Allregal Corporation Pty Ltd v Ghirardi

[2000] WADC 130

JURISDICTION     :   DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION:   PERTH

CITATION:   ALLREGAL CORPORATION PTY LTD -v- GHIRARDI & ANOR [2000] WADC 130

CORAM:   DEPUTY REGISTRAR HEWITT

HEARD:   16 MAY 2000

DELIVERED          :   30 MAY 2000

FILE NO/S:   CIV 343 of 2000

BETWEEN:   ALLREGAL CORPORATION PTY LTD (ACN 090 571 350)

Plaintiff

AND

PATRICK JOHN GHIRARDI
First Defendant

JOANNE ELIZABETH GHIRARDI
Second Defendant

(BY ORIGINAL ACTION)

RODNEY JOHN CHAPMAN
First Third Party

ELIZABETH MARY CHAPMAN
Second Third Party

BRUCE ALEXANDER CHAPMAN
Third Third Party

IAIN LAWLESS
Fourth Third Party

(BY COUNTERCLAIM)

PATRICK JOHN GHIRARDI
First Plaintiff

JOANNE ELIZABETH GHIRARDI
Second Plaintiff

AND

ALLREGAL CORPORATION PTY LTD (ACN 090 571 350)
Defendant

Catchwords:

Practice - Western Australia - Summary judgment - Assignee suing guarantors on debt - Whether debt due - Whether release of some guarantors and discharge of mortgage affected plaintiff's rights

Legislation:

Nil

Result:

Application dismissed

Representation:

Counsel:

Plaintiff:     Mr R A S Rowick

First Defendant             :     Mr R McCormack

Second Defendant         :     Mr R 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 McCormack

Second Plaintiff            :     Mr R McCormack

Defendant:     Mr R A S Rowick

Solicitors:

First Plaintiff                :     Paynes

Second Plaintiff            :     Paynes

Defendant:     Bennett & Co

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

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

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1981-1982) 149 CLR 337

D T R Nominees Pty Ltd v Mona Homes Pty Ltd (1977-1978) 138 CLR 423

Dey v Victorian Railways Commissioners (1949) 78 CLR 62

Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87

Gillon & Ors v Kyle, unreported; FCt SCt of WA; Library No 9123; 16 October 1991

Jacobs v Booth's Distillery Co (1990) 85 LT 262

Scholefield Goodman and Sons Ltd v Zyngier [1986] 1 AC 562

The Fletcher Organisation Pty Ltd v Crocus Investments Pty Ltd (1988) 2 Qd R 517

Webster v Lampard (1993) 177 CLR 598

Williams v Frayne (1937) 58 CLR 710

1. DEPUTY REGISTRAR HEWITT:  In this action the plaintiff has applied for a summary judgment by a chamber summons filed on 25 February 2000 which was argued before me in a special appointment on 16 May 2000.

2. The plaintiff's claim arises under the terms of a Deed of Assignment entered between it and the National Australia Bank by which the Bank assigned to the plaintiff a debt owed by a partnership described in the document as Lawless and Chapman together with the benefit of the guarantees in respect of that debt.  Those guarantees are contained in a document executed by the parties on 23 July 1998.  Under the terms of that document various named individuals and companies are constituted guarantors of the monies advanced by the Bank to the partnership.  For some reason which I am unable to fully understand, the entities which conducted the partnership are also named as guarantors but excluding those companies, the guarantors were Patrick John Ghirardi, Iain Lawless, Bruce Alexander Chapman, Rodney John Chapman, Elizabeth Mary Chapman and Joanne Elizabeth Ghirardi.  Under the terms of the assignment from the Bank to the plaintiff, there are provisions releasing Rodney and Elizabeth Chapman from the liabilities and obligations under the guarantee and discharging a mortgage over certain land which had been provided as a security for the borrowings of the partnership for a consideration of $100.

3. Notice of the assignment has been given by the Bank and by the plaintiff by notices respectively dated 30 December 1999 and 4 February 2000, and demand was made on each of the defendants by a letter on the later date by the solicitors for the plaintiff demanding payment of the sums said to be due to the plaintiff (as assignee) by the defendants (as guarantors) under the terms of the arrangement which had been put in place.

4. In analysing the position, I think it is axiomatic to say that the assignee cannot be in a better position, vis-a-vis the defendants, than the Bank could have been and therefore I turn to the provisions within the original guarantee agreement to see the basis upon which the guarantors could be called upon to honour of the guarantee.  The relevant provisions are those contained in par 6.1 of the guarantee which appears as an exhibit to the affidavit of Rodney John Chapman sworn 25 February 2000.  That paragraph is expressed in the following way:

   "You guarantee that the customer will pay the bank all the amounts which the customer owes the bank at any time.  You agree to pay the bank any of those amounts in respect of which the customer is at any time in default, up to the basic liability as at time the bank demands that you pay them to the bank."

5. The basic liability is not a matter of immediate concern in the context of this application but effectively is the sum of $150,000 together with some incidentals and interest and so forth.  An important point to emerge from this is that as a matter of construction it appears to me that the guarantors can only be called upon to honour the terms of their guarantee in the event that the customer is in default.  Following from that analysis it is necessary to understand the basis upon which the Bank loaned the monies to the customer (ie Lawless and Chapman).  On that score there is no information before me to indicate the terms of the contract which existed between the Bank and the customer.

