Australian Regional Wholesalers Pty Ltd v Gardiner
[2014] WASC 439
•27 NOVEMBER 2014
AUSTRALIAN REGIONAL WHOLESALERS PTY LTD -v- GARDINER [2014] WASC 439
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2014] WASC 439 | |
| Case No: | CIV:2870/2013 | 12 & 13 NOVEMBER 2014 | |
| Coram: | CHANEY J | 27/11/14 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Judgment for plaintiff | ||
| B | |||
| PDF Version |
| Parties: | AUSTRALIAN REGIONAL WHOLESALERS PTY LTD DAMIAN JOHN GARDINER ANTONIO MARTELLI |
Catchwords: | Guarantees Proper Construction Evidence of circumstances in which guarantees executed Whether admissible as aid to construction Whether guarantee a deed Whether consideration given for guarantee Description of consideration ambiguous Whether guarantee limited |
Legislation: | Corporations Act 2001 (Cth) Property Law Act 1969 (WA) Supreme Court Act 1935 (WA) |
Case References: | Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549 Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 Dean & Westham Holdings Pty Ltd v Lloyd [1992] ANZ ConvR 278; (1991) 3 WAR 235 DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25 Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29 International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986]WAR 310 Netglory Pty Ltd v Caratti [2013] WASC 364 Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Smith v Chadwick (1882) 20 Ch D 27 Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
DAMIAN JOHN GARDINER
First Defendant
ANTONIO MARTELLI
Second Defendant
Catchwords:
Guarantees - Proper Construction - Evidence of circumstances in which guarantees executed - Whether admissible as aid to construction - Whether guarantee a deed - Whether consideration given for guarantee - Description of consideration ambiguous - Whether guarantee limited
Legislation:
Corporations Act 2001 (Cth)
Property Law Act 1969 (WA)
Supreme Court Act 1935 (WA)
Result:
Judgment for plaintiff
Category: B
Representation:
Counsel:
Plaintiff : Mr A P Hershowitz
First Defendant : Ms P A Martino
Second Defendant : Ms P A Martino
Solicitors:
Plaintiff : Polczynski Lawyers
First Defendant : PA Martino Barrister & Solicitor
Second Defendant : PA Martino Barrister & Solicitor
Cases referred to in judgment:
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337
Dean & Westham Holdings Pty Ltd v Lloyd [1992] ANZ ConvR 278; (1991) 3 WAR 235
DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423
Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29
International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151
Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986]WAR 310
Netglory Pty Ltd v Caratti [2013] WASC 364
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Smith v Chadwick (1882) 20 Ch D 27
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
- CHANEY J:
Introduction
1 The plaintiff, Australian Regional Wholesalers Pty Ltd (ARW), carries on a business of wholesale sales of goods. The sale of electrical goods is carried on through a division of its business known as Electrical Industrial Wholesalers (EIW).
2 From time to time since at least 2003, Global Electrotech Pty Ltd (Global) purchased goods on credit from ARW. The first defendant, Damien John Gardiner, and the second defendant, Antonio Martelli, are directors of Global, and have been since 2003.
3 On 21 October 2011, each of Mr Gardiner and Mr Martelli executed a document entitled 'guarantee and indemnity' in favour of ARW (the October guarantees). On 9 November 2011, Global applied for credit with ARW by signing a document entitled 'application for credit account' (credit application). Goods were subsequently supplied on credit by ARW and paid for by Global up until November 2012. Between 9 November 2012 and 5 April 2013, ARW sold and delivered goods on credit to Global in response to orders by or on behalf of Global with a total value of $737,395.62. Global failed to make any payments to ARW in relation to those goods.
4 In these proceedings, ARW claims that Mr Gardiner and Mr Martelli are liable under the October guarantees to pay the sum of $737,395.62 together with certain legal fees incurred by ARW which it says are payable under the October guarantees. It also claims interest, pursuant to s 32 of the Supreme Court Act 1935 (WA), at the rate of 6% per annum on $737,395.62 from 6 June 2013 to the date of the issue of the writ (12 December 2013) and on the sum of $755,076.60 (being the total claim including legal costs payable under the guarantee) from 12 December 2013 until judgment.
