Tu v Primary Contracting Services Pty Ltd (trading as Australian Contracting Solutions) [2009] NSWCA 7 (12 February 2009)

Last Updated: 13 February 2009

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Tu v Primary Contracting Services Pty Ltd (trading as Australian Contracting Solutions) [2009] NSWCA 7


FILE NUMBER(S):
40792/07

HEARING DATE(S):
5 December 2008

JUDGMENT DATE:
12 February 2009

PARTIES:
Ming Tu (Appellant)
Primary Contracting Services Pty Ltd (trading as Australian Contracting Solutions) (Respondent)

JUDGMENT OF:
Macfarlan JA Gyles AJA Nicholas J

LOWER COURT JURISDICTION:
District Court

LOWER COURT FILE NUMBER(S):
641/06

LOWER COURT JUDICIAL OFFICER:
Truss DCJ

LOWER COURT DATE OF DECISION:
26 October 2007


COUNSEL:
J Horowitz (Appellant)
S Aspinall (Respondent)

SOLICITORS:
Horowitz & Bilinsky (Appellant)
Deacons (Respondent)

CATCHWORDS:
CONTRACT - Whether oral agreement to accept responsibility for payment of invoices - Whether consideration furnished for appellant's guarantee - Trade Practices Act 1974 s 52 - Misleading and deceptive conduct - Contracts Review Act s 7 - Whether guarantee unjust

LEGISLATION CITED:
Contracts Review Act 1980
Trade Practices Act 1974 (Cth)

CATEGORY:
Principal judgment

CASES CITED:
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153
Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215
Hanave Pty Ltd v Lfot Pty Ltd [1999] FCA 357; (1999) 43 IPR 545
Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41
Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165
Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531

TEXTS CITED:


DECISION:
Appeal dismissed with costs.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40792/07

DC 641/06

MACFARLAN JA

GYLES AJA

NICHOLAS J

THURSDAY 12 FEBRUARY 2009

TU v PRIMARY CONTRACTING SERVICES PTY LTD (TRADING AS AUSTRALIAN CONTRACTING SOLUTIONS)

Judgment

1 MACFARLAN JA: This is an appeal from a decision of Truss DCJ ordering judgment in favour of the respondent against the appellant for the amount of $126,287.73. Her Honour found the appellant liable under a guarantee of the indebtedness to the respondent of a company of which he was a director, Poumeaton Enterprises Pty Limited (in liquidation) (“Poumeaton”). Judgment was given on the same basis against a co-director of the appellant, Mr Liu, but he did not appeal.

2 The first issue which arose before the primary judge was as to the extent of the liability of the principal debtor, Poumeaton, to the respondent. Her Honour determined that Poumeaton orally agreed to accept liability for debts to the respondent incurred prior to the settlement of Poumeaton’s purchase of the business to which the respondent supplied services.

3 The second issue was whether the written guarantee signed by the appellant was binding upon him. The primary judge determined that it was and in so doing rejected defences of misrepresentation and under the Contracts Review Act 1980 advanced by the appellant.

4 The appellant contends that her Honour erred in her determination of each of these issues.

The factual circumstances

5 In the second half of 2005 the respondent was in the business of supplying contract labour to its clients, one of whom was Hillside Meats Pty Limited (“Hillside Meats”). Hillside Meats operated an abattoir at West Wyalong in New South Wales. Its owner and manager was Mr Chris Nicholson.

6 In August or September 2005, Mr Patrick Parsons of the respondent was told by Mr Nicholson that Mr Nicholson was negotiating a sale of Hillside Meats’ business to Poumeaton. Later, Mr Nicholson told Mr Parsons that the purchase was going ahead and that “Frank Liu and one of the other directors of the [purchaser] company, Ming Tu, wants to meet you and discuss the business of ACS and the services that ACS can offer Poumeaton.” (Blue Appeal Book 3H-J). The conversation continued as follows:

“PP: Ok. No problems. When do they want to meet and where?

CN: As soon as possible. They’ll come out to West Wyalong. You’ll probably want to get their lawyers a copy of the hiring agreement and guarantee along with any other paper work you need them to sign.

