Allregal Corporation Pty Ltd v Ghirardi
[2001] WADC 34
•22 FEBRUARY 2001
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: ALLREGAL CORPORATION PTY LTD -v- GHIRARDI & ORS [2001] WADC 34
CORAM: GROVES DCJ
HEARD: 27 SEPTEMBER 2000
DELIVERED : 22 FEBRUARY 2001
FILE NO/S: CIV 343 of 2000
BETWEEN: ALLREGAL CORPORATION PTY LTD (ACN 090 571 350)
Plaintiff
AND
PATRICK JOHN GHIRARDI
First DefendantJOANNE ELIZABETH GHIRARDI
Second DefendantRODNEY JOHN CHAPMAN
First Third PartyELIZABETH MARY CHAPMAN
Second Third PartyBRUCE ALEXANDER CHAPMAN
Third Third PartyIAIN LAWLESS
Fourth Third Party(BY ORIGINAL ACTION)
PATRICK JOHN GHIRARDI
First PlaintiffJOANNE ELIZABETH GHIRARDI
Second PlaintiffAND
ALLREGAL CORPORATION PTY LTD (ACN 090 571 350)
Defendant(BY COUNTERCLAIM)
Catchwords:
Practice - Summary judgment - Appeal from Deputy Registrar refusing application - Assignee suing guarantors on debt - Whether release of some guarantors and discharge of security affected assignee's rights
Legislation:
Rules of the Supreme Court of Western Australia, O 14, r 3
Supreme Court Civil Procedure
District Court Rules 1996, O 6, r 11
Property Law Act (WA) 1969, s20
Trade Practices Act 1974 (C'th)
Credit Act (WA) 1984
Credit (Regulation of Loan Contracts) Regulations 1993
Result:
Appeal allowed
Representation:
Original Action
Counsel:
Plaintiff: Mr M L Bennett
First Defendant : Mr R J L McCormack
Second Defendant : Mr R J L McCormack
First Third Party : Not Applicable
Second Third Party : Not Applicable
Third Third Party : Not Applicable
Fourth Third Party : Not Applicable
Solicitors:
Plaintiff: Bennett & Co
First Defendant : Paynes
Second Defendant : Paynes
First Third Party : Not Applicable
Second Third Party : Not Applicable
Third Third Party : Not Applicable
Fourth Third Party : Not Applicable
Counterclaim
Counsel:
First Plaintiff : Mr R J L McCormack
Second Plaintiff : Mr R J L McCormack
Defendant: Mr M L Bennett
Solicitors:
First Plaintiff : Paynes
Second Plaintiff : Paynes
Defendant: Bennett & Co
Case(s) referred to in judgment(s):
Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363
Dey v Victorian Railways Commissioners (1949) 78 CLR 62
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Hazart Pty Ltd v Rademaker (1993) 11 WAR 26
Case(s) also cited:
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1958) 79 ALR 83
Webster v Lampard (1993) 177 CLR
Commonwealth Bank of Australia v Mehta (1991) 23 NSWLR 84
Crisp v ANZ Bank (1994) ATPR 41-294
Kabwand Pty Ltd v National Australia Bank (1989) ATPR 40-950
Evans v Bartlam [1937] AC 473
GROVES DCJ: This is an appeal by the plaintiff from a decision of Deputy Registrar Hewitt [2000] WADC 130; delivered 30 May 2000 when the plaintiff's application for summary judgment against the first and second defendants was dismissed. The appeal is brought pursuant to O 6, r 11 of the District Court Rules 1996 and it is accepted that the appeal is to be dealt with as a complete review de novo, that is, by way of an actual re‑hearing of the application which led to the order under appeal (see Hazart Pty Ltd v Rademaker (1993) 11 WAR 26 at 28 and 29). Further evidence by way of affidavit on behalf of the plaintiff and affidavits of each of the first and second defendants were received as additional evidence to that which was before the Registrar.