5 The defendants deny that they are liable to pay the amounts claimed. That denial is based on four propositions. The defendants expressed those propositions as follows:
(i) the October guarantees are not deeds;
(ii) the October guarantees are not enforceable as agreements because there was no consideration as at 21 October 2011;
(iii) the October guarantees are not continuing guarantees and therefore do not apply to the transactions the subject of the claim, being transactions between the period 9 November 2012 to April 2013;
(vi) alternatively, the conduct of ARW in increasing the credit limit of Global's account had the effect of altering Mr Gardiner and Mr Martelli's rights as guarantors in a substantial and prejudicial way with the result that they are discharged from their obligations as guarantors.
6 It emerged during trial that, in substance, the third proposition set out above was that the guarantee was limited to an amount of $75,000, being the amount which Global specified as the credit limit on the credit application. The fourth proposition rested on the assumption that the guarantee was limited in that way.
7 On the pleadings, there was also an issue as to whether any liability on the part of the defendants was reduced because of the anticipated receipts from a creditors trust established under a deed of company arrangement they entered into as a result of the appointment of administrators to Global pursuant to s 436A of the Corporations Act 2001 (Cth). That issue was not pursued by the defendants at trial.
8 Very few facts were in issue at trial, and it is convenient to set out the relevant facts in the context of dealing with each of the issues for determination.
Are there October guarantees deeds?
9 ARW pleads that, on 21 October 2011, the first defendant and the second defendant each signed a 'deed of guarantee and indemnity' in respect of the obligations of Global to ARW. The defendants deny that the October guarantees were executed as deeds. The significance of this issue is that, if the October guarantees were executed as deeds, then the issue as to whether they were supported by consideration from ARW falls away. If they were not executed as deeds, but were agreements of guarantee, then they must be supported by consideration.
10 The October guarantee executed by Mr Gardiner reads as follows:
GUARANTEE AND INDEMNITY
To: Australian Regional Wholesalers Pty Ltd, ABN 59 011 009 064 which expression shall include their assigns, namely Electrical Industrial Wholesale ("EIW")
In consideration of EIW at the request of:-
Damian John Gardiner of 14 Whitewater Lookout ILUKA WA 6028
(referred to herein as "the Guarantor") having supplied and/or agreed to supply from time to time hereafter goods and/or services (herein referred to as "Goods and Services") to the customer listed in the Schedule hereto ("the Customer"), the Guarantor hereby agrees with EIW as follows:
1. The Guarantor guarantees to EIW the payment to EIW by the Customer of all amounts which may at any time be due and owing by the Customer to EIW on any account whatsoever in respect of Goods and Services purchased by the Customer from EIW from time to time (including any amounts due and owing in respect of Goods and Services purchased prior to the date of this Guarantee) and, in the event of the Customer failing to pay EIW all such amounts as and when they fall due, the Guarantor shall pay the same to EIW.
2. This Guarantee shall be a continuing Guarantee for the whole debt which may from time to time be owing by the Customer to EIW in respect of Goods and Services purchased as aforesaid. This Guarantee may (subject as hereinafter provided) be revoked by the Guarantor at any time as to future transactions only, by not less than fourteen days written notice to that effect given to EIW. No such notice of revocation shall be effective unless and until receipt thereof is acknowledged in writing by EIW, which EIW undertakes to do promptly upon receipt of the notice.
...
10. Each Guarantor executing this Guarantee and Indemnity shall be jointly and severally liable to EIW hereunder.
11 It is not necessary to set out the remaining paragraphs 3 to 9 of the document which are not material for present purposes. Paragraph 9 was deleted by Mr Gardiner at the time of execution, and I will set out the contents of that paragraph in the context of dealing with the issue of whether or not the October guarantees were limited guarantees. The deletion of the word 'continuing' in cl 2 was initialled by Mr Gardiner.
12 The attestation section of guarantee reads:
IN WITNESS WHEREOFthe Guarantor has executed this Guarantee and Indemnity this 21 day of October 2011.
Guarantor D Gardiner (signature)
Witness A Martelli (signature)
Witness name Antonio Martelli
Address 103 Brandon Street
Kensington WA 6151
14 The defendants contend that the October guarantees are not deeds because:
(i) they are not expressed as deeds;
(ii) they do not comply with s 9 of the Property Law Act 1969 (WA) in that they have not been witnessed by a person who is not a party to the October guarantees.
