Re David Kenneth Rogers and Cheryl Ann Rogers Ex Parte CMV Parts Distributors Pty Ltd v Anthony Christopher Matthews [1989] FCA 52 (9 March 1989)

FEDERAL COURT OF AUSTRALIA

Re: DAVID KENNETH ROGERS and CHERYL ANN ROGERS Ex parte C.M.V. PARTS
DISTRIBUTORS PTY LTD
And: ANTHONY CHRISTOPHER MATTHEWS
Nos. 5 and 6 of 1987
FED No. 99
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA
Von Doussa J.(1)

CATCHWORDS

Bankruptcy - Application to review Trustee's decision to reject proofs of debt - review by way of rehearing - debt arising under guarantee - interpretation of guarantee - use of stated consideration to identify offeree - use of extrinsic evidence to resolve ambiguity as to the identity of party referred to in the consideration clause.

Bankruptcy Act 1966 Part X, s.104

Boral Resources (Qld) Pty Ltd v. Donnelly (1988) 1 QdR 506

HEARING

ADELAIDE 9:3:1989

Counsel for the Applicant: Mr B.J. Jenner

Solicitors for the Applicant: Lynch & Myer

Counsel for the Respondent: Mr M. Randle

Solicitors for the Respondent: Randle & Taylor

ORDER

The respondent admit to proof the debt due by David Kenneth Rogers by reason of his liability to C.M.V. Parts Distributors Pty Ltd under a guarantee dated 1 April 1980.

The respondent admit to proof the debt due by Cheryl Ann Rogers by reason of her liability to C.M.V. Parts Distributors Pty Ltd under a guarantee dated 1 April 1980.

Note: Settlement and entry of order is dealt with in Bankruptcy Rule 124.

DECISION

In each of these proceedings C.M.V. Parts Distributors Pty Ltd ("Parts Distributors") has applied under s.104 of the Bankruptcy Act 1966 to review decisions of the Trustee under arrangements made by David Kenneth Rogers and Cheryl Ann Rogers pursuant to Part X of the Act rejecting proofs of debt lodged by Parts Distributors against the separate estates of each of the debtors.

2. In about 1979 and prior thereto the debtors in partnership conducted the business of Mount Gambier Motors. In early 1980 they formed a company, David Rogers Pty Ltd, of which they became the directors. The company took over the business of Mount Gambier Motors and thereafter conducted it until 1987. The company went into liquidation on 13 April 1987. The debtors entered into the Part X arrangements by deeds dated 13 March 1987.

3. The proofs of debt particularised the indebtedness of each debtor as "goods supplied-$27,800.14". These particulars failed to disclose the true nature of the debts. The Trustee apparently made enquiries and ascertained that Parts Distributors was asserting an indebtedness arising under guarantees given by each debtor to it guaranteeing the present and future obligations of David Rogers Pty Ltd for goods supplied to it at its request. The ground stated by the Trustee for rejecting the proofs was:
"That the debtor did not guarantee performance of

the company Mount Gambier Motors Pty Ltd to C.M.V.
Parts Distributors Pty Ltd."

The ground of rejection should have referred to David Rogers Pty Ltd trading as Mount Gambier Motors but nothing turns on that. Parts Distributors contends that each of the debtors gave to it a valid guarantee the terms of which cover the indebtedness of David Rogers Pty Ltd in respect of which the proofs were lodged.

4. On the hearing of these reviews, both Parts Distributors and the Trustee sought to adduce evidence. Section 104 of the Bankruptcy Act empowers the Court to "review" the decision of the Trustee. In Payne & Ors. ex parte Levi (unreported decision, 23 September 1986, Perth No. 163 of 1983 X) Toohey J. said :

"Section 104 of the present Bankruptcy Act empowers
the Court to 'review' a Trustee's decision and, in
my view, that term carries with it the notion that
the parties may place before the Court such
material as they wish, provided of course that it
is relevant and otherwise admissible. Re
Masters; ex parte Gerovich (unreported decision of
Toohey J. delivered 30 July 1985); Re Kerr ex
parte Bannon (unreported decision of Forster J.
delivered 24 July 1986). The function of the
Court is not to consider the correctness or
otherwise of the trustee's decision in the light
of the material before him but to determine, in
light of the material before it, whether the
applicant has a debt that should be admitted to
proof. Of course, inconsistencies in the
material provided to the trustee and that offered
to the Court may properly be taken into account."