Background
In the latter part of 1997 negotiations commenced between the first and second defendants (Mr and Mrs Ghirardi) on the one hand and Bruce Alexander Chapman (Bruce Chapman) and Iain Lawless (Iain Lawless) on the other hand, in relation to the establishment of a restaurant at the premises at 57 Bayview Terrace, Claremont. The business structure which was put in place which was to operate as a partnership comprised Ghirardi Restaurant Pty Ltd as Trustee of the Ghirardi Restaurant Trust and No Salt Required Pty Ltd as Trustee of the Brewster Family Trust and as Trustee for the Waldo Family Trust. That partnership was to operate the restaurant which became known as "Lawless and Chapman". Mr and Mrs Ghirardi controlled the Ghirardi Restaurant Trust. Iain Lawless controlled the Waldo Family Trust and Bruce Chapman controlled the Brewster Family Trust.
Fit‑out of the restaurant proceeded utilising funds provided by Mr and Mrs Ghirardi. However additional funds were required prior to opening of the restaurant. For this purpose an approach was made by the partners (Ghirardi Restaurant Pty Ltd and No Salt Required Pty Ltd trading as Lawless and Chapman) to National Australia Bank (NAB) for an overdraft for $150,000. On 30 June 1998 NAB offered an overdraft facility in that amount which offer was subsequently accepted. The overdraft facility was subject to cancellation by NAB at any time without default (Condition 5) and provided also that NAB "…may assign or otherwise deal with its rights of beneficial interests under this agreement in any way the bank considers appropriate" (Condition 18).
On 23 July 1998 Ghirardi Restaurant Pty Ltd and No Salt Required Pty Ltd executed Debenture Charges in favour of NAB. The Debenture Charges were registered with the Australian Securities Commission. In terms of the Debenture Charges each company, inter alia, undertook to pay NAB on demand all the secured amounts referred to in the demand (cl 2.1). Default in payment of any secured amount constituted an event of default (cl 12(a)). Furthermore it provided that NAB "…may assign the whole or any part of the benefit of (the Charge) free of any equity set‑off or counterclaim." Reference to NAB was deemed to include any assignees and other successors (cl 44).
By way of additional security NAB required that the overdraft facility be guaranteed by the partners and by Mr and Mrs Ghirardi and Iain Lawless and Bruce Chapman personally. In the case of Bruce Chapman it necessitated his parents, Rodney John Chapman and Elizabeth Mary Chapman, (Mr and Mrs Chapman) being brought in as additional Guarantors. Their guarantee was to be secured by way of a registered first mortgage over a property owned by them at Port Bouvard ("the Port Bouvard property"). The Deed of Guarantee and Indemnity provided, inter alia, that:
(a)Each guarantor guaranteed the Principal Debtors (Ghirardi Restaurant Pty Ltd and No Salt Required Pty Ltd) would pay NAB all the money which the Principal Debtors owe to NAB at any time. (Clause 6.1).
(b)Each guarantor agreed to pay NAB any of those amounts in respect of which the Principal Debtor at any time is in default up to the basic liability as defined. (Clause 6.1).
(c)The guarantors remain liable under the Guarantee even if a co‑guarantor stops being liable or is discharged from liability whether by agreement with NAB or by any principle of law or equity. (Clause 4.1(d)).
(d)The guarantors were required to pay to NAB interest on amounts outstanding when NAB made demand for payment until the date of payment. The rate of interest as determined by NAB not to be more than one and a half times NAB's bench mark rate at the time as published in newspapers. (Clause 8).
(e)NAB was entitled to assign its right under the Guarantee and Indemnity free of any equity, set‑off or counterclaim. (Clause 26).
The Guarantee and Indemnity is signed by each of the individual Guarantors and each signature is witnessed by a solicitor who also signed a Solicitor's Certificate stating:
•I certify that I am a legal practitioner instructed and employed by this Guarantor independently of the Bank.
•I certify that I explained the effect of this Guarantee and Indemnity to the Guarantor who appeared to be aware of and to understand the nature and effect of the obligations of the Guarantor under this Guarantee and Indemnity and executed it in my presence.
Each of the Guarantors also signed a Certificate and Acknowledgment stating that they were fully aware of the nature of the Guarantee and Indemnity and the risks associated with signing it and that they were executing it voluntarily.