15 ARW contends that the attestation clause supports the conclusion that the parties intended to execute the October guarantees as deeds.
16 No particular form of words is necessary to constitute an instrument as a deed.1 The formal requirements of a deed are set out in s 9 of the Property Law Act which provides:
9. Formalities of deed
(1) Every deed, whether or not affecting property -
(a) shall be signed by the party to be bound thereby; and
(b) shall be attested by at least one witness not being a party to the deed but no particular form of words is required for the attestation.
(2) It is not necessary to seal any deed except in the case of a deed executed by a corporation under its common or official seal.
(3) Formal delivery and indenting are not necessary in any case.
(4) Every instrument expressed or purporting to be an indenture or a deed or an agreement under seal or otherwise purporting to be a document executed under seal and which is executed as required by this section has the same effect as a deed duly executed in accordance with the law in force immediately prior to the coming into operation of this Act.
18 The reference to consideration, and the words 'the Guarantor hereby agrees with EIW' are suggestive of an agreement. Such indicia are not conclusive - see Dean & Westham Holdings Pty Ltd v Lloyd. However, that case concerned a document which would have been ineffective if not executed as a deed. In this case, the guarantee could clearly operate as an agreement so that the intention of the parties cannot be ascertained on the basis that they must have intended to give efficacy to the document by executing it as a deed.
19 The defendants also submit that the October guarantees do not comply with s 9 of the Property Law Act because they were not attested by a witness who was not a party to the document. This contention relies upon the proposition that the documents signed by Mr Gardiner and Mr Martelli respectively were, in substance, a single transaction.
20 In support of that contention, the defendants note (and I find), that the October guarantees are in identical terms (apart from one referring to Mr Gardiner and the other referring to Mr Martelli), they contain identical amendments (save that Mr Martelli also initialled the deletion of cl 9), they were executed contemporaneously and they were delivered together to ARW.
21 The defendants assert that the October guarantees are contemporaneous documents in the sense explained by Jessel MR in Smith v Chadwick3 where his Honour said:
… The doctrine as to contemporaneous documents rests on this, that when documents are actually contemporaneous, that is, two deeds executed at the same moment, a very common case, or within so short an interval that having regard to the nature of the transaction the Court comes to the conclusion that the series of deeds represents a single transaction between the same parties, it is then that they are all treated as one deed; and, of course, one deed between the same parties may be read to shew the meaning of a sentence, and be equally read, although not contained in one deed, but in several parchments, if all the parchments together in the view of the Court make up one document for this purpose.
22 Clause 10 of the October guarantees provides that each guarantor executing the guarantee and indemnity shall be jointly and severally liable. The defendants contend that that clause demonstrates that the two October guarantees are intended to be read together. That contention is supported by the evidence of Mr Carl Swann, ARW’s regional credit manager, whose responsibility it was to obtain the guarantees and oversee Global's credit account. He was responsible for the preparation of the October guarantees, which were in a standard form used by ARW. When asked about cl 10 he said that the clause was in the guarantees because Mr Martelli and Mr Gardiner were the guarantors.4
23 Notwithstanding that the October guarantees were in the form of separate documents executed by each of Mr Martelli and Mr Gardiner, they were, in my view, components of a single guarantee transaction. Clause 10 has no work to do if the individual documents have a separate operation. The fact that it would be open to ARW to pursue either guarantor separately on the basis of a separate document executed by that guarantor does not lead to a different conclusion. Even if, as a matter of form, both Mr Martelli and Mr Gardiner had both been named as joint and several guarantors in a single document, it would be open to ARW to pursue either of them separately.
24 As Edelman J observed in Netglory Pty Ltd v Caratti5 , s 9(1) of the Property Law Act is mandatory in its terms. A document which does not meet the requirements of that subsection is not a valid deed. Given my conclusion that the document signed by each of Mr Gardiner and Mr Martelli were components of a single transaction, they were not attested by a witness who was not a party to the transaction, and were thus not deeds.
25 It is thus necessary to consider whether the October guarantees were effective as agreements for consideration.
Was there consideration?