PP: Ok. Will do. Send me the contact details of Frank Liu and the lawyers and I’ll get onto it.

CN: Once the lawyers have explained the agreements to Poumeaton you can meet with them and they can sign the hiring agreements and guarantee straight away.

PP: Yeah – that would be good so I can fully explain how our ODCO system works and we can get things moving.” (Blue Appeal Book 3J-R).

7 In or about late September or early October 2005, Mr Nicholson sent to Poumeaton’s lawyer copies of a proposed hiring agreement and a proposed guarantee, together with “other promotional materials” (Blue Appeal Book 5H-J).

8 A meeting subsequently occurred on 16 November 2005 between Mr Nicholson, Ms Tracey Morris (the group finance manager of the respondent), Mr Liu (who was the second defendant in the proceedings below and against whom her Honour ordered judgment on his guarantee) and the appellant. The commencement of the meeting occurred at a property near to West Wyalong. Mr Liu introduced the appellant to Mr Nicholson and Ms Morris as “the general manager of Poumeaton”. The meeting then continued at a restaurant in West Wyalong. Ms Morris gave evidence that after a discussion about proposed commercial arrangements which is not presently relevant, the following was said:

“FL: [...] We are happy to continue with ACS and the same contracting system that the former owner of the abattoir used – the same system that Chris used when he owned the business.

TM: Ok. Good. Do you and Ming want to sign the hiring agreement, guarantee and safe working environment documents so we can get started?

FL: Yes.

MT: Yes.

CN: I have already spoken with Ming and Frank about signing these documents. We have agreed that they will be backdated to 14 October 2005, because this is the date on which the NSW Food Authority granted Poumeaton the license to operate the abattoir. It is illegal for me to operate the abattoir after 14 October 2005, so it is better this way.

TM: Ok then”. (Blue Appeal Book 62F-P).

9 This part of Ms Morris’ evidence was not the subject of substantial dispute and appears to have been accepted by the primary judge.

10 The appellant and Mr Liu did not dispute before the primary judge that they proceeded to sign a hiring agreement, a guarantee and another document called “a safe working environment” document which is not of present significance. There was a dispute as to whether the appellant inserted the date 14 October 2005 on the hiring agreement and on the guarantee. The primary judge found that he did and that finding is not challenged on appeal.

11 The hiring agreement recited that the respondent was “a service company” which operated a licensed agency contracting system and which had been supplying contract personnel to commerce and industry on a casual basis for over 25 years. The operative portion of the document concluded with the following:

“If you wish to avail yourself of our service, now or in the future, please complete the section below and return this Agreement to us, so that we can initiate action to establish a credit account ready for use at your convenience, thereby avoiding any delay of supply when it is required.” (Blue Appeal Book 251O).

12 The hiring agreement was thus an umbrella agreement which would govern the terms of supply of labour in the event that requests were made for that supply. The agreement did not provide for immediate supply.

13 The guarantee was one which commenced with a heading “GUARANTEE” and used the word “Guarantor” immediately above the place where the appellant inserted the date and immediately below the place where he signed. The place for insertion of the name of the debtor whose debts were guaranteed was left blank. The primary judge held that that was not of consequence as it was plain that it was intended by the parties that Poumeaton be the principal debtor. That finding is not challenged on appeal. The guarantee was expressed to be of all the indebtedness then or thereafter owing by the principal debtor.

14 It is convenient to deal with the remainder of the factual circumstances in the context of the issues to which they relate.

Extent of principal debt

15 Her Honour accepted that after the documents were signed, Ms Morris handed the appellant and Mr Liu a debtor’s statement and four unpaid invoices and that the following conversation occurred:

“TM: As you will see from this debtor statement there are four unpaid invoices. In relation to 12, 13 and 14 October 2005 these dates relate to the invoice for the week ending 19 October 2005. For 12 and 13 October Hillside Meats will probably want to pay for the labour on these dates, since this was before the Food License expired, when Chris Nicholson was still operating the abattoir and before Poumeaton had come on board. The remainder of the week should be paid by Poumeaton, since the license [sic] for Poumeaton came into effect from 14 October 2005. We would like payment for all invoices as soon as possible.

