responsibility. But I see no reason in principle why this could not occur. All that is necessary is that the capacity or capacities in which the person is placing his signature on a contract be clear. If it is clear that he intends to sign the contract in two or more capacities, there is no reason why that intention should not be given effect.”

19 In NEC Wood J (as he then was) considered a number of cases including Young v Schuler (1883) 11 QBD 651, Ariadne Steamship Co Ltd v James McKelvie & Co [1922] 1 KB 518 and Tudor Marine Ltd v Tradax Export SA [1976] 2 Lloyd’s Rep 135. His Honour (at 84-9) stated:

"The decisions to which I have referred, and in particular the passages cited by Clarke J, emphasise the need to bear in mind the differences which may arise depending on whether the contract is signed by a person unconditionally and without qualification, or with an expressed qualification showing that his assent is not unconditional but made on behalf of another, or with words appended which leave it doubtful whether a qualified or unqualified assent is intended. I do not read the dicta of Atkin LJ, the passages in the speeches in the House of Lords in Universal Steam Navigation Co, or the passages in the judgment of Lord Goddard CJ, in Lester v Balfour Williamson Merchant Shippers [1953] 2 QB 168, as excluding reference to the surrounding circumstances or to the terms of the document, when consideration is given to the manner of execution of a document. I do not think that Clarke J intended the contrary. Rather, it appears to me that his Honour was at pains to reject the proposition that the answer could be determined by simply disregarding any qualifications affixed to a signature out of accord with the body of the contract. Although his Honour did use language suggesting that the question was not one of construction, and that regard should be had only to the actual signature placed on the document, I do not think that this was intended as a general statement of principle. The test propounded in the passages in his judgment which I have set out earlier, to my mind involves his acceptance of a wider inquiry in appropriate cases in determining what was the objective intention of the parties.

I have accordingly reached the conclusion that the question in the present case is not to be determined by regard solely to the attestation clause and the actual signature placed on the document. In my assessment, the weight of authority favours the view that the question remains one of construction. As a result, despite the presumption attached to the actual signatures and the presence of the common seal, I consider that regard should be had to the remaining provisions of the deed, and to the circumstances surrounding its execution. The inquiry to be made by reference to these matters concerns what the parties must objectively and fairly be understood to have intended by the document once executed. Evidence of subjective intention is to be disregarded."

20 Howhua Steel’s counsel submitted that these analyses involved a two-step process and referred to the approach of Mahoney JA in Scottish Amicable. In addition, Howhua Steel’s counsel relied upon a passage from the text of The Interpretation of Contracts by Sir Kim Lewis, Sweet & Maxwell [2007];

“The proper construction of a written contract is a question of law. However, the ascertainment of the meaning of a particular word is a question of fact. The division between what is a question of law and what is a question of fact is extremely difficult to draw. However, it has been said on many occasions that the a proper interpretation of a contract is a question of law.”

21 In County Securities Pty Ltd v Challenger Group Holdings Pty Ltd, Spigelman CJ (at [7]-[12]) stated:

“7 A need to identify the particular subject matter of the contract has often arisen, even in the case of a written agreement where there is a form of words to be interpreted. In the present case, the subject matter and the concomitant terms of the contract must be inferred from a combination of surrounding circumstances including conversations, documents and conduct none of which provide a definitive form of words. The issue is not one of interpretation, because there are no words to interpret. The issue is one of fact: what did the parties agree?

8 In the absence of a written document or a conversation constituting the Transfer Agreement in the relevant respect, it is necessary for the Court to consider the full range of relevant surrounding circumstances when determining the subject matter and terms of the contract. Principles of law based on the parol evidence rule are not applicable.

9 As Griffith CJ said in Deane v The City Bank of Sydney (1904) 2 CLR 198 at 209:

“ ... [W]hen a contract is partly in writing and partly verbal, all the circumstances may be looked at and considered for the purpose of construing the contract, and even to vary the written documents ...”

10 Furthermore, as Barwick CJ put it in Handbury v Nolan (1977) 13 ALR 339 at 341:

“The matter ... is not to be resolved ... by construction of written documents, but as a matter of fact, ie what in substance was the subject matter of the sale and purchase.”

(See also Torbett v Faulkner [1952] 2 TLR 659 at 661; Gordon-Cumming v Houldsworth [1910] AC 537 esp at 541, 545.)