I therefore received the evidence and proceed now to consider the claims of Parts Distributors in light of that material.

5. It is common ground that each debtor on 1 April 1980 executed a form of guarantee. Both forms were in identical terms and the issues which now arise for decision in each matter are the same. The form of guarantee is addressed simply to "C.M.V. Group". It is sufficient to set out the opening lines from the document signed by David Kenneth Rogers. It reads :

"To CMV GROUP
241 FLINDERS STREET,
ADELAIDE S.A.
I DAVID KENNETH ROGERS,
of 19 KALIMNA CRESCENT, MOUNT GAMBIER S.A.
IN CONSIDERATION of your having agreed at my
request to supply goods and services to David
Rogers Pty., Ltd., trading as Mt. Gambier
Motors, ... (hereinafter called 'the trader') DO
HEREBY guarantee the due payment to you of all and
every sum or sums of money as may now be due and
payable and may from time to time or at any time
hereafter become due and payable to you by the
trader for or in respect of goods supplied and
hereafter to be supplied to or at the request of
the trader and for services rendered and hereafter
to be rendered for or at the request of the trader
..."

6. At the date when the guarantees were given "C.M.V. Group" was a business name registered under the Business Names Act 1963 (SA). The registered proprietors of the name were seven companies which included Commercial Motor Vehicles Limited and Peters Diesel Pty Ltd. On 30 June 1982 Peters Diesel Pty Ltd changed its name to C.M.V. Parts Distributors Pty Ltd (the creditor in these proceedings) and the proprietorship of the business name was changed - one of the proprietors at 1 April 1980 dropped out and new proprietors came in. The indebtedness of David Rogers Pty Ltd in respect of which Parts Distributors now seeks indemnity under the guarantee was incurred in May and June 1986. If the proprietors from time to time of the business name C.M.V. Group were carrying on business in partnership from 1983 to 1986, and the guarantees were addressed to the partnership, the short answer to Parts Distributors' claim would lie in s.18 of the Partnership Act 1891 as amended (SA) which reads :

"18. A continuing guaranty or cautionary
obligation given either to a firm or to a third
person in respect of the transactions of a firm
is, in the absence of agreement to the contrary,
revoked as to future transactions by any change in
the constitution of the firm to which, or of the
firm in respect of the transactions of which, the
guaranty or obligation was given."

The terms of the guarantees make no agreement to the contrary. As I understood counsel for the Trustee, the Trustee was for a time under the impression that the proprietors of "C.M.V. Group" were carrying on business in partnership, and that the change in constitution of the partnership in 1982 provided the ground for rejecting the proofs. However evidence was given before me by Ross William Hoban, the secretary of Parts Distributors, and a one time employee of Commercial Motor Vehicles Limited, that at no relevant time were the proprietors of the business name carrying on business in partnership. The true relationship was that Commercial Motor Vehicles Limited was the holding company and the other proprietors its subsidiaries. Each company carried on a separate business although Commercial Motor Vehicles Ltd operated a common accounting system for all the companies in the group. When one of the companies made a sale in the course of its business it would issue an invoice in its particular name, but at the end of each month statements of account were sent to debtors which bore the prominent heading "C.M.V. Group", and thereunder the names of the companies in the group (a disclosure required by s.113 of the Companies Act 1962, and later by s.218 of the Companies (SA) Code). At least to the extent that there was a common accounting system the proprietors of the business name carried on business in association.

