Court sets aside a guarantee given to ANZ …

In October 2006, Julie Manasseh with two others, guaranteed a Ioan of more than $10 million of Vivaldi Investments Pty Ltd from the ANZ Bank. Ms Manasseh’s guarantee was limited to the value of a property she owned at City Beach in Perth.

Vivaldi did not repay the loan as agreed and the repayment date was extended by agreement a number of times between 2006 and 2010. In November 2009 ANZ made an offer to Vivaldi, on certain terms, including extending the termination date of the facility. Vivaldi accepted the offer, however, Ms Manasseh did not consent to the guarantee applying to the offer contained in the November 2009 offer.

The 2006 guarantee covered all borrowings of Vivaldi in the future however included a term that Ms Manasseh was not liable if there was a change to the credit contract or a new contract increased her liability under the guarantee unless she agreed in writing and had been given a copy of the particulars of the change or a copy of the new credit contract .
The argument in the Supreme Court of Western Australia, both before a single judge and the Court of Appeal was whether the 2009 agreement increased the liability of Ms Manasseh and whether it was a new agreement. There was no issue that Ms Manasseh did not consent. If the 2009 agreement did not increase her liability the guarantee of 2006 would apply and she would have been responsible for the amount she guaranteed. The court found that the 2009 agreement was a new agreement and therefore the consent of Ms Manasseh was required.

In addition, even if the 2009 agreement was a variation the bank ‘failed to discharge its onus to show that the November 2009 arrangement effected an insubstantial change without detrimentally affecting the liability under her guarantee’. This is a quote from the case of Ankar. This means that the bank must prove that the liability of Ms Manasseh did not increase. The court held that the capitalisation of unpaid interest and fees payable had the effect of increasing the liability of Ms Manasseh under her guarantee.

The court ordered that the guarantee should be discharged and that Ms Manasseh should be provided with a discharge of mortgage of the City Beach property.

Are oral agreements dealing with land enforceable …

Generally, the law in Australia provides that land can only be transferred or dealt its if there is a written document signed by the parties that reflects the intention. The exception is if there is an oral agreement that is partly performed.

In 2002 and following, two couples conducted a series of property transactions. Ultimately one of the parties involved, Leon Papikos, claimed that he had an interest in one the properties following a oral agreement that he claimed had been reached with another of the parties.

The court held that there was no written document reflecting the alleged agreement. Leon sought to rely on the fact that the oral agreement was partly performed. The acts of part performance he relied on were the payment of certain sums of money by Leon to one of the other parties. The difficulty that Leon faced was that the acts he relied on were not clearly referable to the oral agreement that he claimed existed.

The law in Australia is that the acts relied on must be clearly and unequivocally referable to the oral contract sought to be enforced.

Leon argued in the High Court that this strict test should be relaxed. The court refused to change the law and Leon’s appeal claiming an interest in the land was dismissed.

In what circumstances can the writing of a letter create a contract …

In 1986, an agreement was entered into by a land owner, Mr Nock and a cattle owner, Dr Maddern for the agistment of cattle at the property of Mr Nock at Gunning, New South Wales.

Dr Maddern agreed to pay $2.50 per head per week for yearlings and older cattle and $1.50 per head per week for calves older than six months. Everything went smoothly until 2004 when Dr Maddern stopped paying.

In January 2010, Mr Nock wrote to Dr Maddern suggesting new agistment rates. He also proposed that interest at the rate of 10% apply if there was a default in the new arrangement being proposed.

Dr Maddern replied saying that he wanted to continue using the property and would discuss the situation with Mr Nock when he saw him.

The position did not improve for Nr Nock who finally sued for his money in 2014.

For the period after 2010 he sued for agistment using the higher fees and claimed 10% interest that he set out in his letter of January 2010.

Unfortunately for Mr Nock, the court found that the letter he sent to Dr Maddern was an invitation to enter into an agreement that was never taken up by Dr Maddern. Further, the court found that even though Dr Maddern admitted that he owed money to Mr Nock after 2010 those statements did not revive the debts that were older than six years when he commenced court proceedings in 2014.

As an alternative claim Mr Nock claimed that Dr Maddern was estopped from denying that he would pay the higher fees and interest at 10%. He claimed that the estoppel arose from the emails Dr Maddern wrote and his actions, particularly in leaving the cattle on the land. The court found that there was no clear representation in what Dr Maddern wrote and that Mr Nock relied on.

The court found that Mr Nock was entitled to recover agistment fees from April 2008 to the commencement of proceedings in April 2014 at the rates agreed to in 1986.

