RING TREAD SYSTEMS (AUSTRALASIA) PTY LTD (RECEIVER & MANAGER APPOINTED) v TUBB SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, MEAGHER and HANDLEY JJA 30 October 1998, 30 October 1998 [1998] NSWCA 186 Appeal and new trial — fresh evidence — false evidence given by respondent — court deceived in a material aspect — new trial ordered Contracts Review Act — relief available to guarantors of the business debts of a corporate principal Mason P The appellant held the marketing and distribution rights within Australia in respect of a tyre retreading system. In early 1989 there were discussions between a director of the appellant, Mr Carroll, and the respondent, who was the executive director of Speedy Tyres Pty Ltd (Speedy Tyres), a tyre repair organisation operating in Launceston, Tasmania. These discussions culminated in the execution of two documents. The first was a licence agreement dated 30 June 1989 between the appellant and Speedy Tyres, pursuant to which the appellant as licensor granted certain exclusive rights to use the system in Tasmania. That agreement provided inter alia for the credit terms pursuant to which goods would be sold and delivered to Speedy Tyres. The licence agreement was executed under the common seal of Speedy Tyres, with the seal being countersigned by the respondent as a director. There is a dispute as to the place and date of execution of the second document, which is a credit account application form. The respondent's evidence was that this was signed in Bowral on 30 June 1989 at the same time as the licence agreement. Mr Carroll's evidence was that the respondent took the document away from the meeting at Bowral back to Launceston where it was signed. It bears date 6 July 1989. The front page of the document is an application for the granting of credit on behalf of Speedy Tyres signed by the respondent and witnessed. The second page is a guarantee containing six clauses. It is signed by the respondent as guarantor and his signature is witnessed. Trading relations commenced. However, in 1993 the appellant commenced proceedings in the District Court of New South Wales against Speedy Tyres and the respondent. Speedy Tyres was sued for goods sold and delivered in accordance with the terms of the licence agreement. The respondent was sued under the guarantee embodied in the credit account application form. The proceedings were tried before Judge Mahoney QC on 5 and 6 December 1996. The appellant was represented by counsel, Speedy Tyres was unrepresented and the respondent represented himself. Evidence was given on behalf of the appellant by Mr Carroll and on behalf of the defendants by the respondent. The respondent advanced several reasons why he was not bound by the signed guarantee. He said that he had made it clear during discussion that he was not prepared to give a personal guarantee. Indeed, it was demonstrated that the guarantee provisions in the licence agreement had been struck out. A number of grounds were advanced as to why the respondent 2 UNREPORTED JUDGMENTS was not bound by his signature on the guarantee form on the back of the credit account application form. There was a sharp dispute on a number of key matters as between Mr Carroll and the respondent. As indicated already, there was even disagreement as to the time and place in which the guarantee was signed. The respondent said that he had been tricked into signing the document at Bowral and that he had been misled in various ways about its true nature. One of the issues as between the appellant and Speedy Tyres, and consequently as between the appellant and the respondent, related to the extent of the indebtedness of Speedy Tyres. The respondent asserted in his evidence that the goods the subject of the appellant's claim had been delivered on consignment. He denied that there was an outright sale and delivery. In that context he gave explicit evidence to the effect that there was a large stock of goods available to be returned to the appellant, as well as approximately $62,000 standing in a cheque account of Speedy Tyres (see appeal book p116 and p117). Following addresses, judgment was given ex tempore on the morning of Friday 6 December 1996. His Honour held that the plaintiff's claim against the second defendant (the respondent here) under the guarantee failed. He entered a verdict for the second defendant against the plaintiff. It is that verdict and the consequential costs order that are the subject of this appeal. The proceedings between the plaintiff and the first defendant, Speedy Tyres, was stood over for further hearing in the new year. In his reasons, the judge indicated that he accepted the evidence of the respondent that the goods had been sent and received on consignment and that approximately $62,000 was standing in a bank account pending finalisation of the case. His Honour recorded that this was money which the second defendant appeared to concede was payable by the first defendant to the plaintiff under the licence agreement. The further proceedings against the first defendant were stood over because the judge was unable to determine how much if anything remained due as between the creditor and the principal debtor. He issued the equivalent of a Mareva injunction restraining each of the defendants from disposing of the money in the bank account. Various reasons were given for rejecting the appellant's claim against the respondent under the guarantee. Some of these appear to bear little relation to the issues pleaded or debated between the parties. The appellant has submitted that they are unsupported by evidence and involve significant departure from established equitable doctrine. Suffice it to say that the reasons given by the learned judge do not indicate the authorities supporting what at first blush appear to be a number of debatable legal and equitable propositions stated at appeal book 219. In aid of the Mareva injunction, his Honour directed the respondent to identify to the appellant within one hour the bank and branch at which the $62,000 was held in deposit. The court then adjourned. Upon resumption, a little over an hour later at 2 o'clock, his Honour heard evidence from the solicitor for the appellant that on two occasions since the adjournment the respondent had declined to give the particulars required by his Honour as to the whereabouts of the $62,000. He had said "I'm going back to Launceston and you can do what you like". The adjourned proceedings against Speedy Tyres were heard by the learned judge in April 1997. During that hearing the respondent admitted that his sworn evidence given on 5 December 1996, to the effect that there was $62,000 being the proceeds of the sale of consignment goods sitting in a bank account in Tasmania, was not true. WANG TREAD SYSTEMS (AUSTRALASIA) PTY LTD (RECEIVER & MANAGER APPOINTED) v TUBB (Mason P) On 9 April 1998 judgment was given in favour of the appellant against Speedy Tyres in the sum of $184,157. It is hardly surprising that in his reasons for judgment the