11 To similar effect are the observations of Lord Hoffmann in Carmichael v National Power Plc [1999] UKHL 47; [1999] 1 WLR 2042 at 2049:

“[T]he rule that the construction of documents is a question of law ... applies in cases in which the parties intend all the terms of their contract (apart from any implied by law) to be contained in a document or documents. On the other hand, it does not apply when the intention of the parties, objectively ascertained, has to be gathered partly from documents but also from oral exchanges and conduct. In the latter case, the terms of the contract are a question of fact. And of course the question of whether the parties intended a document or documents to be the exclusive record of the terms of their agreement is also a question of fact.”

12 Also to similar effect are the observations of Lord Wilberforce in Liverpool City Council v Irwin [1976] UKHL 1; [1977] AC 239 at 253-254:

“We have then a contract which is partly, but not wholly, stated in writing. In order to complete it, ... it is necessary to take account of the actions of the parties and the circumstances ...

...

The Court here is simply concerned to establish what the contract is, the parties not having themselves fully stated its terms.”

(See also at 261 D-E per Lord Salmon: “all the surrounding circumstances”.)

22 County Securities sets out the general principles of construction of document but does not specifically refer to guarantees.

23 In Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235, Spigelman CJ (at [20]) stated:

“I agree with the conclusion of Campbell JA in Rava v Logan Wines Pty Ltd [2007] NSWCA 62:

“[56] ... [T]he application of the principle for construction of guarantees and indemnities that was adopted by the High Court in Andar does not involve preparing a list of all the possible meanings of a clause that the language can bear without breaking, and choosing the meaning that is most favourable to the guarantor or indemnifier. Rather, the choice is limited to choosing amongst the meanings that are fairly open by reason of the application of other rules of construction.”

24 It is my view that this appeal does not solely relate to a question of fact. Whether the document constitutes both a company guarantee and a personal guarantee is not determined solely by the attestation clause and the actual signature placed on the document. The question is one of construction of the document that is said to constitute a guarantee. This view accords with those expressed in Clark Equipment, NEC and Gardiner. Hence, the question for determination is a matter of law. Even if it were not solely a question of law, I would grant leave on the basis it is mixed question of fact and law.

25 The letter is undated. It is written upon a Light Visions’ letterhead. It purports to give two guarantees, one by Light Visions, the second by David O’Leary. It is signed by “David O’Leary, General Manager, email: xxxx@lightvisions.com.au”. There was some confusion as to whether Mr O’Leary signed the document. A copy of this document is attached to Mr O’Leary’s statement. That copy is unsigned. A copy of this same letter is attached to the witness statement of Leslie Howarth. That copy of the document is signed. A signature appears above the name David O’Leary. It is not in doubt that Mr O’Leary prepared the document without any legal advice.

26 It is necessary to refer briefly to the evidence as to whether Mr O’Leary signed the document. Mr Haddad was the solicitor who represented Mr O’Leary in the Local Court; Mr Wong was the solicitor who represented Howhua Steel. The beginning of the transcript records the following exchange.

“HIS HONOUR: So the only matter you are relying upon is annexure A, is a personal guarantee.

WONG: That is it and the circumstances surrounding it yes your Honour.

HIS HONOUR: Has that been signed? I suppose that is the issue.

HADDAD: No it has not been your Honour.”

27 During the hearing, Mr O’Leary gave conflicting evidence as to whether or not he signed document (t 23.18-21). During cross-examination, Mr O’Leary was asked “And why didn’t you put a date on it?” He replied, “That was an oversight, why didn’t I sign it was another oversight. I was under pressure to provide that guarantee.” In re-examination Mr O’Leary was asked (t 24.18-216), “Was that in relation to past debts or future debts or-” He replied, “I can only go on assumptions of what I consider, if I had signed a guarantee back in 2004, I would guarantee from [that] date forward. I signed it when I signed it and that’s what I assume-.”

The Magistrate’s decision

28 The Magistrate in his extempore reasons dated 15 April 2008 (at t 25.35; 26.15) stated:

“The plaintiff simply relies on that as a personal guarantee under which Mr O’Leary should pay and rely, no doubt, on the clear statement in that document,

‘Should there be a shortfall from Light Visions on the amount payable I David O’Leary personally guarantee repayment on a consistent basis until monies due are paid in full. Monies due are subject to accurately charged invoices. Credits for those invoices, if applicable, will be deducted.”