In or about July 1998 the restaurant commenced trading.
By a Deed dated 30 December 1999 made between NAB, the plaintiff (Allregal) and Mr and Mrs Chapman, NAB assigned to Allregal the debt owing from Lawless and Chapman to NAB, the benefit of the Guarantee and Indemnity and the Debenture Charges in consideration of Allregal paying to NAB the amount outstanding to the account of Lawless and Chapman in the Mortgage Overdraft Facility. Furthermore, and with effect immediately prior to the assignment, NAB for the sum of $100, released Mr and Mrs Chapman from their liabilities and obligations under the Guarantee and agreed to discharge the Mortgage which NAB had over the Port Bouvard property. Mr Chapman is a director of Allregal and it is Mr Ghirardi's understanding (as deposed in his affidavit of 22 August 2000) that Mrs Chapman is also a director.
Pursuant to s 20 of the Property Law Act(WA) 1969 and the Deed of Assignment, NAB gave notice on 30 December 1999 and again on 4 February 2000 to Lawless and Chapman that the debt and the benefit of the securities including the Guarantee and Indemnity dated 23 July 1998 had been assigned to Allregal. The debt was particularised as the sum of $151,110.08 being the amount outstanding on the Mortgage Overdraft Facility as at 30 December 1999 and the further sum of $649.10 being a merchant fee for the processing of transactions on the Facility for the month of December.
On 5 January 2000 Allregal's solicitors wrote to Ghirardi Restaurant Pty Ltd making demand for immediate payment of the debt of $151,110.08. The debt was not paid. By letters dated 4 and 9 February 2000, Allregal's solicitors made demand on each of the first and second defendants for payment of the sum of $151,759.18 (which sum included the merchant fee). The demand was not met and on 20 February 2000 Allregal commenced these proceedings against the first and second defendants for the amount outstanding together with interest thereon.
By their defence and counterclaim filed 7 March 2000 Mr and Mrs Ghirardi admit, inter alia, that:
(a)They entered into the Deed of Guarantee and Indemnity in favour of NAB.
(b)The provisions of clauses 6.1, 4.1(d), 8 and 26 of the Deed of Guarantee and Indemnity.
(c)They received the notices under s 20 of the Property Law Act; and
(d)A demand for the payment of $151,759.18 was served on them and that they had not paid the same.
The defence and counterclaim goes on to contend that Mr and Mrs Ghirardi are not obliged to meet the demand as alleged or at all. Essentially they say that:
(a)the security over the Port Bouvard property owned by Mr and Mrs Chapman would be maintained and preserved for the duration of the Guarantee and thereby be available for the co‑sureties to share in the benefit of that security;
(b)maintaining that security was a condition precedent which NAB failed to perform and operated to release Mr and Mrs Ghirardi in their capacity as guarantors from all liability under the guarantee.
On 23 July 1998 (the same date as the Deed of Guarantee and Indemnity was signed) the guarantors had also executed a Deed on Securities for 57 Bayview Terrace, Claremont. The deed recites, inter alia, the overdraft facility and that NAB required certain securities including "a joint and several guarantee and indemnity from Mr and Mrs Chapman and a first registered mortgage over Mr and Mrs Chapman's property at Lot 126 Spoonville Retreat, Port Bouvard, Western Australia (collectively "the Chapman Mortgage"). The deed then goes on to provide that the parties agreed that despite the terms of the Chapman mortgage the Chapman mortgage would only be security for a principal amount of $102,500 and not for any other moneys that may at any time be owing to the bank in relation to the overdraft facility. NAB was not a party to that deed.
