An earthmoving equipment company has suffered defeat over a $500k personal guarantee debt due to sloppy credit control processes.
TCT Plant Hire hired excavators, machinery and trucks under a “VIP Customer Loan Vehicle Agreement” that recorded terms for their use and maintenance.
Rene Santoro signed the agreement as “customer” above the words “Accepted for and on behalf of Elite Plant Hire Pty Ltd Rene Santoro, Director”.
She had a similar contract with Sydney Trucks & Machinery signed in the same way and under which the company provided equipment use and maintenance to the tune of $352k.
In both cases, the space adjoining where she signed had provision for her to sign again as “Guarantor”. In both cases it was left blank when it was returned to the companies’ credit department.
In submissions to the NSW Supreme Court, the traders contended it was clear they were only prepared to rent the equipment to Elite on the basis that Santoro gave her personal guarantee.
Moreover – they asserted – it made commercial sense that they would require such arrangement before allowing a customer to incur “very considerable debts”.
On that basis – they claimed – the signor should be deemed to have subscribed her signature “in a dual capacity” i.e. on her own behalf and on that of the company.
Justice Richard White took a different view.
He agreed that it should be assumed a person who signs a contract is contractually bound unless the contrary is made clear.
But of equal weight, he ruled, was the assumption that a person who signs under the qualification that such signature is as agent eg for a company, does not accept any personal liability.
The use of the word “director” in this case, he reasoned, had sufficiently qualified the capacity in which Santoro agreed to the transaction terms.
It could therefore not be said that she signed the document in such a way as to indicate an agreement to be personally bound.
Whilst the traders intended to capture a personal obligation – and their paperwork would have been sufficient so to do – they continued to do business with the customer after receipt of an incompletely signed order.
Both traders had to bear their own losses.