7. Although counsel for the Trustee did not formally concede that the proprietors of the business name were not at any relevant time carrying on business in partnership, he offered no argument as to why I should not accept the evidence of Mr Hoban. I do accept Mr Hoban's evidence, and on the basis of it find that there was no partnership between the proprietors. Whereas registration of a business name by a number of companies under the Registration of Business Names Act 1928-1961 (SA) may have provided at least prima facie evidence of a partnership, no inference of partnership arises under the Business Names Act 1963 which does not by its terms provide for registration by a "firm". The requirement for registration under the Business Names Act 1963 arises by force of s.5 which provides -

"5. (1) A person shall not either alone or together
with other persons carry on business in the State
under a business name unless -
(a) the business name consists of the name of that
person and the name of each other person, if
any, in association with whom that person is
so carrying on business, without any addition;
or
(b) the business name is registered or deemed to
be registered under this Act in relation to
that person and each other person, if any, in
association with whom that person is so
carrying on business and such of the
provisions of section 12 as are applicable
have been complied with by or on behalf of the
person or persons in relation to whom the
business name is registered or deemed to be
registered.
Penalty: Two hundred dollars. Default penalty."

A group of companies, for example a holding company and its subsidiaries, can carry on business in the State together, and in association, under a business name without necessarily being a partnership. That was the case in the present instance.

8. Upon learning that Parts Distributors denied that there was a partnership between the companies in the C.M.V. Group counsel for the Trustee sought to uphold the Trustee's decision on other grounds. His starting point was the decision of the Full Court of Queensland in Boral Resources (Qld) Pty Ltd v. Donnelly (1988) 1 QdR 506 which concerned a claim under a guarantee given by the defendant to "the Boral Group" in consideration of the offeree agreeing to supply goods to Donnelly Constructions Pty Ltd. At the time when the guarantee was given, in September 1977, Donnelly Constructions had a trading relationship with two companies in a group of eleven companies which were named in the guarantee as comprising the Boral Group. One of the two companies with which Donnelly Constructions traded had already obtained a guarantee from the defendant. The subject guarantee was given at the request of the other company, Boral Concrete (Qld) Pty Limited. The eleven companies in the Boral Group did not carry on business as a partnership or consortium. Each conducted its own separate business under a "divisionalised" structure. Boral Resources was one of the companies named in the guarantee but in September 1977 it was not a company with which Donnelly Constructions traded. It was not until 1981 that Boral Resources commenced to supply Donnelly Constructions. Thereafter Donnelly Constructions defaulted in payment and Boral Resources sued the defendant on the guarantee.

9. The Full Court identified the true question to be decided as between whom the contract of guarantee was made. Importance was placed on the consideration clause in the guarantee which read - "In consideration of your having at my/our request agreed to supply to Donnelly Constructions Pty Ltd ...". The guarantee thereby identified the offeree as the company within the Group which had agreed to supply Donnelly Constructions, namely Boral Concrete. As the guarantee was addressed "to the Boral Group consisting of the following companies ..." (and the eleven companies were then named) the obligations guaranteed would ordinarily be understood as obligations owed jointly to the eleven companies, but when the guarantee was construed in light of the circumstances surrounding its coming into existence, the description of the identity of the offeree was ambiguous. Extrinsic evidence was therefore admitted to resolve the ambiguity. It was held that the contract of guarantee was between the defendant and Boral Concrete, the company with whom Donnelly Constructions was trading when the guarantee was given. The contract was not with Boral Resources and the claim therefore failed. Counsel drew on the reasoning of the Full Court in a number of ways in support of arguments to justify the Trustee's rejection of the proofs.

