Busuttil v Hilton
[2013] SADC 28
•7 March 2013
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
BUSUTTIL & ORS v HILTON & ORS
[2013] SADC 28
Judgment of His Honour Judge Costello
7 March 2013
GUARANTEE AND INDEMNITY - THE CONTRACT OF GUARANTEE - CONSTRUCTION AND EFFECT - CONDITIONAL GUARANTEES
The plaintiffs entered into an agreement with the defendants whereby the third defendant agreed to repay monies to one of the plaintiffs JSJB Pty Ltd - Hilton, a director of the third defendant as part of the agreement "guaranteed" repayment of the monies - monies not repaid - third defendant did not appear at trial or defend the claim against it - Judgment for the plaintiffs against the third defendant for $440,594.99 - consideration of whether Hilton's "undertaking" constituted a guarantee or a promise to give one - Hilton's "undertaking" constituted a guarantee - no requirement that plaintiffs exhaust rights against third defendant before suing on the guarantee - guarantee conditional upon other instruments securing repayment being executed - as other securities not executed Hilton relieved of liability under his guarantee - if Hilton's "undertaking" properly characterised as a promise to give guarantee Hilton in breach of his agreement - specific performance on contract to execute such a guarantee refused on grounds of futility - Claim against Hilton dismissed.
Fisher Firearms (Wholesale) Pty Ltd v Mariner (2003) 232 LSJS 87; Masters v Cameron (1954) 91 CLR 353; Sunbird Plaza Pty Ltd v Maloney (1989) 166 CLR 245; Re Standard Insurance Co Ltd (In liq) and Companies Act 1936 (1970) 1 NSWLR 392; Moschi v Lef Air Services Ltd [1973] AC 331; Agricultural and Rural Finance Ltd v Gardiner (2008) 238 CLR 570; Prosilis v Double Bay Newpapers Pty Ltd [2000] NSWCA 30; Walter and Morris Ltd v Lymberis [1965] SASR 204; James Graham & Co (Timber) Ltd v Southgate Sands (1986) 1 QB 80; Marston v Charles Griffiths & Co Pty Ltd [1985] NSWLR 294; Gattellaro v Westpac (2004) 204 ALR 258; Dimitrakipoulos & Anor v Farm Pride Foods Ltd [2000] QCA 80; Marks v CCH Australia Ltd & Anor (1999) 3VR 513, considered.
BUSUTTIL & ORS v HILTON & ORS
[2013] SADC 28Definitions
In these reasons
“Busuttil” is the first plaintiff Joseph Busuttil.
“Ashley Holdings” is the second plaintiff, 140 Ashley Holdings Pty Ltd, a company in which Busuttil was a director and shareholder.
“JSJB” is the third plaintiff, JSJB Pty Ltd, a company which was set up by Busuttil to operate as his building company.
“Elder” is Shelley Anne Elder, Busuttil’s business partner.
“Buster” is Buster Development Pty Ltd, a company in which both Busuttil and his business partner Elder owned shares and which was the owner of a building on South Road, Thebarton.
“Hilton” is the first defendant, David Michael Hilton. He was also a director of the second and third defendants.
“2005 UT” is the second defendant, 2005 UT Pty Ltd, a company which at the relevant time held shares in the third defendant.
“The Institute” is the third defendant, the Australian Institute for Higher Studies Pty Ltd and was at the relevant time a lessee of the building owned by Buster on South Road Thebarton.
Introduction
In this action the three plaintiffs seek an order that Hilton and the Institute[1] pay them the sum of $440,594.99 together with interest on that amount.
[1] The action against 2005 UT was discontinued prior to trial.
The plaintiffs’ claim against Hilton and the Institute is said to arise out of an Agreement between the three plaintiffs and the three defendants in August 2009 whereby, inter alia, Hilton “warranted and acknowledged” that the Institute owed JSJB monies and that it would repay JSJB those monies together with interest by certain dates referred to in the agreement. Hilton and the Institute admit that the monies have not been paid.[2]
[2] Paragraph 5 of the Defence to the Fourth Statement of Claim.
Hilton is said to be liable to the plaintiffs by reason of a guarantee which he is alleged to have given or promised to give in order to secure the Institute’s liability to pay the plaintiffs.
In their Defence the defendants deny that any guarantee was given to the plaintiffs or that any guarantee was proffered to Hilton for him to execute.
In summary the defendants assert that:
·the Statement of Claim fails to plead any cause of action against the defendants;
·Hilton did not provide a guarantee in the Agreement;
·no guarantee was sought by JSJB;
·in so far as the Agreement refers to a guarantee it is void for uncertainty; and
·no order for specific performance can now be made requiring Hilton to provide a guarantee.
Background History
The history leading to the making of the Agreement is relatively brief and largely uncontroversial.