26 The October guarantees recite that the guarantee is provided in consideration of EIW, at the request of the guarantor, 'having supplied and/or agreed to supply from time to time hereafter goods and/or services'. It is common ground that, as at the date of execution of the October guarantees, namely 21 October 2011, EIW had not in fact supplied goods to Global (that is, any goods for which payment was outstanding). The defendants' case is that, as at 21 October 2011, ARW had not agreed to supply goods. They contend that no agreement to supply goods came into existence until such time as the credit application was accepted, that being when ARW accepted the first order for the supply of goods on credit after the credit application was delivered to ARW on 9 November 2011. ARW's records show that that occurred on 28 November 2011. The defendants contend that the use of the past tense - 'having ... agreed to supply' requires that, in order for there to have been any consideration moving from ARW at the time of the agreement to guarantee, there needed to be in existence an agreement to supply goods in the future. In the absence of that consideration, they contend that no enforceable agreement exists.
27 It is clear from the evidence of Mr Swann, and from the evidence of each of the defendants, that there were discussions in September 2014 between representatives of ARW, and Mr Gardiner, about a resumption of the supply of goods by ARW to Global. There is a conflict between the evidence of Mr Swann and that of Mr Gardiner as to whether or not the discussions occurred in a meeting or by telephone. It is not necessary to resolve that conflict, because the relevant substance of the discussions was not in issue. The discussions occurred against a background which is revealed in the statement of agreed facts submitted by the parties. That background was that, prior to November 2010, ARW had supplied goods and services to Global, and, at that date, Global owed slightly in excess of $300,000 to ARW. That sum remained unpaid for some months, until 7 June 2011, when ARW and Global, through Mr Gardiner, reached an agreement that ARW would allow Global to repay their debt by instalments of $25,000 per week subject to a guarantee and indemnity being provided by Mr Gardiner and Mr Martelli. On 9 June 2011, each of Mr Gardiner and Mr Martelli executed a document entitled guarantee and indemnity in favour of ARW in relation to the outstanding debt. By 30 August 2011, Global had paid the debt owing to ARW. It was against that background that the discussions as to a resumption of the supply of goods were held.
28 Mr Swann said that, in those discussions, he said words to the effect that, for Global to recommence trading with ARW, ARW would require that the financial accounts of Global be provided to ARW to consideration, and that both Mr Gardiner and Mr Martelli would be required to provide personal guarantees in respect of the account. Mr Gardiner accepted that it was made 'expressly clear' to him that if there was going to be a resupply of goods by ARW, there would have to be guarantees given by himself and Mr Martelli, and that if guarantees were not signed to satisfy that requirement, there would be no supply.6
29 Mr Martelli was asked whether he was aware that ARW would not enter into a new trade arrangement unless he secured the supply. He answered, 'Well, no one does unless you have got some sort of credit application or some sort of guarantee in place. Yes.'7
30 I find that ARW stipulated through Mr Swann, and Mr Gardiner and Mr Martelli both knew and understood, that the resupply of goods on credit would only be undertaken by ARW if the supply was secured by guarantees. The question is whether the October guarantees are to be construed having regard to that context. The plaintiff contended that the description of ARW's consideration for the guarantees, taken in the context of the commercial purpose of the guarantees, encompassed future agreements to supply goods. To the extent of any ambiguity in that respect, the plaintiff contended that the words should be construed having regard to the circumstances in which the guarantees came to be executed.
31 The defendants contended that the description of the consideration was unambiguous, and that evidence of discussions leading to the execution of the October guarantees could not be used to construe those words. They contended that, having regard to the observations in Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd,8 it is open to have regard to the legal context of the documents, namely that there is a special rule concerning guarantees that the liability of a surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety.9
32 It is clear that the words in question must be construed in the context of the document as a whole. The operative provision in cl 1 guarantees payment of 'all amounts which may at any time be due and owing by the Customer to EIW on any account whatsoever in respect of' goods purchased by Global.
33 Counsel for the defendants accepted that, in the ordinary commercial context of the supply of goods from time to time on credit, an agreement to supply goods is made at the time that an order for goods is accepted by supply of those goods. It is only when an order is received that the goods to be supplied pursuant to an agreement to supply can be identified. That is the way that the arrangement between ARW and Global proceeded after November 2011.
