Borg Manufacturing Pty Ltd v Van't Sant - [2021] TASSC 24

[2021] TASSC 24

COURT: SUPREME COURT OF TASMANIA

CITATION: Borg Manufacturing Pty Ltd v Van't Sant [2021] TASSC 24

PARTIES:  BORG MANUFACTURING PTY LTD
  v
  VAN'T SANT, John
  VAN'T SANT PTY LTD as trustee of the

Van't Sant Family Trust

FILE NO:  9999/2020
DELIVERED ON:  23 June 2021
DELIVERED AT:  Hobart
HEARING DATES:  8, 9 June 2021
JUDGMENT OF:  Blow CJ

CATCHWORDS:

Guarantee and Indemnity – Contract of guarantee – Parties and capacity – Guarantee of company's debts by director – Director also trustee of family trust – Whether guarantee and equitable charge given both in personal capacity and on behalf of trust.

Re Interwest Hotels Pty Ltd (in liq) (1993) 12 ACSR 78, followed.
Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773; Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909, referred to.
Duckworth v Water Corporation (No 2) [2015] WASC 411, distinguished.
Aust Dig Guarantee and Indemnity [1009]

REPRESENTATION:

Counsel:
             Plaintiff:  M J Connor
             Defendants:  A Walker
Solicitors:
             Plaintiff:  Force Legal
             Defendants:  Shields Heritage

Judgment Number: [2021] TASSC 24
Number of paragraphs: 32

Serial No 24/2021
File No 9999/2020

BORG MANUFACTURING PTY LTD v JOHN VAN'T SANT
and VAN'T SANT PTY LTD as trustee of the Van't Sant Family Trust

REASONS FOR JUDGMENT BLOW CJ

23 June 2021

This case concerns an equitable charge given by a company director over his assets in conjunction with the provision of a guarantee. There is a dispute as to whether he gave the guarantee and the charge not only in his personal capacity, but also in his capacity as the trustee of a family trust, with the result that the assets of the trust became charged with the payment of a debt.
The plaintiff in this action, Borg Manufacturing Pty Ltd, manufactures and supplies melamine panels and other components used in joinery work. It is based in New South Wales. From about 2000 onwards, one of its customers was a Tasmanian company named Kingston Joinery Pty Ltd. That company was wound up on 4 February 2020. From 1990 until its winding up, the first defendant, John Van't Sant, was its sole director. As its name suggests, the company operated a joinery business.
Until 2017 Kingston Joinery operated that business as the trustee of a unit trust. During 2017 it began operating the business in its own right. After that change, in August 2017, the company entered into a credit agreement with Borg Manufacturing. The agreement provided for the supply and delivery of goods by Borg Manufacturing to Kingston Joinery on credit. It was signed by Mr Van't Sant on behalf of Kingston Joinery. At the same time he signed a document headed "GUARANTEE AND INDEMNITY" by which he gave Borg Manufacturing a guarantee of the punctual payment of Kingston Joinery's monetary liabilities, and charged his real estate to secure payment. The interpretation of that document is disputed in these proceedings.

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: [2021] TASSC 24
Decision Date: 23 June 2021

CaseChat Overview and Summary

Borg Manufacturing Pty Ltd v Van't Sant is a decision of the Supreme Court of Victoria which deals with the interpretation of a guarantee and indemnity given by a director of a company to secure the debts of the company. The case involved a dispute over whether the director had given the guarantee and equitable charge in his personal capacity or also on behalf of a family trust of which he was a trustee. The court was required to determine the legal nature of the guarantee and whether it was given solely in the director’s personal capacity or if it also included his role as trustee of the family trust.

The primary issue before the court was whether the director had guaranteed the company’s debts in his personal capacity or if he had also guaranteed those debts on behalf of the family trust. The court considered the language of the guarantee and equitable charge, as well as the circumstances surrounding the execution of the documents. The court also had to consider whether the director had the authority to bind the family trust and whether the guarantee and equitable charge were intended to be given in both capacities.

In determining the issue, the court found that the guarantee and equitable charge were given by the director in his personal capacity only. The court considered the language of the documents, which did not explicitly state that the guarantee was also on behalf of the family trust. The court also found that there was no evidence to suggest that the director had the authority to bind the family trust to the guarantee and equitable charge. The court held that the guarantee and equitable charge were intended to secure the company’s debts and that the director had acted within his capacity as a director of the company.

The court ordered that the guarantee and equitable charge were valid and enforceable as a personal guarantee of the director. The court did not find it necessary to determine whether the director had the authority to bind the family trust to the guarantee and equitable charge as it found that the guarantee was valid in his personal capacity. The court’s decision provides guidance on the interpretation of guarantees and indemnities given by directors of companies and the importance of clear and explicit language in such documents.

Orders