Kation Pty Ltd v Lamru Pty Ltd [2011] NSWSC 219 (17 March 2011)

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Kation Pty Ltd v Lamru Pty Ltd [2011] NSWSC 219 (17 March 2011)

Last Updated: 10 June 2011

Supreme Court New South Wales

Case Title:	Kation Pty Ltd v Lamru Pty Ltd
Medium Neutral Citation:	[2011] NSWSC 219
Hearing Date(s):
Decision Date:	17 March 2011
Jurisdiction:
Before:	White J
Decision:	Order that the defendant's notice of motion filed on 8 November 2010 be dismissed.
Catchwords:	PRACTICE AND PROCEDURE - summary dismissal - appeal from orders refusing application for summary dismissal - claim based upon contention that plaintiff's claim barred by Limitation Act 1969 - where plaintiff alleges Limitation Act does not apply by reason of acknowledgment of debt under s 54 - whether alleged acknowledgments purport to acknowledge debt and are signed for the purposes of s 54(4) - where no signature in the ordinary sense - arguable that principles of "authenticated signature fiction" apply by analogy to s 54(4) - appeal dismissed
Legislation Cited:	Limitation Act 1969 Conveyancing Act 1919
Cases Cited:	Lamru Pty Limited and Kation Pty Limited, 14 October 2010 unreported, no neutral medium citation) McGuren v Simpson [2004] NSWSC 35 Pirie v Saunders [1961] HCA 4; (1961) 104 CLR 149 Leeman v Stocks [1951] Ch 941
Texts Cited:	K E Lindgren, J W Carter and D J Harland, Contract Law in Australia, (1986) Butterworths N C Seddon and M P Ellinghaus, Cheshire and Fifoot's Law of Contract, 7th Australian ed (1997) Butterworths
Category:	Interlocutory applications
Parties:	Kation Pty Ltd (Plaintiff) Lamru Pty Ltd (1st Defendant) Russell William Lamb (2nd Defendant)
Representation
- Counsel:
- Solicitors:
File number(s):
Publication Restriction:

Judgment

1. HIS HONOUR : By notice of motion filed on 8 November 2010 in proceedings 62736 of 2002 the defendants, Lamru Pty Limited ("Lamru") and Mr R W Lamb, appeal from orders made by Associate Justice Macready on 14 October 2010. On that day his Honour gave judgment on a notice of motion brought by the defendants seeking an order pursuant to r 13.4 of the Uniform Civil Procedural Rules that the statement of claim be summarily dismissed.
   
2. The claim for summary dismissal was based upon the contention that the plaintiff's claim was barred by the Limitation Act 1969. His Honour found that it was arguable that the Limitation Act did not apply by reason of s 54 of that Act and refused the application for summary dismissal. His Honour ordered that a stay of the proceedings, which had been in place for many years, should be lifted.
   
3. The defendants seek in the alternative an order that the issue of whether documents relied upon by the plaintiff as alleged confirmations extending the limitation period are in law confirmations within the meaning of s 54 of the Limitation Act be tried separately. That proposed separate question was further refined in the course of argument today.
   
4. The Statement of Claim was filed on 27 June 2002. The plaintiff is Kation Pty Limited ("Kation"). It alleges that an agreement was made in about April 1991 between Mr Lewis on behalf of Kation and Mr Lamb, either on behalf of himself or on behalf of a company about to be incorporated that became Lamru, that Mr Lamb, or a company to be controlled by him yet to be incorporated, would acquire from Kation 40 per cent of the units in the Nortex Unit Trust for a price of $580,000, and that those units would be transferred by the existing unitholder, Hirmanu Pty Limited ("Hirmanu"), at the direction of Kation, to Mr Lamb or his proposed company.
   
5. The plaintiff alleges that of the purchase price of $580,000, $330,000 was to be payable to Hirmanu and the balance to Kation.
   
6. It is also alleged that the balance of $250,000 payable to Kation would be lent back by Kation to Mr Lamb or to the company to be incorporated, and that loan would be repayable out of future profits of the business of the Nortex Unit Trust in a manner to be agreed between Mr Lewis and Mr Lamb.
   