6. A demand has been made of one of the companies which was a partner in the partnership of Lawless and Chapman by way of a letter dated 5 January 2000 addressed to Ghirardi Restaurant Pty Ltd.  No demand appears to have been made to the other partners.  The date of demand is significant because according to the affidavit of Mr Chapman the assignment of the debt took place on 3 February 2000 (par 11).  Notice of the assignment was given by the Bank on 30 December 1999 but would have been ineffective since an assignment had not taken effect, and by the plaintiff, by notice dated 4 February 2000 which was subsequent to the letter of demand to the company.  All in all the position is somewhat confusing and whether or not any demand has been properly made is debateable.  What is also debateable is whether or not the assignee was in a position to make a demand since the terms of the advance by the Bank to the partnership are unknown and it cannot be said on the basis of the information presented to support this application that the Bank would have been able to properly demand full payment of the monies due and to enforce the guarantee by these defendants in the event that default was made in doing so.

7. For those reasons alone it appears to me that there is a triable issue to the ventilated in this action and the plaintiff's summary judgment application should fail.

8. A great amount of effort however has been put into other issues which have been raised by the defendants in opposition to the summary judgment application and I shall deal with those.  The defendants rely, in raising a defence, upon a document which was executed between all the relevant parties which is entitled "Deed on Security for 57 Bayview Terrace, Claremont" dated 23 July 1998.

9. That Deed sets out the terms upon which the parties intended to collaborate to procure the necessary finance for the establishment of the restaurant business conducted in partnership and known as Lawless and Chapman.  It contain recitals which in part outline the requirements of the Bank for security for a proposed overdraft of $150,000.  Amongst those requirements is recited the fact that the Bank required a joint and several guarantee and indemnity from Rodney and Elizabeth Chapman (among others including the defendants), and a first registered mortgage over their property at Lot 126 Bindal Retreat, Cape Bouvard, Western Australia.

10. The Deed provided that the security by way of the mortgage should only operate as a security for a sum of $102,500 and in the event that the Bank made claim for an amount exceeding that sum, the other parties to the Deed would hold Rodney and  Elizabeth Chapman harmless to the extent of that excess.

11. It is argued by the defendants that the Deed precludes the assignee and the Bank from dealing with the Cape Bouvard mortgage in a manner inconsistent with the pre-existing obligation of Rodney John Chapman and Elizabeth Mary Chapman (first and second third parties respectively) and to the extent of the Deed of Assignment purports to override the Deed, it is invalid as a matter of law.

12. I am unable to see that the Deed which was entered between these parties has any bearing whatever on the rights of the National Australia Bank.  The Bank entered a contract with the guarantors which contains the following provisions:

    "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 that, in relation to any amounts which the customer owes the Bank or any security, guarantee, or indemnity from 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, the customer, a co-surety or any other person to the Bank or to you …"

13. In my opinion, the relationship between the Bank and the guarantors is entirely unaffected and cannot be affected by anything which they may have agreed between themselves under the terms of the Deed on Securities, upon which the defendant relies and the principle of nemo dat qui non habet relied upon by the defendant does not in any way operate to constrain the Bank from its right to release Mr and Mrs Chapman or discharge the mortgage.

14. In my view there cannot be any implied term in the Deed of Guarantee which would require the Bank or any assignee of its interest to maintain the mortgage since that is in contradiction to the express terms of the guarantee document and as a consequence, in my view, not available as a defence to the defendants.

15. The defendants' principal complaint is the fact that by entering the Deed of Assignment with a specific provision for discharge of Rodney John and Elizabeth Mary Chapman, the plaintiff (which appears to be a company on which they exert a considerable influence if not an absolute control) has purported to rearrange the rights of the guarantors to contribution amongst themselves to the effect that the first and second defendants would have to shoulder an unfair proportion of the debt and Mr and Mrs Chapman would have escaped without paying anything.

16. My view it is that the question of contribution amongst the various guarantors is a separate issue and it is not to be confused with the right of the plaintiff (assignee) to seek to recover the full amount of the debt which is owing.

17. I would have thought it to be fairly transparent that the reason that the partnership debt was settled by way of a Deed of Assignment to a company under the control of Mr and Mrs Chapman with a release of their obligations under the guarantee and a discharge of the mortgage was to pass the burden of the debt to other guarantors.  Were Mr and Mrs Chapman to have simply paid out the amount of the debt and sought contribution from the other guarantors then they would have inevitably remained liable for a proportion whereas with the arrangements that have been created there is some prospect they might escape.  Whether or not those arrangements affect the right of contribution between the parties remains to be seen.  It might be said that the arrangements are so patently unfair as to be susceptible to equitable intervention to undo them and to restore a fair balance.  That is a point which I need not consider at the present time and I merely deal with arguments which have been presented to me.  It is my view that the arguments which were aired before me by the defendants purely relate to the question of contribution between the various guarantors and do not impugn the plaintiff's claim.  As I have indicated I think there may be other arguments which could be successfully pursued but there is no point in looking at that matter further at this stage.

18. For the reasons to which I earlier adverted I find there is not sufficient information before me to establish that there has been a default by the customer under the terms of the arrangement with the Bank upon which the plaintiff is entitled to rely (as an assignee of the Bank's interests) to call up the guarantee.  For that reason I am of the view that the application should not succeed and I dismiss it.