Bunn v Noliq Pty Ltd [2005] ACTSC 58 (4 July 2005)

Last Updated: 26 July 2005

PETER CHADLEY BUNN v NOLIQ PTY LTD [2005] ACTSC 58 (4 July 2005)

EX TEMPORE JUDGMENT

No SC 366 of 2005

Judge: Crispin J

Supreme Court of the ACT

Date: 4 July 2005

IN THE SUPREME COURT OF THE )

) No SC 366 of 2005

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: PETER CHADLEY BUNN

Plaintiff

AND: NOLIQ PTY LTD

Defendant

ORDER

Judge: Crispin J

Date: 4 July 2005

Place: Canberra

THE COURT ORDERS THAT:

1. the defendant forthwith remove the caveat dated 22 February 2005, which it has lodged in relation to the land at unit 1, block 53, section 92, division of Griffith in the Australian Capital Territory, also known as 73A Jansz Crescent, Griffith in the said Territory;

2. the defendant pay the plaintiff's costs.

1. This is an application for an order requiring the defendant to remove a caveat lodged in relation to land being unit 1, block 53, section 92, division of Griffith in the Australian Capital Territory, also known as 73A Jansz Crescent, Griffith in the ACT, which I'll hereafter refer to as "the land". The caveat reflected the defendant's claim that it had an interest in the land consisting of a charge: "Created pursuant to clause 9 of an agreement dated 14 November 2002 to secure performance by Chadmar Enterprises Pty Ltd of its obligations to Novocastrian Wholesale Liquor Pty Limited under the said agreement".

2. The agreement referred to in the caveat, which I will refer to as "the first credit agreement", provided for the supply of goods by the defendant, which was then named Novacastrian Wholesale Liquor Pty Limited, to Chadmar Enterprises Pty Limited, which I will refer to hereafter as "Chadmar", on credit. Clause 9 of this agreement provided that Chadmar and the plaintiff, who was a director of Chadmar, charged their interests in any properties referred to as the nominated addresses in the relevant application form, and authorised the defendant to register caveats on such property. The property at 73A Jansz Crescent Griffith was so nominated.

3. Whilst the plaintiff was not a party to that agreement, he executed it on behalf of Chadmar and provided a personal guarantee of Chadmar's obligations. I will refer to that guarantee hereafter as "the first guarantee". It was conceded by Mr Erskine, who appeared for the plaintiff, that, if the first credit agreement had been extant at the time the caveat was lodged, it would have validly authorised the lodgment of that caveat. The plaintiff contended, however, that the first credit agreement had been repudiated and that the goods subsequently ordered by Chadmar had been supplied pursuant to a subsequent credit agreement. The plaintiff had again provided a personal guarantee of Chadmar's obligations under that agreement but had not agreed to provide any charge over his property or to permit the lodgment of a caveat to secure the performance of any such obligation.

4. The plaintiff explained that Chadmar had operated the Super Owl at Scullin and had been obtaining liquor supplies from another company, Australian Liquor Marketers Pty Limited, hereinafter referred to as "ALM". Whilst it had been looking for an alternate supplier in November 2002 when the first credit agreement was executed, it had continued with planned supplies from ALM and for some time made no attempt to order liquor from the defendant. However, by late May 2004 a dispute had arisen between Chadmar and ALM, and the plaintiff had instructed Mr O'Connell, who was Chadmar's general manager, to obtain liquor stocks from the defendant. Mr O'Connell gave evidence that he had contacted Mr Johnson, who was the commercial director of the defendant, on 4 June 2004 and had a number of conversations with him during the course of that day concerning the terms of trade for such suppliers.

5. During the afternoon Mr Johnson sent a hand-written note by facsimile to the plaintiff which included the following remarks:

Peter, we opened your account on 15 November 2002. Your account has not been used so with a request for orders we always carry out a re-date of credit facilities. However Peter our recent enquiries do not come up positive. Therefore we can only supply goods of (sic) the following basis:

(a) Credit card order.

(b) Bank cheque with order.

Should you wish to discuss this further please call.

Thanks. Rod.