...

But, look, having said that a personal guarantee has to objectively be a personal guarantee. All the authorities are consistent in this principle that a personal guarantee is to be strictly construed for obvious reasons. It is not a personal guarantee because one party, and here the party who has guaranteed, believes it to be a personal guarantee.

In this case it is said the terms are unclear and I can draw certain conclusions and imply or clarify the terms in the background circumstances. But the terms, in my view, are not so much unclear. The question to be asked is there a binding and enforceable contract, that is a personal guarantee contract? And to answer that question one simply has to look at the simple construction of the document. That is the appropriate approach in any issue of contract.

The first matter that jumps out, Mr O’Leary has not signed the document in any personal capacity. This is a letterhead of Light Visions Proprietary Limited. It is signed by David O’Leary as general manager. It appears to all intents and purposes on the face of it to be a company document. Mr O’Leary said he did not get legal advice before he handed this up or before he drew it up. I have some reservations on that. There is no signature on the face of it. There is no contract, no personal contract with him.”

29 By the statement “there is no signature on the face of it”, the Magistrate seemed to contradict his earlier finding that there was a signature.

30 At that point Mr Wong, quite properly, drew his Honour’s attention to this inconsistency. The following exchange took place.

“WONG: Your Honour, sorry to interrupt, I just note that annexure A to Ms Howarth’s witness statement has a signed copy of it. So to the extent that that assists your Honour, I’m sorry, but I’ve just noticed that.

HIS HONOUR: I’m sorry, what are you referring to?

WONG: Annexure A to Leslie Howarth’s statement. That one is signed, the one that’s in front of me. I’m sorry to interrupt your Honour but I’ve just noticed it.

HIS HONOUR: Have you got a copy there? Do you mind if I just see that?

WONG: I’ll just show it to my friend.

HIS HONOUR: Oh, that’s the copy I have.

WONG: I must have misled the witness and I apologise for that.

HIS HONOUR; That’s the Howarth’s (sic) signature, that’s the O’Leary signature, yes.

WONG: That is so, yes.”

31 The Magistrate then continued (at t 27.16):

“But the point I am making is this, it is a company document, it was signed by O’Leary as general manager of the company. There is no separate document indicating any signature as a personal signature. It is a company document, it is signed as general manager. There is no indication here that it is ever signed by him in a personal capacity.

...

I think I have already covered the no consideration matter but that is irrelevant now because it certainly, in my view, not a just end result because the defendant’s evidence, even on his own, was that it was only an oversight that he did not sign it. The fact that is that he did not sign it he, after having denied it, he then conceded that his essential intention was to keep the account going on probably both sets of companies and that covers the matter of consideration.

Stepping right back from that the plaintiff cannot be successful because there is no enforceable guarantee. There is not a guarantee which has actually been signed by the defendant. I THEREFORE GIVE VERDICT AND JUDGMENT FOR THE DEFENDANT.”

32 When discussing costs, his Honour stated (at t 28.11):

“I did make a comment or one or two comments during the delivery of my decision in this and those comments are reinforced by the fact that the defendant himself in his own evidence indicated that it was only an oversight that he did not sign the document, presumably meaning that he did intend it to be a personal guarantee and in the circumstances it was a very close matter and a very close run race as to who was going to be successful in this matter.

On just ordinary principles of interpretation the defendant happened to be successful and that is the only way it could have been, in my view, on the circumstances but it was certainly open and certainly made more open by that statement, I indicated, by the defendant.”

33 So far as the ground of appeal that the Magistrate erred in his statement that the letter was “not a guarantee which had actually been signed by the defendant”. It was at times confusing as to whether Mr O’Leary signed the guarantee and what capacity he signed. From a fair reading of the transcript and the Magistrate’s reasons, it is more likely that when the Magistrate made the statement that “the guarantee is not signed” his Honour was referring to the guarantee as not being signed by Mr O’Leary in his personal capacity. However, I do accept that it was not clear.

34 As to the submission that the Magistrate erred in strictly construing the guarantee, because the defendant rather than the plaintiff drafted the letter, I do not agree. In Northstate Carpet Mills Pty Ltd v BR Industries [2006] NSWSC 1057, Young CJ in Eq (at [38]) traced the law in relation to guarantees and stated that guarantees must be strictly viewed. Just because Mr O’Leary prepared the document and did so without the benefit legal advice, does not mean that the document should not be strictly construed.

