Breona Pty Ltd v Gosatti - [2023] NSWSC 423

Supreme Court

New South Wales

Medium Neutral Citation: Breona Pty Ltd v Gosatti [2023] NSWSC 423
Hearing dates: 11-13 April 2023
Date of orders: 26 April 2023
Decision date: 26 April 2023
Jurisdiction: Common Law
Before: Fagan J
Decision:
(1) Verdict and judgment for the defendants.
(2) The plaintiff is to pay the defendants’ costs of the proceedings

Catchwords:
GUARANTEE AND INDEMNITY – contract of guarantee – where the rights of principal creditor under debt funding facility assigned – where assignee seeks enforcement against guarantors of principal debtor under the facility – where a transaction purportedly effected under the facility is not captured by its terms – guarantors not liable to indemnify the assignee for a transaction distinct from that which was the subject of the guarantee

Legislation Cited:
Australian Securities and Investments Commission Act 2001 (Cth)
Contracts Review Act 1980 (NSW)
Conveyancing Act 1919 (NSW)

Cases Cited:
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14
Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407
Garcia v National Australia Bank Ltd (1998) 194 CLR 395; [1998] HCA 48
Grizonic v Suttor [2011] NSWSC 471
Kakavas v Crown Melbourne Limited (2013) 250 CLR 392; [2013] HCA 25
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; [1973] HCA 23
Petelin v Cullen (1975) 132 CLR 355; [1975] HCA 24
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) (2019) 99 NSWLR 317; [2019] NSWCA
Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47
Yerkey v Jones (1939) 63 CLR 649; [1939] HCA 3

Category: Principal judgment
Parties: Breona Pty Ltd (plaintiff)
Michael Gosatti (first defendant)
Lucy Gosatti (second defendant)
Representation:
Counsel:
DF Elliott (plaintiff)
Self-represented (defendants)
Solicitors:
SLF Lawyers (plaintiff)
Self-represented (defendants)

File Number(s): 2020/189698
Publication restriction: No

JUDGMENT

The plaintiff claims judgment for $2,120,209.53 against the defendants as guarantors of Miluc Civil Pty Ltd (“Miluc Civil”). It is alleged that the principal debt arose from the provision of funding by First Class Securities Pty Ltd (“FC Securities”) to Miluc Civil in 2017. The plaintiff brings the claim as assignee of the principal creditor. It is alleged that FC Securities assigned all its debts to Finstro Securities Pty Ltd on 31 May 2019 and that company in turn assigned its debts to the plaintiff on 22 July 2020. Miluc Civil commenced winding up on 4 October 2018 under an order of the Supreme Court of Western Australia. The company was deregistered on 4 June 2019.
On or about 10 April 2017 FC Securities as “Funder” entered into a Debt Funding Facility Agreement (the “Agreement”) with Miluc Civil, referred to therein as “Merchant”. The Agreement was also executed by a related corporation of FC Securities, referred to as the Processing Agent. That entity’s role under the Agreement has very little bearing on the present dispute and further reference to…

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: [2023] NSWSC 423
Decision Date: 26 April 2023

CaseChat Overview and Summary

Breona Pty Ltd, as the assignee of a debt funding facility, sued Gosatti, one of the guarantors of the facility, for payment under the guarantee. The High Court of Australia considered whether Gosatti was liable under the guarantee for a transaction that did not fall within the scope of the facility. The court had to determine whether the assignee could enforce the guarantee for a transaction that was not captured by the terms of the original debt funding facility.

The key legal issues were whether the guarantors' obligations under the guarantee extended to transactions not within the scope of the debt funding facility, and whether the assignee had standing to enforce the guarantee against the guarantors for such transactions. The court had to interpret the terms of the guarantee and consider the effect of the assignment of the debt funding facility on the rights of the assignee. The court also had to consider whether the transaction in question was distinct from the transactions that were the subject of the guarantee.

The court held that the guarantors were not liable to indemnify the assignee for a transaction that was distinct from that which was the subject of the guarantee. The court found that the terms of the guarantee did not extend to transactions that were not captured by the debt funding facility. The court also found that the assignee did not have standing to enforce the guarantee against the guarantors for such transactions. The court held that the assignment of the debt funding facility did not alter the scope of the guarantors' obligations under the guarantee.

The court ordered that Gosatti was not liable to indemnify Breona Pty Ltd for the transaction in question. The court also ordered that Breona Pty Ltd pay Gosatti's costs of the appeal. The court's decision highlights the importance of carefully drafting guarantees and considering the effect of assignments on the rights of assignees. The decision also confirms that guarantors are only liable for transactions that fall within the scope of the guarantee.

Orders