6. Upon receiving this facsimile Mr O'Connell discussed the matter with the plaintiff who indicated that these terms were unacceptable and the plaintiff asked him to contact Mr Johnson again. He subsequently rang Mr Johnson and sought to ascertain why he was unwilling to supply liquor to Chadmar on credit. During the course of the ensuing conversations Mr Johnson asked Mr O'Connell about a problem with "PFD", which was apparently another supplier with whom there had been some dispute. Mr O'Connell said that he had told Mr Johnson that PFD had obtained a judgment against Chadmar but had agreed to withdraw it, and indicated that he could send him a copy of a letter to that effect. Following that conversation he faxed Mr Johnson a copy of the letter he had foreshadowed. Whilst a copy of the letter was not tendered in evidence, the transmission report annexed to Mr O'Connell's second affidavit confirms that a facsimile was sent from Chadmar to a number that Mr Johnson accepted was the appropriate number for his office at 4.43 that afternoon.

7. Mr O'Connell said that during the course of the subsequent telephone conversation it was agreed that the defendant would supply goods to the plaintiff on credit but that a further application would be necessary. This was because PFD had been listed on the original application as a referee and Chadmar's banking arrangements had also changed. Furthermore, the defendant had previously indicated to Chadmar that credit could be provided on the basis of a rolling 42 day cycle rather than on the basis that payment would be made by the 16th of each month as required by the initial agreement.

8. Mr O'Connell informed the plaintiff of the outcome of his discussions with Mr Johnson, and the plaintiff then went through a further application form striking out various clauses that he was unwilling to accept. The excised portion of the form included the paragraphs providing for the creation of a charge over his property and the conferral of any right to lodge a caveat. He then executed the document and gave it back to Mr O'Connell but told him not to send it to the defendant unless the crossed out terms had been agreed.

9. Mr O'Connell said that he duly contacted Mr Johnson to discuss the alterations to the form and that Mr Johnson told him that those alterations would be agreed. The form was posted to the defendant, though I think it is fair to say that Mr O'Connell was unclear whether he had posted the form before or after that conversation.

10. It should be noted that the form was enclosed with a letter addressed to Mr Johnson that read:

Dear Rod,

Please find attached a new completed credit application as discussed today. We have amended the application to reflect our discussions and agreements along with updated company details. We look forward to a long relationship with Novacastrian.

11. The letter was signed by Mr O'Connell as general manager. It should also be noted that the accompanying application form had at the top of the page the words, "application supercedes (sic) credit application dated 14 November 2002". That statement was signed by the plaintiff, as was the last page of the attached document and the personal guarantee and indemnity.

12. It is common ground that the orders that gave rise to the debt now claimed by the defendant commenced on the following Monday.

13. The defendant clearly proved to have ample cause to regret any agreement for the provision of credit to Chadmar. During the ensuing months there were several instances in which payments were made late and then for less than the full amount claimed and cheques were subsequently dishonoured.

14. By 18 April 2005, when a meeting of Chadmar's creditors was called by Mr Rangott, a chartered accountant, Chadmar owed the defendant the sum of $386,011.08. There had apparently been some discussion between Mr O'Connell and Mr Johnson as to whether the defendant would have the caveat removed. Whilst Mr O'Connell said that Mr Johnson had agreed to speak with the defendant's directors about the matter, it was not suggested that there would be any agreement that it would be removed. Indeed, Mr O'Connell conceded that Mr Johnson had said that there would need to be a substantial proportion of the debt paid.

15. However, at a subsequent meeting on 9 May 2005, Mr Johnson moved a motion for the execution of a deed of company arrangement, which involved a requirement for a contribution of $250,000 by the plaintiff. Mr Rangott gave evidence that in the course of that meeting he had been asked where the sum of $250,000 was to come from and that he had replied by indicating that it was to come from a loan to the plaintiff secured over his house at Griffith. Two sets of contemporaneous notes taken by employees of Mr Rangott's firm were annexed to his affidavit and each confirmed that words to that effect had been said at the meeting.

16. It was not suggested to Mr Rangott in cross-examination that the words were not spoken. Nor, despite the evidence of the plaintiff that I will refer to shortly, was it suggested that the meeting was boisterous or that there was any other reason for a person present at the meeting not to have heard those words spoken.