CN: Yes. The license [sic] to operate the abattoir changed from Hillside Meats to Poumeaton Enterprise effective 14 October 2005 – obviously I will need to sort out this invoice with Frank and Ming. We will arrange payment of this invoice and the other invoices to ACS as soon as we can.

FL: Yes. We will sort this out with Chris.

TM: If it makes it easier for you I can create 2 invoices which split up the week and each of the days that we supplied labour to the abattoir – each invoice will then relate correctly to each relevant business so you can pay separately.

FL: That won’t be necessary – we can sort this out between us and pay the money to ACS for all four invoices.

CN: Yes. It won’t be a problem.” (Red Appeal Book 83M-84D).

16 The primary judge found that “it is clear that Mr Liu by his agreement and Mr Tu by his silence consented to Poumeaton accepting responsibility for the contracting services after 14 October 2005, consistent with the dating of the documents by Mr Tu” (Red Appeal Book 84F-G). Her Honour added:

“Given the impending settlement and problems associated with the license in my view it was clearly in Poumeaton’s interests to ensure continued operation of the abattoir which required labour and for that reason it agreed to accept liability for services provided by the plaintiff after 14 October 2005.” (Red Appeal Book 87H-J).

17 The “impending settlement” to which her Honour referred occurred on 30 November 2005 (Red Appeal Book 67C). It is clear that the parties were aware at 16 November 2005 that the purchase by Poumeaton had not yet been settled as there were references to a prospective settlement in the conversations that occurred on that day (see Red Appeal Book 87Q, V, 89D, Q-U). However there does not appear to have been any evidence that they were aware of the precise date upon which settlement was to occur.

18 The primary judge found that the purchaser, Poumeaton, was not operating the abattoir in the period 17 to 30 November 2005 (Red Appeal Book 86H-J) nor, it follows, in the period prior to 17 November 2005.

19 Her Honour’s reference to “problems associated with the licence” was presumably a reference to what Mr Nicholson said prior to the signing of the documents. This indicated that Poumeaton’s licence to operate the abattoir had been “backdated” to 14 October 2005 and that it was illegal for Mr Nicholson to operate the abattoir after that date. However her Honour held that “the suspension of the Hillside licence was lifted on 25 October 2005” (Red Appeal Book 86T), with the consequence that by the time of the meeting of 16 November 2005 there does not appear to have been any prohibition upon Mr Nicholson’s company, Hillside, operating the abattoir and her Honour held that it continued to do until 30 November 2005.

20 In the conversation of 16 November set out in [15], the Hillside Meats and Poumeaton representatives were, to an extent, non-committal as to what the arrangements were between the two companies. However, in my view it is clear that during the conversation Ms Morris on behalf of the respondent sought and obtained from both companies an assurance that four outstanding invoices would be paid. In particular, Mr Liu, who was speaking for Poumeaton, said, in this respect that “we can sort this out between us and pay the money to ACS for all four invoices”.

21 Contrary to the appellant’s submission, I do not consider that Poumeaton’s agreement to pay, or at least ensure payment of, these invoices was unenforceable for want of consideration. Whilst the respondent had earlier signed the hiring agreement, it had not, by that document or otherwise, undertaken to meet all, or indeed any, requests for the supply of labour which might be made by the abattoir business. In my view it was implicit in the terms of the conversation of 16 November and from the circumstances in which it occurred that payment of outstanding invoices would have to occur to ensure continuity of supply to the business. The continuation of supply thereafter represented the consideration for Poumeaton’s promise. In light of what was said by Heydon JA in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; 53 NSWLR 153, at [71-81], there is no need to find a clearly identifiable offer and acceptance. However, what occurred was, I consider, an implicit offer by Poumeaton to pay the outstanding invoices if supply were continued and an acceptance of that offer by the further supply of services.

