Allcott Hire Pty Ltd v Silk - [2016] NSWSC 1135

Supreme Court

New South Wales

Medium Neutral Citation: Allcott Hire Pty Ltd v Silk [2016] NSWSC 1135
Hearing dates: 10 June 2016
Date of orders: 17 August 2016
Decision date: 17 August 2016
Jurisdiction: Common Law
Before: Rothman J
Decision:
(1)   To the extent necessary, leave to appeal be granted;
(2)   To the extent necessary, leave to raise the issue of the existence of an indemnity, as distinct from a guarantee, be granted;
(3)   Leave be granted to raise the issue relating to the lack of proof of the primary obligation;
(4)   Appeal allowed;
(5)   The judgment of the Local Court of 15 May 2015 in Allcott Hire Pty Limited v Silk be set aside;
(6)   The matter be remitted to the Local Court for it to deal with remaining issues between the parties, if any, not dealt with by this judgment;
(7)   The defendant to pay the plaintiff’s costs of the appeal;
(8)   Costs of the proceedings in the Local Court be dealt with by the Local Court on remitter;
(9)   To the extent eligible, the defendant be granted a Certificate under s 6 of the Suitors Fund Act 1951 for the costs of these proceedings;
(10)   The parties have liberty to make application for any different or special order as to costs within seven days of the date of this judgment. Such application shall be in writing to the Associate of Justice Rothman with a submission of no more than three pages together with any documents upon which such submission may be based that are not otherwise before the Court. Any such application may be the subject of response by any other party affected by the application. Such response shall also be limited to three pages, together with any documents upon which the response is based that are not otherwise before the Court.

Catchwords: APPEAL – question of law – construction of clause in commercial contract – principles of construction – ambiguity – decision below concluded no meaning to clause – appeal allowed; CONTRACT – guarantee or indemnity – strictissimi juris – principles of construction of surety contract – common sense, commercial construction – appeal allowed.
Legislation Cited: Suitors Fund Act 1951
Cases Cited: Allcott Hire Pty Limited v Silk (District Court (NSW), Bradd LCM, 26 June 2015, unrep)
Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; (2004) 217 CLR 424
Anderson v Fitzgerald (1853) 4 HLC 484, (1853) 10 ER 551
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR
Associated Alloys v ACN 001 452 106 Pty Ltd [2000] HCA 25; (2000) 202 CLR 588
Atco Controls Pty Ltd (In Liq) v Newtronics Pty Ltd (Receivers and Managers Appointed) (In Liq) [2009] VSCA 238; (2009) 25 VR 411
Berghoff Trading Ltd v Swinbrook Developments Ltd [2009] EWCA Civ 413
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337
Concut Pty Ltd v Worrell [2000] HCA…

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: [2016] NSWSC 1135
Decision Date: 17 August 2016

CaseChat Overview and Summary

The appeal before the court involved Allcott Hire Pty Ltd, the appellant, and Silk, the respondent. The dispute arose from the interpretation and application of a clause in a commercial contract, specifically a guarantee or indemnity agreement. The primary issue before the court was whether the clause in question was ambiguous and, if so, how it should be interpreted. The court was required to decide whether the lower court's interpretation of the clause as having no meaning was correct.

The appeal centred on the principles of construction of surety contracts, which are interpreted strictly. The court had to consider whether the clause was ambiguous and, if so, whether the ambiguity was such that the clause should be construed in favour of the guarantor. The court also had to examine whether the lower court had correctly applied the principles of common sense and commercial construction in interpreting the clause. The appellant argued that the clause should be interpreted to mean that the guarantor was liable for any losses incurred by the hire company, whereas the respondent contended that the clause was ambiguous and should be disregarded.

The court found that the clause in question was ambiguous and, in light of the principles of strict construction, should be interpreted in favour of the guarantor. The court held that the lower court had erred in concluding that the clause had no meaning and should be disregarded. Instead, the clause should be interpreted to mean that the guarantor was liable for any losses incurred by the hire company. The court emphasised the importance of a common sense and commercial approach in interpreting surety contracts. The appeal was allowed, and the matter was remitted to the lower court for further proceedings in light of the court's decision.

Orders