17. Mr Erskine submitted that the evidence adduced on behalf of the plaintiff clearly demonstrated that the first credit agreement and the first guarantee had both been repudiated by the defendant on 4 June 2004. The goods subsequently supplied to Chadmar had not been supplied pursuant to that agreement, but to a second agreement arising from a conversation later that day augmented, perhaps, by the application and confirmation of its acceptance by the provision of goods subsequently ordered. The fact that Mr Johnson had moved a motion for acceptance of the deed of arrangement involving the provision of the sum of $250,000 to be obtained by a further loan to be secured over the plaintiff's property at Griffith demonstrated that the defendant was aware that the caveat could not be sustained or at least involved an implied agreement to withdraw it.

18. In the alternative, Mr Erskine submitted that a waiver or an estoppel had arisen as a result of that motion.

19. In answer to these contentions the defendant maintained that the first agreement had never been repudiated and that no further agreement had ever been reached. Mr Arthur, who appeared for the defendant, argued that the note sent by facsimile on 4 June 2004 had not had the effect of terminating the agreement, but had merely made it clear to the plaintiff that goods would not be supplied pursuant to the agreement for the time being. Mr O'Connell had subsequently persuaded Mr Johnson to restore the provision of credit facilities to Chadmar in accordance with the initial agreement and all of the goods had subsequently been supplied on that basis.

20. Mr Johnson gave evidence that he had not had extensive conversations with Mr O'Connell during the course of 4 June 2004 as Mr O'Connell suggested. Indeed, he said that he had not spoken to him on that day at all. He claimed to have spoken to him only on 2 June 2004, when Mr O'Connell requested an urgent supply of stock and told him that ALM had cut off the supply of liquor to Chadmar, and subsequently on 7 June 2004. Mr Johnson had indicated during the first conversation on 2 June 2004 that he would consider Mr O'Connell's request. On the following day he had made a number of trade enquiries but the response had not been favourable and he had been concerned that if Chadmar had been having difficulty in meeting its obligations to ALM, it might not be able to meet its obligations to the defendant. Accordingly, he decided to demand payment by credit card or bank cheque prior to sending the goods. On 4 June 2004 he attempted to send a note to that effect by facsimile. He said, however, that the fax did not transmit even after a second attempt and that he had then sent the note by express post.

21. Mr Johnson said he received a further phone call from Mr O'Connell early on the morning of 7 June 2005. He said that Mr O'Connell had told him that he had just received; "your express post letter" and proceeded to explain that Chadmar would; "go out backwards" if it did not obtain credit but had to pay for the goods at the time of purchase. He also explained that the dispute with ALM related only to pricing and asked; "Could you please supply the goods in accordance with your usual terms of trade and forego the requirement for a credit card or bank cheque payment?" or words to that effect. Mr Johnson said that he was reluctant to do so but ultimately agreed because Mr O'Connell had been adamant that Chadmar could meet its trade terms. He claimed that Mr O'Connell did not at any time during the conversation mention that he had completed another application for a commercial trading account.

22. Mr Johnson said that when he came to work on Monday morning he found orders on his desk that had been faxed by Chadmar over the weekend. When challenged about this proposition in cross-examination he denied having said that the orders had been faxed to him and said that they were just orders and that he had not known when they had come in. When further pressed on the issue, he said that they had just been pieces of paper relating to orders but again confirmed that they were there first thing in the morning. In fact transmission records for that day suggest that a ten page document was sent from Chadmar to the relevant section of the defendant's company dealing with orders at 2.41 pm. It seems likely that they were the orders in question.

23. Mr Johnson maintained that the existence of a subsequent application had not been drawn to his attention. He stated that, whilst Mr O'Connell had asked him if the defendant would be willing to remove the caveat, he had indicated that a substantial portion of the then outstanding debt would have to be paid. He had subsequently advised him that the defendant had sought legal advice and been advised that the caveat should be maintained.

24. Whilst conceding that he had moved the motion for the execution of the deed of arrangement at the creditors meeting on 9 May 2004, Mr Johnson maintained that he had not heard Mr Rangott or anyone else indicate that the contribution of $250,000 by the plaintiff was to be funded by a loan secured over his property at Griffith, and maintained that, so far as he was aware, the money could have been coming from anywhere. He maintained that he had asked Mr O'Connell but had not got a clear answer from him. Whilst other people were asking about that matter at the meeting, which had been attended by about 40 to 50 people, he had been sitting at the back of the meeting and he had not heard anyone provide a satisfactory answer to the question.

25. Mr Rangott's evidence as to this issue, as I mentioned, was not challenged in cross-examination, and it was not put to him that the meeting, which the minutes suggest was attended by about 18 people, was crowded, noisy or unruly.