22 Responsibility for payment for services supplied after the services which were the subject of the four outstanding invoices (representing in the main services supplied after 16 November) was not the subject of express discussion at the meeting of 16 November. As pointed out above, the primary judge’s finding was that Poumeaton did not take over the conduct of the business until settlement occurred on 30 November. Prima facie, this would lead to the conclusion that Poumeaton’s responsibility only commenced on or after 30 November. However, what Ms Morris said at the meeting of 16 November (see [15] above) clearly indicated an assumption on her part that Poumeaton’s operation of the business commenced on 14 October and was continuing. The Hillside Meats and Poumeaton representatives did not correct this assumption and by allowing it to go unchallenged implicitly confirmed it.

23 The result is in my view that there was an implicit acceptance by Poumeaton, leading to an agreement between it and the respondent to that effect, that requests for the supply of services to the business were to be regarded as made by or on behalf of Poumeaton. The result is that Poumeaton is liable to the respondent to pay for services requested by, and supplied to, the business prior to (as well as after) settlement.

24 I accordingly agree with the primary judge’s conclusion as to the amount of the principal debt the subject of the guarantee signed by the appellant.

Whether misleading and deceptive conduct

25 The appellant sought to avoid liability under the guarantee which he signed upon the basis that the respondent had engaged in misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth). The appellant also sought to have the guarantee set aside under s 7 of the Contracts Review Act.

26 Implicit in the submissions made by the appellant in these respects was the correct assumption that unless the appellant could succeed on one or other of these bases, the appellant would be bound by his signature on the written guarantee notwithstanding that, so he claimed, he had not read it prior to signing it (see Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165).

27 The appellant relied upon two items of evidence which he said demonstrated that the respondent had engaged in misleading and deceptive conduct. Both were in the evidence of Mr Parsons, given in the course of cross-examination. Neither was the subject of evidence from the appellant or from Mr Liu. The primary judge described the two items of evidence as follows:

“[96] Mr Parsons gave evidence that at the beginning of the meeting at the Paragon Café, Mr Liu said:

Ming Tu is the general manager of Poumeaton Enterprises and he has authority to sign the hiring agreement and the guarantee on behalf of the company.

[97] In cross examination, Mr Parsons said that he replied That’s fine or That’s good. “

...

“[99] In cross examination, Mr Parsons gave evidence that during the course of the meeting he said, Poumeaton will have to give us a guarantee and Ms Morris confirmed this in cross examination.” (Red Appeal Book 89N-P, 90C).

28 The evidence to which her Honour referred in [99] of her judgment was in the following terms:

“A. It had been done in the promotional – when we spoke about our services, the Odco services. That’s how Odco works, we must have a guarantee.

Q. And in that promotional material you’re saying, are you, that you would have said to Mr Liu and Mr Tu that “if you enter into arrangements with ACS Poumeaton will have to give us a guarantee”, is that what you’re saying?

A. That’s correct.

Q. You said words to that effect?

A. Words to that effect.” (Black Appeal Book 76Q-U)

29 Her Honour found that the conduct of the respondent was not misleading or deceptive because it did not “convey in all the circumstances of the case a misrepresentation” (Red Appeal Book 91F). She took into account in this respect the following matters:

“The defendants were businessmen. The hiring agreement and guarantee had been forwarded to Poumeaton’s solicitors 2 months previously. Whilst I accept that Mr Parsons did not specifically state that the effect of the guarantee was that the defendants were personally liable for the debts of Poumeaton, I do not consider that it was encumbent upon him to do so.

The plaintiff draws the court’s attention to the fact that the face of the documents indicate that Mr Tu signed the hiring agreement as a director of Poumeaton and, along with Mr Liu, the guarantee as an individual not on behalf of Poumeaton. The plaintiff also relied upon the fact that Mr Liu does not assert that he was misled into believing he was signing the guarantee on behalf of Poumeaton.” (Red Appeal Book 90O-W).

30 The reference in the evidence quoted in [31] above to “promotional material” was to promotional materials referred to by Mr Parsons in para 10 of his affidavit of 20 June 2007 where he said:

“In or about late September or early October 2005 I sent Poumeaton’s lawyer, Andrew Frank (Cumberland Frank Solicitors) a copy of the hiring agreement, the guarantee and other promotional materials. I never heard from Mr Frank after sending him this information.” (Blue Appeal Book 5H-J).