Counsel for Mr and Mrs Ghirardi on the hearing of this appeal claimed that had not Mr and Mrs Chapman been prepared to give security to the bank over the Port Bouvard property to secure (as agreed between the co‑guarantors) up to $102,500 maximum then they, Mr and Mrs Ghirardi, would not have given their personal guarantees unless Bruce Chapman's share of the liabilities was otherwise secured or his interest in the business reduced. Furthermore it was contended that the release of Mr and Mrs Chapman by NAB and the assignment from NAB to Allregal was to effectively "gut" the guarantee arrangement. The loss of the Port Bouvard property as security they contend clearly operated to the detriment of the co‑sureties because the securities which would have been available to them as a means of enforcing their claim to contribution from another co‑surety was prima facie lost to them by reason of the release and discharge. That argument was advanced on the basis that the contractual position as between the guarantors and the bank is not to be assessed solely by reference to the express terms of the Guarantee but must also take into account the pre‑contractual negotiations and representations as a result of which it is argued that the express terms of the Deed of Guarantee and Indemnity are subject to a collateral warranty, or alternatively a collateral contract.
The law on application for summary judgment
It is accepted that the power to order summary judgment should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried; Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99. The criterion to be applied is that after the matter has been explained to the Court there must be real uncertainty without full argument or further investigation of the facts as to the plaintiff's right to judgment; Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332 at 335. Furthermore, the procedure is not confined to cases which are immediately plain and obvious and the fact that a transaction is intricate does not disentitle the plaintiff to relief in a clear case; Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91.
Seaman in the Supreme Court Civil Procedure in his commentary at par 14.3.1 and following, deals with the principles to be applied with respect to an application of this nature and without repeating them I simply adopt and apply those principles as are there stated.
Condition precedent ‑ an express or implied term
Mr and Mrs Ghirardi plead that the maintenance of the specific security given to NAB by Mr and Mrs Chapman (namely mortgage over the Port Bouvard property) was an express or implied term of the Deed of Guarantee and Indemnity. Insofar as the term is implied Mr and Mrs Ghirardi rely upon the circumstances in which they entered into the Deed of Guarantee and Indemnity. In their affidavits opposing the application for summary judgment they have detailed the course of various communications and discussions which ultimately led to execution of the documentation.
First it has to be said that there is no express term to be found in the Deed of Guarantee to the effect contended for by Mr and Mrs Ghirardi. Secondly, the requirements for implication of terms were stated in the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363 at 376 where it was held that:
"…for a term to be implied the following conditions (which may overlap) must be satisfied:
(1)it must be reasonable and equitable;
(2)it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it;
(3)it must be so obvious that "it goes without saying";
(4).it must be capable of clear expression;
(5)it must not contradict any express term of the contract."
In their defence Mr and Mrs Ghirardi rely, in the alternative, upon those conditions as being present and sufficient to grant the implication of the condition precedent into the contract of guarantee. I fail to see how that contention can be maintained when one considers the purported condition precedent in the context of the stated conditions and having regard to the express terms of the guarantee. The assertion made on behalf of Mr and Mrs Ghirardi as to the implied term cannot on any interpretation satisfy conditions (2), (3) and (5) referred to as above. It is directly contradictory to certain of the provisions of the guarantee. Clause 3(a) of the Deed of Guarantee and Indemnity provides:
3.You acknowledge that:
(a)all the terms and conditions of this Guarantee and Indemnity are set out in these provisions;
…"
Furthermore cl 13.2(c)(ii) of the Guarantee provides as follows:
"13.2Your obligations under this Guarantee and Indemnity are not affected by anything that might otherwise affect them under the law relating to sureties, including;
…
(c)The fact in relation to any amounts which the customer owes the bank or any security guarantee or indemnity for them, the bank:
(i)…
(ii)gives up, releases, varies or exchanges or fails to obtain, perfect, register or realise, or deals in any other way with any security guarantee or indemnity; or
(iii)grants time or any other concession to, or compounds or compromises with, or does or omits to do anything which affects the obligation of, a customer, a co‑surety or any other person to the bank or to you…"
The express terms of the guarantee leave no room for the implied term alleged by Mr and Mrs Ghirardi. It would be a contradiction to the express terms of the guarantee for such a condition precedent as contended to be implied.