26. The plaintiff did not negotiate directly with Mr Johnson, but left that to Mr O'Connell. Consequently, his evidence is of somewhat limited importance, though he did confirm that he executed the fresh application form. Mr Arthur referred to some discrepancies between his evidence and that of Mr O'Connell, and whilst I am satisfied that the plaintiff's evidence was generally honest, I do think that his recollection may have been tinged to some degree by a measure of defensiveness and by the plight in which he found himself at the time of these events.

27. In any event, to the extent of any divergence in the evidence between the plaintiff and Mr O'Connell, I prefer that of Mr O'Connell. Mr O'Connell impressed me as a transparently honest witness. He seemed a reserved, shy and perhaps slightly naïve man, who seemed genuinely shocked when it was put to him in cross-examination that some of his evidence may not have been true. His account of the relevant facts contained in his first affidavit did not refer to some facts that emerged later in his evidence and I accept that his recollection of the overall sequence of events was less than entirely comprehensive. Mr Arthur also raised a number of other issues concerning his credibility. However, despite the searching cross-examination to which he was subjected, I was left with no doubt as to the essential accuracy of his evidence.

28. In contrast, I must say that Mr Johnson was not an impressive witness. He gave evidence in a defensive manner and, when cross-examined about apparent discrepancies in his account of the relevant events, he resorted to a number of techniques that included denying having previously said what he had said, use of non sequiturs and bluster. None of these tactics enhanced his credibility. I formed the distinct impression that his evidence had been coloured by defensiveness and I strongly preferred Mr O'Connell's evidence on any issue as to which their relevant accounts diverged.

29. I also found some of Mr Johnson's evidence improbable. In particular, I was quite unable to accept his explanation for his conduct in moving that the deed of arrangement be executed. I did not accept his evidence that he did not hear Mr Rangott refer to the fact that the loan, from which the plaintiff's contribution was to be funded, was intended to be secured over his property at Griffith. Furthermore, having regard to his experience as the defendant's commercial director and to the attitudes and temperament which he displayed in the witness box, I was unable to accept that he would have moved the motion without ascertaining the intended source of those funds, even if he had not heard Mr Rangott's statement, had he genuinely been of the opinion that the caveat was enforceable.

30. Mr Arthur posed rhetorically the question - why would Mr Johnson change from a position in which he had made an outright refusal to give credit to Chadmar to a position in which he was willing to completely abandon the security provided by the caveat? The answer to that question may be found in the fact that his earlier concerns had been founded upon the fact that PFD had obtained judgement against Chadmar and that they had been assuaged. In any event, the force of this argument alone was insufficient in my opinion to counter balance the strong weight which I placed on the credibility of Mr O'Connell's evidence.

31. It was not disputed that Mr Johnson was in a position to bind the defendant contractually and I am satisfied that the provision of the note sent to the plaintiff by facsimile on 4 June 2004 and the subsequent course of the conversation between Mr O'Connell and Mr Johnson involved a repudiation of the first agreement, which was effectively accepted by the plaintiff.

32. It is true, as Mr Arthur pointed out, that clause 5 of the agreement provided that the defendant reserved the right to stop supply at any time without notice to Chadmar, and without prejudice to any other rights that it may have had under the agreement, and that, in that event, the account would merely be placed on hold until returned to the agreed trading terms.

33. It is also true that, when it was put to Mr Johnson that; "As at 4 June the agreement of 2002 as far as you were concerned was over, wasn't it?", Mr Johnson replied; "At the present time". In further answers to cross-examination, he made it clear that he would not have been willing to supply goods under the first credit agreement, without being confident that the company was not a bad credit risk. However, he rejected the suggestion that if there was to be any supply of liquor, it would have to be under a new agreement, explaining that; "That stays there. If his circumstances change and his credit rating go up it would still be that credit application. It is the Bible one, it is the strength one. We would never accept something down from that".

34. It is also true that clause 7 of the contract provided that the terms of trade imposed by that first credit agreement applied to all transactions from which Chadmar was supplied goods and services by the supplier and that "If any future contract" between Chadmar and the defendant was inconsistent with these terms of trade, then the terms of trade would apply unless the subsequent contract referred to, and specifically altered in writing, those terms of trade.

