Burrell & Family Pty Ltd v Harris - [2010] SASC 184

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
BURRELL & FAMILY PTY LTD v HARRIS
[2010] SASC 184
Judgment of The Honourable Justice White
24 June 2010
GUARANTEE AND INDEMNITY - THE CONTRACT OF GUARANTEE - PARTIES AND CAPACITY
GUARANTEE AND INDEMNITY - THE CONTRACT OF GUARANTEE - CONSTRUCTION AND EFFECT - GENERALLY
Defendant is the sole director of a company which borrowed money from the plaintiff - written loan agreement executed by the defendant as director of the borrower contained in cl 4(d) an acknowledgment of personal liability by the defendant but no provision for signature by him in two capacities.
Whether the defendant executed the loan agreement in his personal capacity as well as in his capacity as director of the borrower - whether the acknowledgment of personal liability constitutes an enforceable guarantee by the defendant.
Held: defendant executed the loan agreement in both his personal capacity and in his capacity as director of the borrower - cl 4(d) of the loan agreement constitutes an enforceable guarantee - plaintiff's claim upheld.
Limitation of Actions Act 1936 (SA) s 42, referred to.
McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503; Australian Broadcasting Commission v Australasian Performing Rights Association Ltd (1973) 129 CLR 99; Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160; Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067, applied.
Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909; Stage Club Limited v Millers Hotels Pty Ltd (1981) 150 CLR 535; Surrendra Overseas Ltd v Government of Sri Lanka [1977] 1 WLR 565; Bush v Stevens [1963] 1 QB 1; Spencer v Hemmerde [1922] 2 AC 507, distinguished.
Ariadne Steamship Company Ltd v James McKelvie & Co [1922] 1 KB 518, not followed.
Hardel Pty Ltd v Burrell & Family Pty Ltd (2009) 103 SASR 408, discussed.
Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310; Rawcliffe v Bianco Hiring Service Pty Ltd (2002) 224 LSJS 266; Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773; Ontario Marble Co Ltd v Creative Memorials Ltd (1963) 39 DLR (2d) 149; Wharf Street Pty Ltd v Amstar Learning Pty Ltd [2004] QCA 256; Universal Steam Navigation Co Ltd v James KcKelvie & Co [1920] AC 492; Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549, considered.

BURRELL & FAMILY PTY LTD v HARRIS
[2010] SASC 184
Civil

WHITE J: The plaintiff seeks to recover more than $2m from the defendant (Mr Harris) on the basis of a guarantee. For this purpose it…

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: [2010] SASC 184
Decision Date: 24 June 2010

CaseChat Overview and Summary

The court was asked to determine whether a guarantee provided by Mr Harris was valid and enforceable against him. The case involved the plaintiff, Burrell & Family Pty Ltd, and the defendant, Mr Harris. The plaintiff sought to enforce a guarantee provided by Mr Harris for a loan made to Hardel Pty Ltd. The dispute centred on the interpretation and enforceability of the guarantee clause in the contract. The Federal Circuit Court of Australia was tasked with interpreting the contract and determining whether Mr Harris was liable under the guarantee.

The primary legal issue was whether the guarantee provided by Mr Harris was effective and enforceable. Specifically, the court needed to determine if the guarantee clause in the contract clearly and unambiguously committed Mr Harris to personally repay any outstanding debt of Hardel Pty Ltd to the plaintiff. The court also had to consider whether Mr Harris had the capacity to enter into the guarantee and whether the terms of the guarantee were clear and unequivocal.

The court found that the guarantee clause in the contract did indeed contain a clear and unequivocal commitment by Mr Harris to personally repay any outstanding debt of Hardel Pty Ltd to the plaintiff. The court held that Mr Harris had the capacity to enter into the guarantee and that the terms of the guarantee were sufficiently clear to be enforceable. The court further determined that Mr Harris was liable under the guarantee for the full amount of Hardel Pty Ltd's outstanding debt, including accrued interest. Consequently, the court upheld the plaintiff's claim and ordered that judgment be entered in favour of the plaintiff for the full amount of the debt, together with interest calculated in accordance with the terms of the contract.

The court ordered that judgment be entered in favour of the plaintiff, Burrell & Family Pty Ltd, in the sum of $1,440,786.87, together with interest calculated in accordance with clause 4 of the April 2008 Agreement to the date of judgment. The court requested that the parties provide details regarding the calculation of the interest.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

I see no reason not to give cl 4(d) the meaning which the words used suggest, namely, that Mr Harris acknowledged, in a formal way that, in addition to the recovery action which could be taken against Hardel, he would be personally liable for any amount of the loan and accrued interest which was unpaid at 1 June 2008. Accordingly cl 4(d) does contain an effective and enforceable commitment by Mr Harris to pay the amount of Hardel’s outstanding indebtedness to the plaintiff.Conclusion For the reasons given above, I uphold the plaintiff’s claim. I will enter judgment for the plaintiff in the sum of $1,440,786.87 together with interest calculated in accordance with cl 4 of the April 2008 Agreement to the date of judgment. I will hear from the parties as to the calculation.

Ratio Decidendi

Legal Principle Established

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