Mr and Mrs Ghirardi further contend in par 3(c) of their defence that NAB (and any purported lawful assignee) was under an equitable duty to maintain all securities for their benefit as well as their co‑guarantors under the guarantee such that they would be available for each of the co‑sureties to share in the benefit of that security in the event of a claim being made under the guarantee by the bank (or its assignee). The fact is however that the guarantee does not contain any reservation of rights clause for the benefit of any guarantor in the event that a co‑guarantor was released. The continued existence of a co‑guarantor or of the maintenance of any security given by a co‑guarantor was not expressed to be a condition of the guarantee. In fact the contrary is the case in that the guarantee specifically provides that a guarantor continued to be liable even if any co‑guarantor stops being liable or was discharged from being liable (cl 4.1(d) of the Deed of Guarantee and Indemnity). Nor does the guarantee require NAB to transfer to any assignee of the guarantee the benefit of any security that it may hold. Again the contrary is specifically indicated (cl 26).
Despite what Mr and Mrs Ghirardi now say, with the benefit of hindsight, they must be taken to have been fully aware of the nature and effect of the Guarantee when they signed it. That was explained to them by a solicitor independent of NAB and they signed a Certificate of Acknowledgment to that effect.
Conclusion
I conclude that the relationship between NAB and the guarantors is unaffected by anything which the guarantors may have agreed between themselves under the terms of the Deed on Securities upon which Mr and Mrs Ghirardi rely. The principle of nemo dat qui non habet relied upon by counsel for Mr and Mrs Ghirardi does not in any way operate to constrain NAB from its right to release Mr and Mrs Chapman or discharge the mortgage. The question of contribution amongst the various guarantors is a separate issue and not one to be confused with the right of Allregal to seek to recover the full amount of the debt which is owing. To that end I am satisfied that the admissions made and information before the Court on the hearing of this appeal allows me to find:
1.NAB agreed to and did advance moneys to Ghirardi Restaurant Pty Ltd and No Salt Required Pty Ltd trading as Lawless and Chapman.
2.Mr and Mrs Ghirardi and others guaranteed that advance.
3.NAB validly assigned the debt and benefit of the guarantee to Allregal.
4.Notice of the assignment as required by s 20 of the Property Law Act was given.
5.Allregal, as it was entitled to do without default, made demand on Ghirardi Restaurant Pty Ltd.
6.Ghirardi Restaurant Pty Ltd defaulted in payment.
7.Allregal validly made demand on Mr and Mrs Ghirardi as guarantors.
8.Mr and Mrs Ghirardi have defaulted in payment.
It is clear in those circumstances that there is no real question to be tried. Accordingly I am satisfied that Allregal should be entitled to summary judgment against Mr and Mrs Ghirardi.
Other matters
In submissions dated 28 August 2000 in opposition to the appeal Mr and Mrs Ghirardi raised further issues which were not canvassed to any extent by their counsel on the hearing. None of these matters are raised in the defence and counterclaim of Mr and Mrs Ghirardi. For the sake of completeness I will briefly dispose of those matters.
First it is contended that the circumstances of the dealings by Mr Ghirardi with an employee of NAB prior to the guarantee being executed was arguably capable of being characterised by a court as involving misleading or deceptive conduct contravening s 52 of the Trade Practices Act 1974 (C'th).
Part V of the Trade Practices Act which includes s 52 does not apply to the supply or possible supply of services that are financial services. "Financial services" has the same meaning as in Division 2 of Part II of the Australian Securities and Investment Commission Act 1989. A financial service consists of providing a financial product which means, inter alia, a security, which is the case here. Hence s 52 does not apply to this dealing. Further Mr and Mrs Ghirardi contend that the facts raised by them are capable of sustaining an arguable case of unjust or unconscionable conduct by reason of their having been placed at a serious disadvantage by NAB. Reliance is had on s 51AB of the Trade Practices Act. Suffice to say that s 51AAB of the Trade Practices Act provides that s 51AB does not apply to the supply or possible supply of services that are financial services.
A further issue raised, but not argued on the appeal, was whether NAB properly discharged its obligations as a credit provider in terms of the Credit Act 1984 (WA) and Credit (Regulation of Loan Contracts) Regulations 1993. The substantive provisions of the Act do not apply with respect to the provision of credit by a bank where the credit is provided by way of overdraft or otherwise than by way of a credit sale contract, continuing credit contract or term loan (s 18(2)). The Act is not relevant to the circumstances at hand.
0
7
7