Masci & another v Australian Frameless Glass Solutions Pty Ltd & others
[2011] QDC 56
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- Masci & another v Australian Frameless Glass Solutions Pty Ltd & others[2011] QDC 56
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Masci & another v Australian Frameless Glass Solutions Pty Ltd & others[2011] QDC 56
Masci & another v Australian Frameless Glass Solutions Pty Ltd & others[2011] QDC 56
DISTRICT COURT OF QUEENSLAND
CITATION: | Masci & another v Australian Frameless Glass Solutions Pty Ltd & others [2011] QDC 56 |
PARTIES: | FREDERICK ALBERT MASCI AND LINA MASCI AS TRUSTEES FOR THE MASCI FAMILY TRUST v PAUL GULA |
FILE NO/S: | 3099 of 2010 |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court |
DELIVERED ON: | 27 April 2011 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 3 March 2011 |
JUDGE: | Devereaux SC |
ORDER: |
|
CATCHWORDS: | CONTRACTS: SPECIFIC – GUARANTEES – LIABILITY OF GUARANTOR – where guarantor pleads unconscionable conduct by creditor - whether the defendant has no reasonable prospects of success Blomley v Ryan (1956) 99 CLR 362 Commercial Bank of Australia Ltd v Amadio (1982) 1515 CLR 447 Dubois v Ong & Anor [2004] QCA 185 Garcia v National Aust Bank LTD (1998) 194 CLR 395 Legione v Hateley (1983) 152 CLR 406 Yerkey v Jones (1939) 63 CLR 649 |
COUNSEL: | Mr R.J. Anderson for the applicant Ms C.M. Muir for the respondent |
SOLICITORS: | Grasso Searles Romano for the applicant McDonald Phillips Lawyers for the respondent |
- [1]The plaintiff seeks summary judgment against the third defendant. The claim is brought on a guarantee executed by the second, third and fourth defendants in consideration of the plaintiff granting a lease to the first defendant. The second and fourth defendants were directors of the first defendant. The third defendant was a shareholder.
- [2]The third defendant, Mr Gula, has pleaded several points in defence of the claim. The most significant for present purposes is that the guarantee should be declared void as against him because:
- He had no opportunity to get independent legal advice;
- The document was not adequately described to him by the plaintiff and other defendants;
- There was no consideration for the guarantee; and
- Because he ceased being a shareholder in 2009 he should no longer be bound by the guarantee.
- [3]There is no merit in the last two points. The consideration for entering into the guarantee was the plaintiff’s granting of the lease to the first defendant, the company, in which Mr Gula was a shareholder. The guarantee was not conditioned upon Mr Gula having a continued association with the first defendant. The question is whether the first two points contain substance enough to resist the plaintiff’s submission that the third defendant has no real prospect of successfully defending the claim on the guarantee and that there is no need for a trial.
Evidence on affidavit by Mr Gula and Mr Masci
- [4]For about twenty years, before his brief involvement with the other defendants, Mr Gula worked for himself, from home, as a building designer and planner. He is now unemployed. In early 2009, he joined with the fourth defendant, Mr Walewski, to acquire a business, Discount Frameless Glass Brisbane Pty Ltd. Mr Waleski introduced the second defendant, Mr Chorobski. Mr Gula spoke to an accountant, with Mr Walewski, in relation to setting up the business. He does not recall taking any other part in setting up the business.
- [5]From early March 2009, Mr Gula ran the day-to-day business. He was a joint signatory to the bank account.
- [6]In late June 2009, without warning, bank access was taken from him. His practical involvement with the company ended. He was not paid certain monies owing to him. He refused to sign a document presented to him by Mr Chorobski and Mr Walewski – the effect of which was apparently to transfer his shares – because he was owed about $2,200. Yet he is, apparently, no longer a shareholder. He was not involved in the change of name of the company in December 2009.
- [7]The first Mr Gula knew of his obligation as guarantor was the service on him of the statement of claim in late 2010.
- [8]He deposes that on the afternoon of about 6 April 2009 he chanced upon a meeting of Mr Masci (one of the plaintiffs) and the two directors of the first defendant, Mr Chorobski and Mr Walewski. Mr Waleski asked him to sit down for a few minutes and sign some papers “for the lease”. Mr Gula, considering himself a business partner of Mr Walewski, signed what was handed to him without reading it. It was either Mr Masci or he and Mr Walewski who directed Mr Gula where to sign or initial on a particular page. They did not tell Mr Gula he was signing a guarantee. That word was not uttered. He then left the meeting, the others staying. There was no other person present. He does not recall seeing the title page of the deed of guarantee.