7. The plaintiff alleges that that agreement was completed on 19 June 2001 when the units were transferred to Lamru.
   
8. The plaintiff alleges that for each of the financial years ended 1991 to 1997, Nortex Pty Limited as trustee of the Nortex Unit Trust distributed income and profits from the trust to Lamru in its capacity as a 40 per cent unit holder.
   
9. Paragraph 18 of the statement of claim alleges that Lamru has not paid to Kation the sum of $250,000 or any part thereof since 19 June 1991. The statement of claim does not specify when, according to the plaintiff, the debt of $250,000 or any part of it, first became payable.
   
10. The plaintiff does not allege whether a further agreement was made as contemplated by the agreement alleged in paragraph 10(d) of the statement of claim between Mr Lewis and Mr Lamb as to when the debt of $250,000 would become repayable out of future profits. Nor does the plaintiff allege that no such agreement was made, or what the consequences would be if no such agreement was made. Nor does the plaintiff allege what profits were distributed. I do not think that it can be said from the pleading itself that the plaintiff's cause of action for a debt of $250,000 had necessarily accrued by 27 June 1996.
    
11. It may be inferred from paragraphs 20 and 21 of the statement of claim that the plaintiff apprehends that the cause of action for at least some part of the alleged debt would have accrued prior to that date. That is because in those paragraphs the plaintiff alleges that Mr Lamb on behalf of Lamru acknowledged a debt of $200,000 in respect of the alleged loan. The only purpose of pleading the acknowledgements would be to invoke s 54 of the Limitation Act, which postpones the reckoning of the limitation period where a person against whom a cause of action lies confirms the cause of action.
    
12. In paragraph 20, the plaintiff alleges that on 28 June 1996, Mr Lamb on behalf of Lamru, acknowledged that Lamru was indebted to Kation in the sum of $200,000. The acknowledgement is said to be in writing and contained in a document called "Settlement" dated 28 June 1986 and to have been handed by Mr Lamb on behalf of Lamru to Mr Lewis on behalf of Kation on that date. A further acknowledgement is alleged in paragraph 21 to have been made on 3 June 1997.
    
13. Section 54(2) of the Limitation Act provides:
    

" 54 Confirmation

...

(2) For the purposes of this section:

(a) a person confirms a cause of action if, but only if, the person:

(i) acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made...."

14. Section 54(4) provides:
    

" An acknowledgment for the purposes of this section must be in writing and signed by the maker.”

15. The argument addressed to his Honour and again today is that there is no arguable case that the defendants have acknowledged the plaintiff's cause of action for the purposes of s 54 because the acknowledgements relied upon for that purpose, although in writing, are not, it is said, signed by the maker of the writing.
    
16. Associate Justice Macready recorded in paragraph 31 of his reasons (Lamru Pty Limited and Kation Pty Limited, 14 October 2010 unreported, no neutral medium citation) that he did not have the benefit of submissions on what might constitute a signature for the purpose of s 54(4).
    
17. His Honour found as follows:
    

" 31 There is no pleaded allegation of a signature of these documents and indeed on the face of them there is no signature. They are said to be in the handwriting of Mr Lamb and it is submitted that this would not be in compliance with the section. I did not have the benefit of any submissions on what might constitute a signature for the purposes of section 54(4).

32 The importance of a signature on an acknowledgement for the purposes of section 54(4) becomes clear in Gibbs CJ's minority decision in Stage Club Ltd v Millers Hotels Pty Ltd [(1981)] [1981] HCA 71; 150 CLR 535. When deciding whether a balance sheet may amount to a sufficient acknowledgment of debts recorded in it, his Honour stated at 547:

'... Since by s 54(4) an acknowledgment must be signed, there can be no acknowledgment for the purposes of the section until the document containing the admission is signed. It seems to me to follow that the document, to be an acknowledgment, must recognize the existence of a debt at the date of signature.... The effect of s 54 is that an acknowledgment is made only when it is signed (s 54(4)) and the creditor can only have the benefit of the acknowledgment if it is made to him (s 54(5)). If it is delivered, it is effective as at the date of signature; if it is never delivered, the creditor never has the benefit of it.'