In 2007 Buster purchased the land and building referred to above, at South Road, Thebarton. After purchase, Busuttil and Elder set about renovating the building. In 2008 Elder introduced Hilton to Busuttil. Hilton expressed an interest in leasing part of that building for the purposes of an international students’ college which he was interested in establishing. An agreement was struck between Hilton, Busuttil and Elder whereby Hilton agreed to pay for certain refurbishments to the building (to suit his particular tenancy requirements) in return for which he was allowed to acquire (through 2005 UT) a half interest in the building.
In 2009 the Institute entered into a lease of the building with Buster. Thereafter JSJB commenced to carry out building work by way of refurbishment of the building to accommodate, inter alia, the specific requirements of the Institute in its tenancy.
JSJB then rendered accounts to the Institute for this work, some of which were paid by the Institute and some of which were not. As a result of some of these accounts not being paid, the Agreement, which is the subject of these proceedings, was entered into in August 2009.[3]
[3] Neither party was able to state, with any further precision, the date on which the Agreement was entered into other than that it was entered into prior to 21 August 2009 - Transcript p 23.
The terms of the Agreement are central to this dispute and it is necessary to set out the Agreement in its entirety.
AGREEMENT
1.Joe warrants that he is authorised to enter into this agreement for and on behalf of each of 140 Ashley and JSJB (the “Joe Parties”) and that he and the Joe Parties intend to be legally bound by the terms of this agreement.
2.David warrants that he is authorized to enter into this agreement for and on behalf of the Institute and 2005 UT (the “David Parties”) and that he and the David Parties intend to be legally bound by the terms of this agreement.
3.2005 UT has agreed to purchase 360 ordinary shares in Buster Developments Pty Ltd ACN 126 516 498 (“the Shares”) from 140 Ashley for consideration of ONE HUNDRED AND THIRTY THOUSAND DOLLARS ($130 000.00).
On the Completion Date, David warrants and acknowledges that the sum of ONE HUNDRED AND THIRTY SEVEN THOUSAND SEVEN HUNDRED AND SIXTY NINE DOLLARS AND TWENTY THREE CENTS ($137,769.23) comprising of $135,000.00 plus accrued interest of $2,769.23 is or will be owed by 2005 UT to 140 Ashley in relation to the Shares will be repayable to 140 Ashley under the terms of a Vendor Finance Agreement as follows:
a. 2005 UT must make a payment of ONE HUNDRED AND THIRTY SEVEN THOUSAND SEVEN HUNDRED AND SIXTY NINE DOLLARS AND TWENTY THREE CENTS ($137,769.23) on 21st August 2010 comprising $135,000.00 plus $2,769.23 (in accrued interest to 21 August 2009 at 20% per annum); and
b. 2005 UT must make twelve (12) consecutive equal monthly payments of TWO THOUSAND TWO HUNDRED AND NINETY SIX DOLLARS AND FIFTEEN CENTS ($2,493.99) which must be made on the 21st day of September 2009 and ending on the 21st day of August 2010.
4.David will guarantee the obligations of 2005 UT to 140 Ashley under the terms of the Vendor Finance Agreement referred to in clause 3 above.
5.2005 UT will grant a share mortgage over the Shares in favour of 140 Ashley as security for the transfer of the Shares.
6.140 Ashley will:
a. grant to David and or his nominee a first right of refusal to purchase a further 240 shares in Buster Developments Pty Ltd ACN 126 516 498 in one or more parcels at a price and on such terms as to be advised by Joe; and
b. grant to Shelly and or her nominee a second right of refusal to purchase the shares referred to in clause 6a on the same terms as they were offered to David.
on the condition that that any sale under the above rights of refusal must be completed within 21 days of any offer to sell made by 140 Ashley.
7.The payment of monies owing by the Institute to JSJB for all matters including without limitation, for building and other work done by JSJB, consulting fees, all other costs payments outgoings compromises and accrued interest will accrue interest at the rate of 20% per annum and be payable by the Institute to JSJB as follows:
7.1 On the Completion Date, David warrants and acknowledges that the sum of ONE HUNDRED AND TWENTY SEVEN THROUSAND FIVE HUNDRED AND SIXTY FOUR DOLLARS AND TEN CENTS ($127,564.10) comprising of $125,000.00 plus accrued interest of $2,564.10 is or will be owed by the Institute to JSJB. This sum of ONE HUNDRED AND TWENTY SEVEN THOUSAND FIVE HUNDRED AND SIXTY FOUR DOLLARS AND TEN CENTS ($127,564.10) will be repayable as follows:
7.1.1the Institute must make a payment of ONE HUNDRED AND THIRTY EIGHT THOUSAND FIVE HUNDRED AND FIFTY FOUR DOLALRS AND SEVENTY FOUR CENTS ($138,554.74 (in accrued interest to 21st January 2010 at 20% per annum); and
7.1.2the Institute must make twelve (12) consecutive equal monthly payments of TWO THOUSAND THREE HUNDRED AND NINE DOLLARS AND TWENTY FIVE CENTS ($2,309.25) which must be made on the 21st day of each and every month commencing on the 21st day of January 2010 and ending on the 21st day of December 2010.