35 Counsel for Howhua Steel submitted that the Magistrate erred in construing the guarantee because he failed to hold that on the proper construction of the guarantee, the defendant was liable to the guarantor in his personal capacity; and failed to take into account the express words of the guarantee. I agree that his Honour did not attempt to construe the document nor the express words “Should there be a shortfall from Light Visions on the amount payable I David O’Leary personally guarantee repayment on a consistent basis until monies due are paid in full ...”

36 As far as the attestation clause is concerned, there were three possible findings open to the Magistrate. The first is that Mr O’Leary signed the document on behalf of the company. The second is that Mr O’Leary signed the document in his personal capacity. The third and final possibility is that Mr O’Leary signed the document in two capacities, namely on behalf of the company and in his own capacity. As far as the attestation clause is concerned, the words “general manager” appears under the signature. The document is on company letterhead. While at times it was not clear, it seems that the Magistrate found that Mr O’Leary did not sign the document in his personal capacity. I accept that this is a finding of fact.

37 In relation to the ground of appeal that the Magistrate erred in holding that the letter was not a personal guarantee “because one party, and here the [defendant], believes it to be a personal guarantee” when the fact that both parties believed it to be a guarantee was a relevant circumstance supporting the notion that on the proper construction of the letter Mr O’Leary was liable as a guarantor in his personal capacity, that statement was taken out of context. What the Magistrate actually said was:

“But, look, having said that a personal guarantee has to objectively be a personal guarantee. All the authorities are consistent in this principle that a personal guarantee is to be strictly construed for obvious reasons. It is not a personal guarantee because one party, and here the party who has guaranteed, believes it to be a personal guarantee.”

38 The Magistrate did not approach the construction of the document by taking into account the subjective intention of Mr O’Leary.

39 The final ground of appeal is that the Magistrate erred in holding that on a proper construction of the letter, it did not include debts owed by Light Visions before the delivery by the defendant to the plaintiff of the letter and related to prospective purchases, the Magistrate stated (at t 29.23):

“There is no agreement as to what goods it applies to, as I say, the strict construction of these matters, it has already been raised and argued that there is no indication of what goods it applies to. There can be no assumptions unless the circumstances scream out that there can be no other interpretation and that is not the case here. There can be no assumption that it covers anything in particular apart from the goods supplied from one particular date even if it is enforceable. But there it is silent on that point. It certainly would be, and even if it was signed, in my view would be inadequate to cover any prior debts because it simply does not say. It could only cover those goods supplied subsequently.”

40 The wording of the guarantee does not stipulate that it relates to prior debts.

41 Further, Mr O’Leary gave evidence that he could only go on the assumption if he had signed the guarantee back in 2004, he would guarantee forward. In these circumstances it was open for the Magistrate to make the finding that the guarantee only related to the goods supplied subsequently.

42 The Magistrate’s findings as to whether Mr O’Leary signed the document and in what capacity are at times confusing. I accept that it was open to the Magistrate to find that Mr O’Leary signed the guarantee in his personal capacity but before so doing his Honour should have also had regard to the wording of the document. In that regard his Honour did not refer to the express words where it says “Should there be any shortfall from Light Visions on the amount payable I David O’Leary personally guarantee repayment...”

43 In my view leave should be granted to appeal the question of mixed fact and law.

44 The appeal is upheld. The decision of the Magistrate Garbutt dated 15 January 2008 is set aside. The matter is remitted to the Local Court to be determined according to law.

45 Costs are discretionary. Costs normally follow the event. The defendant is to pay the plaintiff’s costs as agreed or assessed. The defendant is to have a Certificate pursuant to the Suitor’s Fund Act, if applicable.

The Court orders

(1) Leave to appeal is granted.

(2) The appeal is upheld.

(3) The decision of his Honour Magistrate Garbutt dated 15 January 2008 is set aside.

(4) The matter is remitted to the Local Court to be determined according to law.

(5) The defendant is to pay the plaintiff’s costs as agreed or assessed.

(6) The defendant is to have a Certificate pursuant to the Suitor’s Fund Act, if applicable.

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LAST UPDATED:
17 November 2008