31 Bearing in mind that the cross examiner was putting a question about the content of promotional materials (which were not in evidence) supplied to solicitors for Poumeaton together with the proposed hiring agreement and form of guarantee to be provided, the answer given by Mr Parsons as to those promotional materials does not in my view evidence any misleading or deceptive conduct on the part of the respondent. The intended recipients of the communication were solicitors. They would clearly have understood upon receipt of the form of guarantee that it was, as one would expect it to be, a proposed guarantee whereunder the guarantor would assume a personal liability in respect of a principal indebtedness of Poumeaton.

32 Likewise the first referred to item of evidence ([96-7] of the judgment below and [30] above) did not in my view evidence any misleading or deceptive conduct on the part of the respondent. The evidence was of an acceptance by Mr Parsons of a statement of Mr Liu. The appellant contends that Mr Liu’s reference to the guarantee constituted a statement that the guarantee was one which would be given by the company of its own liability and was not a document whereunder the appellant would assume any personal liability. However bearing in mind that the form of hiring agreement and guarantee had been provided to Poumeaton’s solicitors some time previously and that the appellant was being introduced by Mr Liu as the general manager of Poumeaton, the respondent’s acknowledgement was simply an acknowledgement that the guarantee to be provided or procured by Poumeaton was to be signed by the appellant. In my view, the exchange did not involve any suggestion that the appellant was not to be personally liable under the guarantee.

33 A further reason for rejecting the defence based upon misleading and deceptive conduct is that even if it be assumed that what occurred at the meeting was capable of being understood by the appellant as a representation by the respondent that by signing the guarantee the appellant would not incur any personal liability, there was no basis for concluding that the appellant so understood what occurred and relied upon that understanding in signing the guarantee. In particular, the appellant did not give any evidence to this effect. The appellant did not give any evidence at all of a representation by the respondent that he would not incur personal liability. His evidence was that he did not believe that he would incur any such liability but he did not attribute his formation of that belief to conduct of the respondent.

34 The appellant pointed to the fact that reliance upon an inducement by misleading and deceptive conduct may be inferred where the representee does not give direct evidence to that effect. He relied first upon Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215 which supports the general proposition that inducement may be inferred. That does not however appear to have been a case where the representees did not give evidence of inducement.

35 Secondly the appellant relied upon Hanave Pty Ltd v Lfot Pty Ltd [1999] FCA 357; (1999) 43 IPR 545 and in particular the following passage in the judgment of Wilcox J (at 548):

“In a case where Mr Burke was thought unworthy of credit because of a tendency to tailor his evidence to suit his company’s case, it is ironic that the respondents’ best point is that Mr Burke failed to give the standard self-serving evidence of reliance. However, I do not think this matters. I agree with Kiefel J that causation can sometimes (perhaps best) be resolved by the court objectively determining the likely effect of the misleading conduct. This is such a case. All the objective facts point to the conclusion that, if Mr Burke had been given information that caused him to doubt the ability of Barbara’s Storehouse reliably to pay its rental over the long period of the lease to May 2003, he would have declined to proceed with the transaction on the negotiated terms.”

36 That was a case in which there was non-disclosure to a purchaser of property of an adverse matter relating to a tenant of the property. The tenant had been described to the purchaser by the vendor’s agent as a “high quality” tenant. It was not therefore a case like the present where, putting the case at its highest for the appellant, there was a representation which might conceivably have borne a particular meaning (contrary to what I regard as its natural meaning in the circumstances of the case) and the supposed representee has not given evidence that he took the statement in that particular way and relied upon it when deciding to sign the guarantee. In the circumstances of this case, there is in my view no basis for drawing any inferences which would overcome the absence of such evidence from the appellant. The parties might have been otherwise if the natural meaning of the words said to have been used clearly supported the appellant’s misrepresentation case.

Contracts Review Act

37 The appellant contended that the guarantee was unjust within the meaning of s 7 of the Contracts Review Act and was for that reason liable to be set aside.

