JUDGE:	Ashley J
WHERE HELD:	Melbourne
DATE OF HEARING:	22, 23, 24, 25 February 1999
DATE OF JUDGMENT:	10 June 1999
CASE MAY BE CITED AS:	Benson-Brown v. Smith
MEDIA NEUTRAL CITATION:	[1999] VSC 208

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Guarantee – Disputed effect of execution provision – Whether rectification necessary, and available – Delay, laches and acquiescence – Whether principal debtor clause effective – Whether need for demand before commencement of suit – Certificate of indebtedness – Prima facie evidence of quantum – Operation of certificate in light of all the evidence.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M. Robins	Sam Holt & Co
For the Defendant	Ms C.H. Sparke	Nicholas O’Donohue & Co

HIS HONOUR:

Background and initial chronology

The plaintiff sues the defendant on a deed of guarantee and indemnity (the guarantee) dated 6 March 1997.

He claims $102,244.30 plus statutory interest (which he calculates to be $39,092.88).

It is not in dispute that Chiri Shelf Company No. 60 Pty Ltd (Chiri), a special purpose vehicle of which the defendant and a man named Wayne Spencer were in early 1997 directors and shareholders, at that time agreed to purchase from the plaintiff certain nightclub businesses, a hairdressing salon and a home unit in Perth. The purchase of the nightclub businesses was to involve the acquisition of shares in the operating entity - a company named Leisure Corporation of Australia Pty Ltd (Leisure Corp). The various businesses and Leisure Corporation operated in leased premises. The purchase agreement contemplated assignment of the leases.

The agreed purchase price was, or was in the vicinity of, $1,430,000. I do not imply, and it was not the case, that there was any lack of certainty as to the purchase price. The plaintiff agreed to provide $300,000 vendor finance. A loan agreement was drawn up by the plaintiff's then solicitors on the instructions of the plaintiff. Those instructions were, at least for the most part, given by the plaintiff to his accountant, Mr Towell; and relayed by Mr Towell to the solicitors - specifically, Mr Barry Woods. I note that at an earlier time the plaintiff said on affidavit that he had given instructions directly to Mr Woods. I am satisfied by the viva voce evidence I heard from the plaintiff, Mr Towell and Mr Woods that the plaintiff’s earlier account was not accurate.

The loan agreement was made between the plaintiff as lender and Chiri as borrower. It recited that the plaintiff had made $300,000 available to the borrower, interest free. The loan was to be repaid by instalments of $50,000 commencing on 30 June 1988 and thereafter six monthly until 31 December 1990.

The agreement contained a default clause. It also provided that the borrower was to pay costs, stamp duty, fees and expenses; and that the agreement was to be governed by Western Australian law.

The…

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.

Continue reading Benson-Brown v Smith

Details

AGLC: Benson-Brown v Smith [1999] VSC 208
Case: [1999] VSC 208
Decision Date: 10 June 1999

CaseChat Overview and Summary

Benson-Brown was the plaintiff and Smith was the defendant in a case before the Supreme Court of Victoria. The plaintiff sought to enforce a guarantee provided by the defendant for debts owed by a third party, which included an execution provision in the guarantee document. The dispute centred around the disputed effect of this execution provision, whether rectification was necessary and available, and the impact of delay, laches, and acquiescence. Additionally, the case examined whether the principal debtor clause was effective and whether a demand was necessary before commencing the suit. The court also considered the role of a certificate of indebtedness as prima facie evidence of the quantum owed and its operation in light of all the evidence.

The primary legal issues the court addressed were the enforceability of the execution provision in the guarantee, the conditions under which rectification could be applied, and the implications of delay, laches, and acquiescence on the defendant's defences. Furthermore, the court scrutinised whether the principal debtor clause was valid and enforceable, and if a demand was a prerequisite before initiating legal action. Finally, the court assessed the admissibility of the certificate of indebtedness as prima facie evidence of the debt and its relevance in the context of the overall evidence presented.

The court ruled that the execution provision was not ambiguous and thus did not require rectification. It found that the defendant's delay in asserting his defences did not bar the plaintiff's claim, and there was no evidence of laches or acquiescence on the part of the plaintiff. The principal debtor clause was deemed effective, and a demand was not necessary before commencing the suit. The certificate of indebtedness was acknowledged as prima facie evidence of the quantum of the debt, but its operation was subject to the totality of the evidence presented. Consequently, the court found in favour of the plaintiff, ordering the defendant to pay the amount guaranteed, including interest and costs.

The court ordered the defendant to pay the principal sum guaranteed, plus interest from the date of the certificate of indebtedness and costs of the suit. The defendant was also directed to cover the costs of the appeal if the case proceeded to a higher court. The judgment clarified the enforceability of guarantees with execution provisions and the conditions under which rectification may be sought, providing guidance for future cases involving similar issues.

Orders