34 Evidence of the surrounding circumstances is admissible to assist in the interpretation of a contract if the language is ambiguous or susceptible to more than one meaning.10 In Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd,11 McLure P said:
The word 'ambiguous', when juxtaposed by Mason J with the expression 'or susceptible of more than one meaning', means any situation in which the scope or applicability of a contract is doubtful: Bowtell v Goldsbrough, Mort & Co Ltd (1905) 3 CLR 444 at 456 - 457. Ambiguity is not confined to lexical, grammatical or syntactical ambiguity.
35 Even apart from the existence of ambiguity, the evidence of the genesis and objective aim of the transaction is admissible as one of the recognised limitations or exceptions to the parol evidence rule. The court may admit evidence of the genesis or objective aim of a transaction to show that the application of a strict interpretation might make a transaction futile.12 In this case, to construe the description of the consideration as a reference to an existing agreement to supply goods in the future, when it was known to all parties at the time the agreement was executed that no such agreement was in place would be to render the guarantee futile. On that basis as well, the evidence of the circumstances in which the contract came to be made, and as to the purpose for which the guarantee was executed is admissible as to the construction of the document.
36 It is clear that the commercial purpose of a contract, the genesis of the transaction, and the context in which the parties were operating are circumstances relevant to the construction of a contract. Statements to that effect were the most recently found in Electricity Generation Corp (t/as Verve Energy) v Woodside Energy Ltd13 where, citing a number of authorities including Pacific Carriers Ltd v BNP Paribas,14Codelfa Construction Pty Ltd v State Rail Authority (NSW),15Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd,16International Air Transport Association v Ansett Australia Holdings Ltd,17 French CJ, Hayne, Crennan and Kiefel JJ said:
Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties … intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.
37 In my view, in the context of the words of cl 1 of the guarantee, which contemplates a guarantee operating in relation to future agreements to supply goods, there is ambiguity in the relevant sense in the expression 'having supplied and/or agreed to supply from time to time hereafter ...'. In those circumstances, it is open to have regard to the evidence as to the circumstances in which the guarantees came to be executed.
38 In the context of the ordinary commercial arrangement contemplated by ARW and Global for the ongoing supply of goods on credit, the words 'agreed to supply from time to time heareafter' should be construed as referring to agreements made from time to time after execution of the October guarantees. That construction is not only consistent with what was the clear understanding of the parties, it is also necessary to give the guarantee efficacy.
Was the guarantee limited?
39 The defendants contend that, if the October guarantees were enforceable as agreements, then they are limited only to the amount of $75,000. That limitation is said to arise because Mr Gardiner and Mr Martelli inserted the figure of $75,000 as the 'credit limit required' on the credit application and deleted the word 'continuing' from cl 2 and deleted the whole of cl 9 of the October guarantees. The defendants' position on that limitation was put in different ways during the course of the trial. In the written submissions filed before trial, the defendants said that the October guarantees 'were only to apply to the first transaction to the limit of $75,000'. Initially in opening, counsel for the defendants indicated that the defendants' case was that as soon as the first $75,000 worth of transactions had been paid for, the guarantee would cease to have effect'.18 Subsequently in opening, that position was revised so that it was said that, if there was an enforceable guarantee, it was a continuous guarantee limited to $75,000.19 In closing, that position was, in essence, confirmed.
40 The defendants' contentions on this point are untenable. There are several reasons before that.
41 The first is that there is no evidence that any intended limitation on the guarantee was communicated to ARW. The October guarantees were executed and sent to ARW shortly after execution. Before supply could commence, ARW required a credit application to be submitted. It was completed and sent to ARW on 9 November 2011. I accept that the required credit limit figure of $75,000 was inserted by Mr Gardiner. Whatever may have been his subjective intention specifying that limit, he did not communicate to ARW any connection between that figure and the guarantee.
42 Secondly, the construction of the October guarantees contended for by the defendants is inconsistent with the plain wording of the documents. The difficulty which the defendants' counsel had in explaining how the limitation would operate illustrates the impossibility of rewriting the plain words of the cl 1 and cl 2 of the October guarantees to accommodate the alleged limit on liability.