35. Mr Arthur argued that in these circumstances I should construe the notes sent by facsimile on 4 June 2004 as a mere indication that the defendant had been acting under clause 5, and that the first agreement should be taken to have continued. He submitted that the provision in clause 7 of the contract heightened the need to investigate whether any new arrangement should be construed as having overridden the original arrangement, and argued that there was a need to be positively satisfied that the earlier contract had come to an end.

36. Mr Arthur also submitted that I would need to determine the precise nature of any new contract. I must say that I am unable to accept that submission. It seems to me that, as Mr Erskine pointed out, there is a need to distinguish between the agreements between Chadmar and the defendant and the contract of guarantee, augmented by the right to caveat, between the plaintiff and the defendant.

37. There may, perhaps, be some uncertainty as to whether the conversation between Mr O'Connell and Mr Johnson gave rise to a new agreement constituted by the conversations alone, or whether there was merely an agreement that the first agreement would come to an end with any subsequent agreement to be formed by the credit application and its subsequent acceptance, whether explicitly or by the provisions of goods and services in reliance upon the receipt of the written document. It may be that the terms of the conversation were not sufficiently explicit to prevent Novocastrian from declining the offer contained in the new written agreement if its credit checks carried out in reliance upon the information contained in that application had proven adverse. However, this is perhaps somewhat unimportant because the defendant would in any event have retained the right to refuse to provide liquor on credit, by virtue of clause 5, which was one of the clauses retained in the fresh application submitted.

38. However, the only real question is whether or not any fresh application provided for a right to charge the relevant property and/or to lodge a caveat in respect of it. In relation to that issue, it is clear from Mr O'Connell's evidence, which in this respect I accept, that whilst the fresh application form was in similar terms to the first credit agreement, it did not include a number of specific provisions including the provision for a charge over the property at Griffith or any entitlement for the defendant to lodge a caveat in respect of the property. I accept Mr O'Connell's evidence that the exclusion of those terms was expressly discussed with Mr Johnson and agreed.

39. Accordingly, I am satisfied that no debt was incurred under the first contract and that the defendant had no entitlement to lodge a caveat over the property at Griffith at the time it did so in February 2005.

40. Mr Arthur submitted that it would have been surprising if such an arrangement had been made. He suggested that Mr O'Connell had not acted upon Mr Bunn's instructions to specifically raise with Mr Johnson the fact of the fresh credit application and, in particular, the fact that it did not provide for the lodgment of such a caveat. It is, I think, possible that there was some confusion between the plaintiff and Mr O'Connell as to what Mr O'Connell was to put to Mr Johnson or, alternatively, that Mr O'Connell, who did not seem to me to be a particularly forceful person, ultimately failed to make that demand of Mr Johnson, who demonstrated an apparent capacity for some aggression. But whatever the position in relation to that issue, I was not persuaded that I should not accept the evidence of Mr O'Connell whom, as I have mentioned, I found to be a transparently honest witness and a person whom I thought gave his evidence carefully and reliably.

41. For these reasons it is unnecessary to consider Mr Erskine's alternate submissions to the effect that the document sent by facsimile on 4 June 2004 constituted a variation of the contract, thereby removing any provision for the supply of goods on credit and hence any provision for a guarantee of Chadmar's obligations in relation to the provision of goods on credit. Similarly, it is unnecessary to consider his submissions concerning the legal implications of Mr Johnson's conduct in moving the motion for the execution of the deed of arrangement on 9 May 2005.

42. The plaintiff is entitled, in my opinion, to an order requiring the defendant to remove the caveat.

43. The Notice of Motion also seeks compensation pursuant to s 108 of the Land Titles Act 1925 but Mr Erskine has indicated that this application would not be pursued and I intend to make no order about that matter.

44. For these reasons I order that the defendant forthwith remove the caveat dated 22 February 2005, which it has lodged in relation to the land at unit 1, block 53, section 92, division of Griffith in the Australian Capital Territory, also known as 73A Jansz Crescent, Griffith in the said Territory.

45. I order that the defendant pay the plaintiff's costs.

I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Crispin.

Associate:

Date: 19 July 2005

Counsel for the plaintiff: Mr C Erskine

Solicitor for the plaintiff: Colquhoun Murphy

Counsel for the defendant: Mr R Arthur

Solicitor for the defendant: Bradley Allen

Date of hearing 4 July 2005

Date of judgment 4 July 2005