10. Before considering these arguments it is necessary to refer to the evidence of Mr Hoban, which in this respect was supported by evidence from the debtor David Rogers. This evidence establishes that in 1980 David Rogers Pty Ltd regularly dealt with three companies in the C.M.V. Group, but in particular with Commercial Motor Vehicles Limited and Peters Diesel Pty Ltd. At that time Commercial Motor Vehicles Limited was the State distributor of Mitsubishi parts and Peters Diesel Pty Ltd was a distributor of Volvo trucks and parts. The third company in the C.M.V. Group with which David Rogers Pty Ltd dealt distributed Kenworth truck parts. There was some suggestion raised in cross examination of the witnesses by counsel for the Trustee that David Rogers Pty Ltd may have dealt with other companies in the C.M.V. Group but this was not established. At the time of the change of name of Peters Diesel Pty Ltd to C.M.V. Parts Distributors Pty Ltd on 30 June 1982 there were also substantial changes within the structure of the C.M.V. Group of companies. Commercial Motor Vehicles Limited relinquished the Mitsubishi distributorship which was taken over by Parts Distributors. At the same time Parts Distributors relinquished the Volvo distribution in favour of another company in the group.

11. Against this evidence counsel for the Trustee contended that the guarantees given by the debtors were void for uncertainty. Whereas in the Boral Resources case the extrinsic evidence identified one company as the offeree, here the evidence showed that David Rogers Pty Ltd in 1980 dealt with three companies in the C.M.V. Group. It was argued that the obvious intent of the guarantees was to oblige the parties giving them to indemnify each company which from time to time was a proprietor of the business name C.M.V. Group. It was argued that at the time when the guarantees were given it was therefore uncertain to which companies the benefit of the guarantee would enure in the future. I am unable to accept this contention. As in Boral Resources, the guarantees must be construed in light of the matrix of circumstances in which they were given. They should be construed so as to reflect what may fairly be inferred to have been the parties' real intention and understanding as expressed by them in writing, and so as to give effect to them rather than not (Halsbury's Laws of England, 4th Ed. Vol. 20 para.143). It could not have been the intention of the parties that the guarantees would only operate in respect of obligations incurred by David Rogers Pty Ltd jointly to all the proprietors of the C.M.V. Group. On the contrary, the intention as expressed in the consideration clauses was that the guarantees would operate in favour of the particular companies which had agreed at the request of the principal debtor to supply it with goods. The evidence led by Parts Distributors establishes that there were three such companies - Commercial Motor Vehicles Limited (at the time supplying Mitsubishi parts), Peters Diesel Pty Ltd (at the time supplying Volvo parts) and the company which supplied the Kenworth truck parts. In my view Peters Diesel Pty Ltd, now Parts Distributors, was a party to the guarantees, and is entitled to be indemnified according to their terms. I am also unable to accept the submission that the reasoning in Boral Resources is distinguishable on the ground that the evidence there identified one company only as the offeree of the guarantee. Once it is determined, as a matter of construction, that the reference to the "Group" is to be read distributively and not as descriptive of obligations owed jointly to all the proprietors, it becomes a matter of evidence to determine the identity of the contracting parties.

12. An alternative submission by counsel for the Trustee was that even if Peters Diesel was a contracting party to the guarantee, the guarantee operated only in respect of the supply of Volvo trucks and parts, that is of goods of the description which were supplied by it in April 1980 when the guarantees were given. It was contended that the guarantees to Parts Distributors could not extend to debts incurred by the principal debtor in respect of the supply of Mitsubishi parts. The evidence established that at least the bulk of the goods supplied to David Rogers Pty Ltd in May and June 1986 were Mitsubishi parts. I am also unable to accept this submission. The terms of the guarantees leave no scope for arguing that a limitation of this kind should be implied. The guarantees are for payment of "all and every sum or sums ... for or in respect of goods ... hereafter to be supplied to or at the request of the trader ...". In respect of goods supplied to the principal debtor in the course of its business, Mt Gambier Motors, there is no restriction as to the type of goods. The guarantee operates in respect of goods generally which are supplied at the request of the trader. In my view the guarantees extended to the obligations of David Rogers Pty Ltd incurred in May and June 1986 whether that obligation related to Volvo parts or Mitsubishi parts.

13. In my opinion the decisions of the Trustee should be reversed and he should be directed to admit to the proofs of debt under the arrangements of each of the debtors.