- [9]Mr Masci, in an affidavit filed by leave on the day of the hearing, denies any such meeting took place. He swears that he was not present when Mr Gula signed the documents. On 7 or 8 April 2009 he went to the premises and Mr Walewski gave him the executed lease and deed of guarantee. He and his wife then went to a Justice of the Peace and signed the documents on 8 April 2009.
The documents
- [10]It appears Mr Gula and two others signed the lease on 6 April 2009. Their signatures seem to have been witnessed by a Justice of the Peace. The guarantee is dated 6 April 2009. Curiously Mr Gula’s signature on the guarantee appears to have been witnessed by Mr Chorobski, who was also, of course, a party to the guarantee agreement.
The arguments
- [11]Ms Muir submits that Mr Gula was in a position of special disadvantage and that the plaintiff sought to take unconscientious advantage of him. The special disadvantage arises from Mr Gula’s inexperience and lack of sophistication in commercial matters and the facts that he was not a director and had never been a director and had never signed a guarantee. He had no legal representation and was not given a copy of the documents. Crucially, he was directed how and where to sign and was not told it was a guarantee.
- [12]Ms Muir referred to Commercial Bank of Australia Ltd v Amadio (1982) 1515 CLR 447 and Blomley v Ryan (1956) 99 CLR 362.
- [13]Mr Anderson argued that the pleaded defence, properly understood, was one of undue influence. In any case the guarantee could not be avoided on grounds of undue influence or unconscionable conduct because the third defendant was not a volunteer – because he was a shareholder and employee of the first defendant. No position of special disadvantage had been pleaded or demonstrated by evidence. The defence was, therefore, bound to fail.
Discussion and conclusion
- [14]I think the case the third defendant seeks to make is one of unconscionable conduct, an example of the second kind of circumstance examined by Dixon J in Yerkey v Jones (1939) 63 CLR 649. In Garcia v National Aust Bank LTD (1998) 194 CLR 395 at 409, Gaudron, McHugh, Gummow and Hayne JJ said the decision in Yerkey v Jones ‘that the enforcement of the guarantee would be unconscionable … “conforms to the fundamental principle according to which equity acts, namely that a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct”.’[1]
- [15]In their Honours’ analysis, such a case depends on,
“the surety being a volunteer and mistaken about the purport and effect of the transaction, and the creditor being taken to have appreciated that because of the trust and confidence between surety and debtor the surety may well receive from the debtor no sufficient explanation of the transaction’s purport and effect. To enforce the transaction against a mistaken volunteer when the creditor, the party that seeks to take the benefit of the transaction, has not itself explained the transaction, and does not know that a third party has done so, would be unconscionable.”
- [16]Whether the person giving the guarantee was a volunteer must depend on all the evidence in each case. In Dubois v Ong & Anor [2004] QCA 185 at [56], Muir JA said “the question of whether a guarantor is a volunteer is not, necessarily, determined conclusively by the examination of legal rights and interests.”
- [17]The third defendant’s material lays the groundwork for a finding that there was a marked imbalance of power between him and the directors of the company and that he was taken advantage of by others, with more experience in commercial matters, who had higher stakes in the lease transaction. On his account, the representative of the lessor – the person seeking to take advantage of the transaction - and a director of the company called him in and directed him where to sign “for the lease” without any suggestion that he was about to personally guarantee the lease payments by the first defendant. The material in reply, rather than quelling any possible factual and legal dispute, only deepens the mystery.
- [18]In the circumstances, it cannot be said with confidence that Mr Gula was not a volunteer. The precise nature of the relationship between Mr Gula and the directors of the company and the degree to which Mr Masci was aware of that relationship, must be determined at trial.
- [19]There are other issues to be resolved about the circumstances in which the documents were executed. For example, on Mr Gula’s account no justice of the peace was present, yet his signature is apparently witnessed by one. Indeed, there are questions raised on the documents themselves about the correctness of their execution, given Mr Chorobski’s apparent witnessing of Mr Gula’s signature.
- [20]Ms Muir also raises questions about the calculation of the quantum of the claim and argued the plaintiffs’ evidence does not sufficiently prove default under the lease by the company. It is unnecessary to decide these matters given the view I have taken concerning the unconscionable conduct point.
- [21]I am unable to be satisfied the defence has no real prospect of success thereby obviating the need for a trial. In the circumstances, the application must be dismissed.
Footnotes
[1] Their Honours were quoting Mason and Deane JJ in Legione v Hateley (1983) 152 CLR 406.