33 The nature of a signature is a problem that has been the subject of judicial consideration over a long period of time. To take one text book on the subject Contract law in Australia by Lindgren, Carter and Harland, Butterworths, 1986:

'[514] Signature. The concept of "signature" under the Statute of Frauds 1677 (Imp) is a fairly loose one. The requirement is signature by the party to be charged under the contract or by his agent "lawfully" authorised; but the courts have striven to widen it so as not to allow the statute to be the engine of injustice. In Thomson v McInnes [1911] HCA 30; (1911) 12 CLR 562 at 573 Griffith CJ said that the statute contemplated " three different modes of signature, first, by a person with his own hand, secondly, by an amanuensis signing the name of another person in that other person's presence by his direction, and, thirdly, by an agent". Signature by an agent, for example one party's solicitor (see, eg Kalnenas v Kovacevich [1961] WAR 188; Elias v George Sahely & Co (Barbados) Ltd [1983] 1 AC 646), will bind that party if the agent has authority to sign. The authority of the agent need not be in writing except in Victoria where s 127 of the Instruments Act 1958 requires written authorisation of an agent who signs a contract for the sale of land (see [509] and eg Grummitt v Natalisio [1968] VicRp 14; [1968] VR 156).

Where the name of the party to be charged appears on the alleged note or memorandum, for example because it has been typed in by the other party, the so-called "authenticated signature fiction" may apply. Thus, if the party to be charged expressly or implicitly acknowledges the writing as an authenticated expression of the contract the typed words will be deemed to be his signature. But this principle has no application to a document "which is not in some way or other recognisable as a note or memorandum of a concluded agreement." (Pirie v Saunders [1961] HCA 4; (1961) 104 CLR 149 at 154. See also Neill v Hewens [1953] HCA 92; (1953) 89 CLR 1.'

34 The acknowledgement referred to in paragraph 23 [scil 21] of the statement of claim contains no signature or reference to Mr Lamb or Lamru. On the other hand the document in paragraph 20 of the statement of claim contains the names 'Lamru' and 'R Lamb' in the document above the tabulation.

35 In the circumstances pleaded there is at least an arguable case for the authenticated signature fiction to apply. The stay should be lifted and I will not dismiss the proceedings."

18. Counsel for the defendants submits that his Honour did not address a separate argument that was put in relation to the alleged acknowledgments, namely, that the acknowledgments do not purport to acknowledge a debt.
    
19. It was also submitted by reference to the passage quoted from the 1986 edition of Contract Law in Australia that the principle of "authenticated signature fiction" had no application to a document unless it was recognisable as a note or memorandum of a concluded agreement.
    
20. It is clear that the documents in question in this case are not notes or memoranda of a concluded agreement.
    
21. It is sufficient to deal with the document of 28 June 1996 which contains the names "Lamru" and "R Lamb".
    
22. It contains a heading "Settlement" and under a column apparently referable to R Lamb, it contains a figure for goodwill "$600,000" and against that an amount described as " less owing $200,000."
    
23. Against each of those items there is a reference to a note that reads "Other component of goodwill $600,000 off set against $200,000 owing (after allowing for GD/OL)".
    
24. In their defence the defendants allege that the documents have nothing to do with any alleged debt to Kation in respect of the acquisition in 1991 of Lamru's 40 per cent unit holding, "but concern entirely unrelated matters." The defendants do not plead what those unrelated matters are.
    
25. There was no argument as to whether for the purpose of s 54 of the Limitation Act extrinsic evidence is admissible to determine whether a statement alleged to be an acknowledgement of the cause of action is in truth of that character.
    
26. Certainly if extrinsic evidence is admissible for that purpose, it may be open to the plaintiff to establish that the acknowledgement in the document that a sum of $200,000 was owing was an acknowledgement of the debt alleged in the statement of claim.
    
27. Even if extrinsic evidence is not admissible for that purpose, I think it is arguable that the document contains an acknowledgement of such debt.
    
28. The principal focus of counsel's submission was on the absence of a signature.
    
29. Certainly there is no signature in the ordinary sense on either document.
    
30. I think it arguable, as his Honour found, that the principles developed in relation to the requirements of a signature in s 54A of the Conveyancing Act 1919 or its counterparts, described as the "authenticated signature fiction", may be applicable by analogy to s 54(4) of the Limitation Act.
    
31. So far as counsel's research goes, that is a question that has been the subject of very little judicial consideration. Counsel's research reveals only the decision in McGuren v Simpson [2004] NSWSC 35 prior to his Honour's decision in this case.
    