43 Thirdly, the evidence of Mr Gardiner and Mr Martelli as to their intentions in deleting the word 'continuing' from cl 2, is somewhat unclear. Mr Gardiner said that he was concerned that the guarantee was open-ended because it did not state a figure for which he and Mr Martelli would be responsible, unlike the guarantee which he had signed in June 2011. Crossing out the word 'continuing' would not have addressed that concern. It appears that Mr Gardiner's principal concern arose from the fact that he and Mr Martelli had previously had a business which they sold, but in respect of which they were later liable for the business' debts after the sale because they had given continuing guarantees for the business. That would appear to have been the potential problem which he sought to address by deleting the word 'continuing'. In fact, that problem could have been avoided by revocation as to future transactions pursuant to cl 2 regardless of whether or not the word 'continuing' was deleted. It is not possible to derive from the deletion of 'continuing' a limitation on the guarantee to $75,000.
44 Fourthly, the deletion of cl 9 cannot carry with it, either alone or in conjunction with the deletion of 'continuing', a construction of the guarantee which limits its operation to $75,000. Clause 9 provided: 'The Guarantor hereby waives and relinquishes all rights or suretyship [sic] inconsistent with any of the provisions of this Guarantee and Indemnity.' Whatever Mr Gardiner and Mr Martelli's uncommunicated intentions might have been in deleting that clause, it cannot be construed as imposing a limit on the guarantee by reference to the subsequent specification of a credit limit in the credit application.
45 It may well have been that Mr Gardiner and Mr Martelli intended that they should limit their exposure under the guarantee to $75,000. That was a matter entirely within their control. As directors of the company, there is no reason why they could not have put in place processes to ensure that no more than $75,000 worth of goods were supplied on credit, simply by limiting the orders for goods placed with ARW. It is no answer to say that they did not personally place orders which were the responsibility of project managers in what was a relatively large organisation.
46 I find that the October guarantees operated in accordance with their terms, and were not subject to any limitation by reference to the credit application or otherwise.
Did ARW's conduct have the effect of discharging the guarantors?
47 The defendants' fourth answer to the claim is based upon a proposition drawn from Ankar Pty Ltd v National Westminster Finance (Australia) Ltd20 where Mason ACJ, Wilson, Brennan and Dawson JJ said:
According to the English cases, the principle applies so as to discharge the surety when conduct on the part of the creditor has the effect of altering the surety's rights, unless the alteration is unsubstantial and not prejudicial to the surety. The rule does not permit the courts to inquire into the effect of the alteration. The consequence is that, to hold the surety to its bargain, the creditor must show that the nature of the alteration can be beneficial to the surety only or that by its nature it cannot in any circumstances increase the surety's risk ... .
48 As indicated earlier, this contention is based upon the assumption that the guarantee was limited a credit limit of $75,000, and the subsequent extension of credit beyond that limit substantially altered the liability under the guarantee. Having regard to my conclusion that there was no such limit on the guarantee, the fact that the balance of Global's account with ARW increased over time did not alter the surety's rights or risks. The guarantee extended to all the monies due as a result of goods supplied by ARW to Global. The principle as described in Ankar has no application to the facts of this case.
Conclusion
49 For those reasons, the plaintiff is entitled to judgment in the sum claimed. That includes the legal costs claimed which counsel for the defendants accepted were properly recoverable under the guarantee if it was not subject to the limitation for which the defendants contended. It is also entitled to interest pursuant to s 32 of the Supreme Court Act as claimed.
1Dean & Westham Holdings Pty Ltd v Lloyd [1992] ANZ ConvR 278; (1991) 3 WAR 235, 251 (Ipp J); Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986]WAR 310, 353 - 354 (Kennedy J).
2Dean & Westham Holdings Pty Ltd v Lloyd [1992] ANZ ConvR 278; (1991) 3 WAR 235, 252 (Ipp J).
3Smith v Chadwick (1882) 20 Ch D 27, 62 - 6 (Jessel MR).
4 ts 39 (12 Nov 2014).
5Netglory Pty Ltd v Caratti [2013] WASC 364 [99].
6 ts 72 (12 November 2014).
7 ts 105 - 106 (12 November 2014).
8Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 [45] (McLure P, Newnes JA agreeing), [150] (Murphy JA).
9Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549, 561 (Mason ACJ, Wilson, Brennan & Dawson JJ).
10Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, 352 (Mason J).
11Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29 [77].
12DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, 429; Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 [177] (Murphy JA).
13Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7; (2014) 306 ALR 25 [35].
14Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, 462 [22].
15Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337.
16Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179 [40].
17International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151, 160 [8], [53].
18 ts 62 (12 November 2014).
19 ts 64 (12 November 2014).
20Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549, 559.