7.2On the Completion Date, David warrants and acknowledges that the sum of TWO HUNDRED AND TWENTY EIGHT THOUSAND SIX HUNDRED AND SEVEN DOLLARS AND SIXTY NINE CENTS ($228,607.69) comprising of $220,000.00 plus accrued interest of $8607.69 to 21st August 2009 is or will be owed by the Institute to JSJB. This sum of TWO HUNDRED AND TWENTY EIGHT THOUSAND SIX HUNDRED AND SEVEN DOLLARS AND SIXTY NINE CENTS ($228,607.69) will be repayable as follows:
7.2.1the Institute must make a payment of TWO HUNDRED AND TWENTY EIGHT THOUSAND SIX HUNDRED AND SEVEN DOLLARS AND SIXTY NINE CENTS ($228,607.69) on 21st September 2010 comprising comprising (sic) of $220.000.00 plus accrued interest of $8607.69; and
7.2.2the Institute must make twelve (12) consecutive equal monthly payments of THREE THOUSAND EIGHT HUNDRED AND TEN DOLLARS AND THIRTEEN CENTS ($3,810.13) which must be made on the 21st day of each and every month commencing on the 21st day of September 2009 and ending on the 21st day of August 2010.
7.3On the Completion Date the sum of ONE HUNDRED AND SEVENTY NINE THOUSAND THREEE HUNDRED AND ONE DOLLARS AND EIGHTY FIVE CENTS ($179,301.85) comprising of $138,301.85 plus accrued interest of $41,000.00 will be paid by the Institute to JSJB.
8.The obligations of the Institute to repay in full all monies owed by it to JSJB will be secured by:
a. a guarantee granted by David;
b. one or more guarantees (to be procured by David) granted by any person who is a director of the Institute at the date of this agreement and any other person who becomes a director of the Institute for the period commencing on the date of this agreement and concluding on the date that all monies owing by the Institute to JSJB have been repaid in full; and
c. a fixed and floating charge granted in favour of JSJB and registered over the whole of the assets and undertaking of the Institute.
9.Payment in relation to the purchase of any shares in Buster Development Pty Ltd ACN 126 516 498 acquired by David and or and his nominee or any one or more of the David Parties will be secured by:
a.a guarantee granted by David;
b. one or more guarantees (to be procured by David) granted by any person who is a director of the Institute at the date of this agreement and any other person who becomes a director of the Institute for the period commencing on the date of this agreement and concluding on the date that all monies owing by the Institute to JSJB have been repaid in full; and
c. a fixed and floating charge granted in favour of JSJB and registered over the whole of the assets and undertaking of the Institute.
10.On or before the Completion Date, David must procure the repayment of a loan of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) owing by Buster Development Pty Ltd ACN 126 516 498 to Joe. In procuring the repayment of this loan owing to Joe, David acknowledges that he must arrange for the upstamping of a mortgage in favour of Westpac Banking Corporation over the real property held by Buster Developments Pty Ltd ACN 126 516 498.
11.The parties to this agreement acknowledge that the terms of this agreement do not in any way alter or affect the liability of Buster Developments Pty Ltd ACN 126 516 498 to pay the sum of $249,215.11 plus interest accruing thereon to Joe.
12.David and the David parties will be jointly and severally liable for all stamp duty and half costs payable in relation to the transactions referred to in this agreement.
13.Each party must do, sign, execute and deliver and must ensure that each of its employees and agents does, signs, executes and delivers, all deeds, documents, instruments and acts reasonably required of it or them by notice from another party effectively to carry out and give full effect to this agreement and the rights and obligations of the parties under it, both before and after the Completion Date.
14.All loan and other agreements in relation to David’s superannuation fund will be executed by the relevant parties.
15.Joe will use his best endeavours to assist with the financing of the building work to be carried out by JSJB for the Institute.
16.Each of the parties must carry out and give full effect to this agreement and the rights and obligations of the parties under it by 21 August 2009 (“the Completion Date”).
In their Statement of Claim the plaintiffs seek repayment of the monies referred to in paragraphs 7.1 and 7.2 respectively. These payments related to money owed to JSJB for work which it had done on the South Road building, via its subcontractors (paragraph 7.1), and for its project management (paragraph 7.2).[4] After the amounts referred to in paragraphs 7.1 and 7.2 became due, the plaintiffs’ solicitor made a demand for payment which was not met.[5]
[4] Transcript p 24 - There was no evidence nor any agreement concerning the payments referred to elsewhere in the Agreement.
[5] Transcript p 25.