Important changes to the Farm Debt Mediation Act …

For more than 20 years, farmers in New South Wales have had access to mediation at times of debt crisis because of the Farm Debt Mediation Act. The Act has improved communication between farmers and rural lenders and in all likelihood saved many farming operations.

In early September, the 2018 amendments to the Act commenced by proclamation.

The amendments include some important changes. The definition of a farming operation has been broadened to include more contemporary farming practices such as forestry and aquaculture and what a mediation is has been more clearly defined.

A common criticism of farm debt mediations is the way in which they are conducted by the mediator. The new amended Act aims to clarify the functions of the mediator and sets out requirements about how mediations should be arranged and conducted.

The Act makes it clear that a creditor must make one mediation offer to a farmer in default before there can be any enforcement.

For some time farmers who are not in default, but believe a mediation would assist in the relationship with the creditor, have been permitted to initiate a mediation under the Act. That practice is encouraged in the new Act.

There is now mutual recognition of mediations that take place under the corresponding law of other states or territories. Since it often happens that farm holdings are held in different states this is an important development.

Appropriate penalties have been introduced for creditors who take enforcement action contrary to the Act.

Finally, the confidentiality provisions of the Act have been updated.

Should any of our readers have any questions about the new Act they can contact Peter Jackson on (02) 8076 6020 or pjackson@jacksonassoc.com.au

SUING FOR DAMAGES TO THE COMPANY

In what circumstances can a shareholder or creditor use the name of a company in liquidation to sue for damages caused to the company …

From time to time the courts are confronted with applications by shareholders or creditors who wish to use the name of a company in liquidation to sue for damages that the company has suffered before it went into liquidation. The case of Aliprandi v Griffith Vintners Pty Ltd (in liq), sets out the principles quite clearly.

Mr Aliprandi was a shareholder in Griffith Vintners Pty Ltd. Without the approval of the liquidator. Mr Aliprandi commenced proceedings against a receiver who had been appointed to his former company. He alleged that the appointment of the receiver was invalid for a number of reasons including:
• there was no proper demand or notice;
• that Partnership Pacific (the company who appointed the receiver) was estopped, by virtue of certain representations, from appointing the receiver;
• that in conducting the company’s business and realising its assets, the receiver committed breaches of its duty to the company; and finally
• that Partnership Pacific was liable to the company for damages under the consumer law at the time for misleading and deceptive conduct.

Mr Aliprandi commenced proceedings to seek the leave of the Court to allow him to continue the proceedings using the company name or alternatively start new proceedings in the name of the company and himself.

The Judge indicated that he must satisfy himself that the proceedings that are foreshadowed have some prospects of success.

His Honour found that the only case that had reasonable prospects of success on the evidence before him at the time was that the receiver had committed breaches of his duty to the company.

His Honour was satisfied that in circumstances where the Court approved this course of action there was no prospect of the liquidator becoming personally liable in respect of the Defendant’s cost in the proceedings conducted in the company’s name by Mr Aliprandi. The Court did however require Mr Aliprandi to deliver to the liquidator a deed duly executed by him indemnifying the company and the liquidator against any costs, charges or expenses, including the liquidator’s remuneration in connection with or arising out of the proceedings.

In summary the Court found that a creditor or contributory of a company in liquidation can be authorised to use the company’s name as a Plaintiff and, that provided a proper indemnity was given to the liquidator and the company and provided the Court was satisfied that there was an arguable case, there is no reason that the leave should not be granted.

An electronic signature will not always bind the signing party …

Mr Crocker was a director of IDH Modular Pty Ltd, a company that supplied building modules. Williams Group Australia Pty Ltd supplied building materials to IDH. As part of his contract arrangement IDH required personal guarantees from each of the three directors.

Mr Crocker’s guarantee had an electronic signature affixed to it. He was sued for more than $800,000 on the guarantee after IDH went into liquidation. His defence was that he did not authorise the signature and was therefore not bound by the guarantee. He was successful and Williams appealed. On 22 September 2016 the NSW Court of Appeal dismissed the appeal by Williams.

Williams had argued that Mr Crocker was bound by ostensible authority. The court rejected that by saying that there was no representation of authority by Mr Crocker of some other person to affix the signature. The court also found that there was no evidence that Mr Crocker had ratified the electronic signature that had been put on the guarantee.

There is no doubt that electronic signatures are useful but extreme care must be taken to ensure that if you intend it to be your signature you make it clear that is the case.