38 The appellant’s defence contained the following particulars of this contention:

“(a) The Second Defendant was not reasonably able to protect his interests by reason of the fact that:

(i) he was born in China in 1957, and his native language is Mandarin;

(ii) he has only been living in Australia since 2001;

(iii) his English was poor when he signed the Guarantee; and

(iv) he has trouble reading and understanding written English;

(b) there was a material inequality in bargaining power between the Plaintiff and the Second Defendant at the time the Guarantee was signed;

(c) prior to the time the Guarantee was signed, its provisions were not the subject of negotiation by the Second Defendant;

(d) it was not reasonably practicable for the Second Defendant to negotiate for the alteration of or to reject any of the provisions of the Guarantee;

(e) the Plaintiff constituted the First Defendant its agent for the purposes of having the Second Defendant sign the Guarantee;

(f) the First Defendant led the Second defendant to believe he was signing an overdraft contract on behalf of the Company;

(g) the First Defendant failed to advise the Second Defendant that he was signing a guarantee;

(h) the Second Defendant did not read the Guarantee before he signed it;

(i) no independent legal advice was obtained by the Second Defendant in relation to the Guarantee, and neither the Plaintiff nor the First Defendant verbally advised him to obtain such legal advice;

(j) the provisions of the Guarantee and its legal and practical effect were not explained by any person to the Second Defendant; and

(k) the First Defendant told the Second Defendant that he had to sign the Guarantee because he was a director of the Company. (Red Appeal Book 39G -40I).

39 The primary judge considered each of these sub-paragraphs other than sub-paragraph (k). That sub-paragraph was presumably not considered upon the basis that it was not ultimately pressed but in any event no complaint is made about the matter on appeal.

40 The primary judge’s conclusion that the contract was not unjust is open to review on appeal. This Court must form its own view as to that issue and give effect to it if it differs from that of the primary judge (Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [100, 107] and see [40]; Warren v Coombes [1979] HCA 9; (1979) 142 CLR 531). I do not however consider that there was any error in the primary judge’s reasoning or conclusion as to the Contracts Review Act defence.

41 For good reason, the appellant’s argument on appeal (and before her Honour) focused on the alleged misrepresentations made to the appellant concerning the nature of the guarantee document. The finding at first instance (with which I agree) that there were no such misrepresentations, although not fatal to the Contracts Review Act defence, left little room for it. The defence was in my view bound to fail in circumstances where it was found that:

•	The appellant was introduced as, and presumably was, the general manager of the principal debtor company.
•	The guarantee was entered into as part of commercial arrangements between parties of apparently equal bargaining power, the appellant and his brother having negotiated the purchase of a substantial business.
•	The forms of hiring agreement and guarantee were supplied to the solicitors for the principal debtor some time before the occasion arrived for signature of the forms. The principal debtor company was owned and operated by the appellant and his brother, Mr Liu.
•	The guarantee document signed by the appellant used the word “guarantee” in a prominent fashion.
•	No misrepresentation about the nature of the document was made by the respondent.

42 In essence, the position was, as the primary judge found, that in the context of commercial dealings in which he was involved, the appellant signed a guarantee in circumstances where no misrepresentation about the nature of the document was made to him and he had every opportunity to apprise himself of its contents and to decline to sign it.

Orders

For the reasons I have given, my view is that the appeal should be dismissed with costs.

43 GYLES AJA: I have had the advantage of reading the reasons of Macfarlan JA in draft. I agree that the appeal ought to be dismissed with costs, and, with one qualification, I agree with his Honour’s reasons.

44 The trial judge summed up the position as she saw it on 16 November as follows:

“Given the impending settlement and problems associated with the licence in my view it was clearly in Poumeaton’s interests to ensure continued operation of the abattoir which required labour and for that reason it agreed to accept liability for the services provided by the plaintiff after 14 October 2005.”

45 On 16 November Poumeaton was anxious to ensure that supply of labour to the abattoir from then on was continued. ACS was prepared to do so if, as the trial judge put it, Poumeaton accepted liability for services provided after 14 October, no matter what the true situation was behind the scenes. Poumeaton did accept that responsibility.

46 In my opinion, a contract to that effect was complete at the end of the meeting on 16 November and the mutual promises were good consideration.

47 NICHOLAS J: I agree with Macfarlan JA.

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LAST UPDATED:
12 February 2009