learned judge excoriated the respondent's credibility. Speedy Tyres brought an appeal from this judgment but that appeal has recently been dismissed for want of prosecution. This appeal is the one that was lodged by the appellant shortly after the judgment that was given on 6 December 1996. As well as challenging his Honour's reasons in a number of respects, the appellant tendered in the appeal the evidence as to the respondent's deception of the trial judge. That evidence was admitted. The deception practised by the respondent on the court strikes so vitally at the heart of the case that the interests of justice require the Court to set aside the judgment in the respondent's favour and to order a new trial. (See generally Commonwealth Bank of Australia v Quade (1991) 178 CLR 134 at 142-143) It was common ground between the parties that a new trial is the appropriate order if the judgment below is set aside. Counsel for the respondent referred the Court to Meek v Fleming [1961] 2 QB 366 and reminded the Court that, where the fresh evidence relied upon goes solely to an issue of credit, then there is a high standard to be satisfied before the Court will order a new trial. (See also Akins v National Australia Bank Ltd (1994) 34 NSWLR 155) It is hard to think of a clearer case than the present one where dishonestly given evidence had a vital impact upon the verdict. This was a case where the court was deceived in a material respect by the deliberate and temporarily effective false evidence of the respondent. That evidence led his Honour to grant the Mareva injunction and to adjourn the proceedings against Speedy Tyres. More importantly, it was material which, had its falsity been exposed prior to judgment being given on the morning of 6 December, would in my view almost certainly have led to a different conclusion as regards the credibility of the respondent's testimony. This being a case which turned in its ultimate analysis upon a credibility issue, a new trial is therefore required. The respondent was given leave this morning to file a late notice of contention. We gave that leave because it raises an issue of law and an issue which is appropriate to be determined in the event that a new trial is to be ordered. Mahoney DCJ held that the Contracts Review Act was not available to the respondent in defence of the claim under the guarantee. That holding was explicit and it may have been material, given the fact that some of the grounds upon which his Honour found in favour of the respondent are grounds which are germane to the type of review permitted and required under a contracts review challenge. As I have already indicated, Speedy Tyres was unrepresented at the trial and the respondent, who is not a lawyer, represented himself. It does appear to have been submitted on behalf of the appellant (see appeal book 133) that the provisions of the Contracts Review Act were not available because the respondent was "someone in a business connection". It is commonplace in this Court to hear appeals from judgments in the District Court and the Commercial Division in relation to claims against guarantors who have guaranteed the business debts of a corporate principal. S6(2) of the Contracts Review Act provides that a person may not be granted relief under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by him or proposed to be carried on by him other than a farming undertaking, 4 UNREPORTED JUDGMENTS including but not limited to an agricultural, pastoral, horticultural, orcharding or viticultural undertaking carried on by him or proposed to be carried on by him wholly or principally in New South Wales. In the present case, the trading or business undertaking was that of Speedy Tyres and I cannot see any basis upon which the Contracts Review Act was excluded from the proceedings so far as they touched the respective rights of the appellant or the respondent. It is sufficient that reference be made to two early decisions in relation to the Contracts Review Act, Toscano v Holland Securities Pty Ltd (1985) 1 NSWLR 145 and Australian Bank Ltd v Stokes (1985) 3 NSWLR 174. The principles stated in those two judgments, so far as they pertain to the matters in issue in this case, have not to my knowledge been doubted in any later case. Counsel were asked whether they had any submission as to whether, in the event that the Court was disposed to order a new trial in this matter, the Court should indicate any view as to whether that new trial should take place before Judge Mahoney QC or another judge. Each counsel put the submission that in the circumstances of this case it would be appropriate for this Court to indicate that the new trial ought to take place before another judge. I agree with that submission. It was put on a particular basis and I am agreeing on that particular basis, namely this is a case where credibility will be critical to the ultimate resolution of the dispute between the parties. His Honour was put in the difficult position of addressing the issue of credit in one factual context and then being confronted with the impact of the deception placed upon him in another. In my view it would be in the interests of justice that, if this case continues, the ultimate question of credibility as between the appellant and the respondent be determined by someone who can be referred to the earlier evidence but is in a position to assess it on its respective merits without direct concern about its earlier impact in the proceedings. For those reasons, I would accordingly propose the following orders: (1) appeal allowed; (2) set aside the judgment and order in relation to costs entered on 6 December 1996 in favour of the respondent against the appellant; (3) order that there be a new trial of the issues as between those parties; (4) order that the costs of the first trial as between those parties abide the result of the new trial; (5) order that the respondent pay the appellant's costs of the appeal and to have a certificate under the Suitors Fund Act if qualified. The order for costs that I would propose in relation to the appeal deal with those matters of costs that have not already been disposed of in earlier stages of the appeal. Meagher JA I agree. Handley JA I agree. Mason P Those are the orders of the Court. (1) appeal allowed; (2) set aside the judgment and order in relation to costs entered on 6 December 1996 in favour of the respondent against the appellant; (3) order that there be a new trial of the issues as between those parties; (4) order that the costs of the first trial as between those parties abide the result of the new trial; WANG TREAD SYSTEMS (AUSTRALASIA) PTY LTD (RECEIVER & MANAGER APPOINTED) v TUBB (Mason P) (5) order that the respondent pay the appellant's costs of the appeal and to have a certificate under the Suitors Fund Act if qualified. Counsel for the appellant: D F Rofe QC/J Oakley Solicitors for the appellant: Dibbs Crowther & Osborne Counsel for the respondent: M Walton Solicitors for the respondent: Cassidy Gibson Howlin