Adisan Pty Ltd v Irwin - [2015] NSWCA 217

Court of Appeal
Supreme Court

New South Wales

Case Name:	Adisan Pty Ltd v Irwin
Medium Neutral Citation:	[2015] NSWCA 217
Hearing Date(s):	10 July 2015
Decision Date:	30 July 2015
Before:	Beazley ACJ at [1]; Meagher JA at [2]; Gleeson JA at [56]
Decision:	1. Appeal dismissed. 2. Set aside order 3 made on 1 August 2014. 3. Order the appellant pay the respondent’s costs of the appeal.
Catchwords:	CONTRACT – guarantee and indemnity – where guarantee provided that it could be extended to cover “new loan contract” – interpretation – deed of variation to extend guarantee presented to guarantors for agreement – terms of new loan contract capping liability of co-guarantor not disclosed in deed or otherwise – whether deed of variation effective to extend guarantee to cover the liability of the borrower under the new loan contract, including capping arrangement AUSTRALIAN CONSUMER LAW – order under s 87 of the Trade Practices Act 1974 (Cth) – misleading or deceptive conduct including omission to disclose information – whether presentation of deed of variation without disclosure of agreement to cap co-guarantor’s liability misleading or deceptive – whether guarantor suffered or likely to suffer loss or damage by the misleading conduct
Legislation Cited:	Trade Practices Act 1974 (Cth)
Cases Cited:	Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; 162 CLR 549 Allianz Australia Insurance Ltd v Haddad [2015] NSWCA 186 Blest v Brown (1862) 4 De G, F & J 367; 45 ER 1225 Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152 Greer v Kettle [1938] AC 156 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; 241 CLR 357 Westpac Banking Corporation v Robinson (1993) 30 NSWLR 668
Texts Cited:	J O’Donovan and J Phillips, Thomson Lawbook Co, Modern Contract of Guarantee, Vol 1
Category:	Principal judgment
Parties:	Adisan Pty Ltd (Appellant) Craig Irwin (Respondent)
Representation:	Counsel: MK Condon SC with A Di Francesco (Appellant) P Bolster (Respondent) Solicitors: Wood Marshall Williams (Appellant) Pikes & Verekers Lawyers (Respondent)
File Number(s):	2015/236538
Decision under appeal:
Court or Tribunal:	Supreme Court of NSW
Jurisdiction:	Common Law
Citation:	[2014] NSWSC 1043
Date of Decision:	1 August 2014
Before:	Nicholas AJ
File Number(s):	2012/101107

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE

[This headnote is not to be read as part of the judgment]
In 2007, a loan agreement between the appellant lender and two companies engaged in a residential property development (“the borrower”) was guaranteed by six co-guarantors, including the respondent. An advance of $600,000 was made to the borrower. The principal and capitalised interest…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NSWCA 217
Decision Date: 30 July 2015

CaseChat Overview and Summary

Adisan Pty Ltd (the appellant) appealed to the Court of Appeal of New South Wales against a decision of the primary judge concerning a guarantee and indemnity. The dispute arose from a deed of variation presented to the guarantors (the respondents) to extend an existing guarantee to cover a "new loan contract". The terms of this new loan contract included an agreement to cap the liability of a co-guarantor, which was not disclosed to the respondents when they were asked to execute the deed of variation.

The Court of Appeal was required to determine two primary legal issues. Firstly, whether the deed of variation was effective to extend the guarantee to cover the borrower's liability under the new loan contract, specifically in light of the undisclosed capping arrangement for the co-guarantor. Secondly, the Court considered whether the presentation of the deed of variation without disclosing the capping agreement constituted misleading or deceptive conduct under section 87 of the *Trade Practices Act 1974* (Cth) (now the *Australian Consumer Law*), and if so, whether the guarantors suffered or were likely to suffer loss or damage as a result.

The Court of Appeal dismissed the appeal, upholding the primary judge's findings. The Court reasoned that the failure to disclose the capping arrangement to the co-guarantor was a material omission. This omission rendered the presentation of the deed of variation misleading and deceptive conduct, as it created an inaccurate impression of the extent of the guarantors' potential liability. The Court applied principles of contract interpretation and consumer protection law, finding that the undisclosed capping arrangement fundamentally altered the nature of the guarantee as presented to the respondents. Consequently, the deed of variation was not effective to extend the guarantee to the new loan contract in the manner intended by the appellant, and the conduct was found to be misleading.

The Court of Appeal ordered that the appeal be dismissed, set aside an order made on 1 August 2014, and ordered the appellant to pay the respondent’s costs of the appeal.

Orders

Orders of the court

1. Appeal dismissed.

2. Set aside order 3 made on 1 August 2014.

3. Order the appellant pay the respondent’s costs of the appeal.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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