32. The passage from K E Lindgren, J W Carter and D J Harland, Contract Law in Australia (1986) Butterworths (now Carter and Harland, Contract Law in Australia), which is set out at paragraph [33] of his Honour's reasons, was directed to the requirement of the Statute of Frauds (s 54A of the Conveyancing Act) that a contract for the sale or other disposition of an interest in land is unenforceable, unless the agreement or memorandum or note thereof is in writing, signed by the party to be charged, or by some other person thereunto lawfully authorised by the party to be charged. It is in that context that the High Court in Pirie v Saunders [1961] HCA 4; (1961) 104 CLR 149 at 154 said that the document relied upon must be a note or memorandum of a concluded agreement.
    
33. That has no obvious application to s 54(4) of the Limitation Act, because there is no suggestion that an acknowledgement for the purpose of s 54 of the Limitation Act must be a concluded agreement.
    
34. The principle of "authenticated signature fiction" evidenced in cases such as Leeman v Stocks [1951] Ch 941 appears to be that where a person's name or initial is written on or printed on a document, whether it is at the beginning, end or in the body of the document, that name or initial may be treated as the person's signature if the person or his agent has expressly, or impliedly represented, that the name can be treated as a signature so as to give what has been called "authenticated expression to the contract."
    
35. In Leeman v Stocks there was no signature on the memorandum of the agreement in the ordinary sense by the vendor. But the agreement contained the vendor's name, and the document was given to the purchaser in circumstances that showed that it was not intended to be further signed, but was nonetheless intended to be a "perfect instrument" (at 951). That is to say, the document was dealt with by the vendor's agent in a way that indicated to the purchaser that the document was intended to be binding on the vendor, which would only be the case if the vendor were treating his name as it appeared in the document as being his signature. It was in this way that the vendor through his agent "authenticated" or adopted the printed name as his signature.
    
36. In McGuren v Simpson, Master Harrison (as her Honour then was) referred (at [17]) to a passage from N C Seddon and M P Ellinghaus, Cheshire and Fifoot's Law of Contract 7 th Australian ed (1997) Butterworths in which the learned authors said, "If the name of the party to be charged is printed or written on a document intended to be a memorandum of the contract either by himself of [sic] his authorised agent, it is his signature whether it is at the beginning, the middle or the foot of the document." It is arguable by analogy that a name or initial might be treated as a signature for the purpose of s 54(4) of the Limitation Act, if the party so writing the word intended the document to be an acknowledgement of a debt.
    
37. The decision in Leeman v Stocks (at 951) would indicate that extrinsic evidence would be admissible to determine that question. I express no view myself as to the merits of such an argument, except that it raises a serious question of law whose resolution may depend upon extrinsic evidence. This makes it inappropriate for the proceedings to be summarily dismissed.
    
38. For these reasons I refuse the relief sought in paragraph 1 of the defendants' notice of motion. I should add that for the reasons I earlier gave, it is not at all clear to me that even if the defendant succeeded on the limitation point, that that would have warranted an order for summary dismissal.
    
39. The deficiencies in the pleading to which I have earlier referred also make it impossible at this stage of the proceedings to decide whether the just, quick and cheap resolution of the real issues in the proceedings would be facilitated by ordering a trial of a separate question in the circumstances of this case.
    
40. I cannot at the moment say that if the documents relied upon as confirmations under s 54 are not effective for that purpose, that the proceedings would necessarily fail on that account. Nor can I ascertain the extent of the evidence that might be required to deal with the s 54 points.
    
41. If all issues arising under s 54 were to be determined separately, there would undoubtedly be a factual dispute as to whether or not the documents did concern "entirely unrelated matters" as the defendant alleges. Even a more narrow dispute as to whether there is a signature for the purpose of s 54(4) will throw up questions about the intended purpose of the documents. But even if the s 54 point was decided in favour of the defendants, it would not be appropriate to order a separate trial of that issue, unless it could be seen that that trial would dispose of the proceedings.
    
42. In my view, the appropriate course is to require the plaintiff to replead the statement of claim to address the matters to which I have referred earlier in these reasons, and also for the plaintiff to serve the evidence upon which it will rely. When that has been done, it then might be possible to see that there is merit in a trial of a separate issue. At the moment I am not prepared to make such an order.
    
43. For these reasons, I order that the defendant's notice of motion filed on 8 November 2010 be dismissed.
    

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