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Chan Now & Company Ltd v Vito [2003] WSSC 34 (24 October 2003)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN:

CHAN NOW & COMPANY LIMITED
a duly incorporated company having its registered office at Apia.
Plaintiff

AND:

FUIMAONO LAFAELE VITO
of Togafuafua, Businessman.
Defendant

Counsel: Ms R. Drake for the plaintiff
Mr S. Leung Wai for the defendant

Hearing: 30 July 2003
Decision: 24 October 2003

DECISION OF VAAI J

The plaintiff filed civil proceedings seeking payment from the defendant for the value of goods supplied by the plaintiff for the defendant’s family businesses at three separate locations in the town area. The credit sales were arranged by the defendant’s family company and the credit agreements executed by Fritz Lafaele a son of the defendant and Genevieve Pupi. Debts were by the same agreements guaranteed by Fritz Lafaele Vito. Payments for the credit sales fell into arrears and officers of the plaintiff company met with the defendant who personally executed an acknowledgement of the debts by his family company.

The plaintiff says that pursuant to the Credit Agreements and the acknowledgement of the debts the defendant was personally liable for the debt owing. The defendant in response to the claim filed an application to strike out the claim on the basis that the debt is not his and he is not liable in law for their payments.

The Credit Agreements

The credit agreements prepared by the plaintiff in its standard form were executed before the goods were supplied to the defendant’s family company. Although the defendant was probably not aware of the credit Agreements the plaintiff argues that as the defendant’s name rather than the defendant’s family company name appears on the credit agreements, the credit sales were therefore issued to the defendant. The argument even in the eyes of any layperson lacks sense and merit. The defendant did not request any credit sales from the plaintiff and he was not a party to any credit sales agreement with the plaintiff and the credit sales agreement were entered into after the defendant's family company requested the plaintiff in writing on the defendant’s family company letterheads for the supply of goods on credit.

Written acknowledgement of the debts

When the defendant’s family company were seriously in arrears with their debt repayments to the plaintiff, officers of the plaintiff called on the defendant who signed printed forms prepared by the plaintiff acknowledging the debts owing to the plaintiff. Each acknowledgement of debt correlate to each credit sale agreement. The plaintiff submits that by signing the acknowledgements of debts the defendant acknowledged his indebtedness to the plaintiff and therefore agreed to be personally responsible for the payments of the amounts owing on the acknowledgements. In the alternative the plaintiff argues that even if the defendant was not personally indebted to the plaintiff pursuant to the acknowledgement of debts he signed he was still liable personally if he did sign the acknowledgement on behalf of the company without using the proper company name pursuant to section 116(5)(b) Companies Act 1955 (NZ). That section imposes on a company officer personal liability if the officer signs or authorises to be signed on behalf of the company any bill of exchange, promissory note, endorsement, cheque, or order for money or goods if the name of the company is not mentioned in legible characters on those documents.

I have had the benefit of perusing the acknowledgements of debts as well as the credit sales agreements attached to the supporting affidavit to strike out the statement of claim. Although I do not accept the argument by counsel for the defendant that the defendant can never be liable for a debt which was never his, I do accept nonetheless that by executing the acknowledgements of debt the defendant did not become personally liable for the debt incurred by the family company under the credit sales agreement. As a consequence I reject the submission by counsel for the plaintiff that the acknowledgements of debts signed by the defendant are effectively promissory notes. By the same reasoning I reject submission by counsel for the plaintiff that the defendant by executing the acknowledgements of the debt was caught by section 116(5)(b) when the Acknowledgement of debts were issued in the defendant’s own name and not in the proper name of the defendant’s family business. The acknowledgements of debt forms like the credit sales agreements were all prepared by the officers of the plaintiff. In particular the acknowledgements of debts were not issued by the defendant; they were prepared by the plaintiff in an effort to recover the debts the plaintiff knew they could not recover from the real debtor. Section 116(5) is intended to protect creditors by serving to them notice that they are dealing with a company which is limited. In this case the defendants family company requested in writing the plaintiff for credit sales. The request was made in the company’s letterhead signed by Fritz Lafaele the son of the defendant. And when the request was granted credit sales agreements were prepared by the plaintiff and executed by Fritz Lafaele and another officer. Fritz Lafaele as I have stated before also signed as guarantor so that right from the start the plaintiff knew it was dealing with the defendant’s family company. It cannot say that the defendant is caught by section 116(5)(b).

For the above reasons the statement of claim is struck out. The plaintiff is ordered to pay costs of $500.00 to the defendant.

JUSTICE VAAI