The Hearing
On the hearing, Hilton was represented by counsel. Despite the fact that he had, at an earlier stage in the proceedings, sought and been given an authorisation to represent the Institute,[6] he informed the Court through his counsel that he appeared only in his individual capacity. There was no appearance by or on behalf of the Institute. It was nevertheless accepted that the Institute was aware of the trial date.
[6] Pursuant to a DCR 27 Order made by Master Blumberg on 7 September 2012.
In their case the plaintiffs tendered, without objection, various ASIC Company Extracts[7] and the Agreement.[8] They also called Mr Busuttil who gave evidence as to the background leading up to the making of the Agreement. He was not cross examined as to these matters and I accept his evidence.
[7] Exhibit P2.
[8] Exhibit P1.
Hilton did not give evidence. However his counsel did apprise the Court as to two areas of “agreed fact” namely:
1.No written form of guarantee, apart from the Agreement relied upon by the plaintiffs in their Statement of Claim, was prepared by the plaintiffs or proffered to the first defendant or to any other director of the third defendant or executed by the first defendant or any other director of the third defendant either prior to the Completion Date referred to in the Agreement or at all.
2.No written charge over the assets of the third defendant in favour of the third plaintiff was prepared by the plaintiffs or executed by the third defendant either prior to the Completion Date or at all.
In the context of the facts agreed in paragraph 1 above, I was informed by Hilton’s solicitors (without objection from the plaintiff’s counsel) that, at the time of the execution of the Agreement in August 2009, the directors of the Institute were Hilton and a Barjinder Kaur and that by December 2009 a further three directors had been appointed in addition to Hilton.
Discussion
A Cause of Action
As I have previously observed, in their Defence, Hilton and the Institute assert that, inter alia, the Statement of Claim fails to plead a cause of action against any of the defendants.
A cause of action is defined in DCR 30 to be “some basis in law and fact on which the plaintiff asks the Court for a remedy”. It has elsewhere been described as the “facts which give rise to the right to sue”.[9]
[9] Fisher Firearms (Wholesale) Pty Ltd v Mariner (2003) 232 LSJS 87.
True it is that the plaintiffs here have not nominated a specific cause of action. They have simply pleaded the existence of an Agreement wherein Hilton, on behalf of the Institute, acknowledges that the Institute is liable to repay specified amounts by certain dates and that these amounts, despite a demand, have not been paid.
These facts as pleaded are in my view sufficient to make out a cause of action supporting a claim for a debt against the Institute.[10]
[10] See Carter-Contract Law in Australia 6th Ed - Chapter 37-01 - 37-03.
The claim against Hilton is more straightforward although pleaded in the alternative. In essence the Statement of Claims alleges that Hilton entered into a guarantee to answer for the Institute. The Institute has not not paid and Hilton is alleged to be liable under the guarantee. Alternatively, it asserts that he promised to give a guarantee and is in breach of his promise to do so. I am quite satisfied that this is a more than sufficient basis for a cause of action against Hilton.
The Claim Against the Institute
The Institute did not attend at the hearing to defend the claim against it. I am satisfied on the basis of the Agreement and the evidence of Busuttil that the plaintiffs have made out their claim on the merits against the Institute. I now turn to the plaintiffs’ claim against Hilton.
The Claim Against Hilton
In the claim against Hilton the following issues arise for determination:
i.Does Clause 8(a) by its terms constitute a guarantee by Hilton or does it merely constitute a promise to give a guarantee at a future time?
ii.If Clause 8(a) constitutes a guarantee is it void for uncertainty?
iii.If it is otherwise valid are the plaintiffs required to exhaust their rights against the Institute before proceeding against Hilton?
iv.If it is otherwise valid did the plaintiffs waive their rights against Hilton?
v.If it is otherwise valid is Hilton’s liability conditional upon the execution of the other securities referred to in Clauses 8(b) and 8(c)?
vi.In the alternative, if Clause 8(a) was a promise to give a guarantee rather than a guarantee, did it form part of a valid and binding agreement between him and the plaintiffs to execute a guarantee?
vii.Has Hilton breached that agreement and, if so, is it now appropriate to order him to execute a guarantee?
Does Clause 8 by its Terms Constitute a Guarantee?
The principles which apply, in determining whether parties have reached a binding agreement to which they intend to be immediately bound, are well settled.
In Masters v Cameron[11] the High Court identified three categories of cases where parties in negotiation reach agreement upon terms of a contractual nature which are to be dealt with by a formal contract:[12]
First, it may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect.
Secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one of more of the terms conditional upon the execution of a formal document.
Thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
[11] (1954) 91 CLR 353.
[12] (1954) 91 CLR 353, 360.
In the context of the contract under consideration here, all the essential terms had been identified, expressly or by implication, namely the parties, the amount of the principal debt, the rate of interest and the terms and duration of the security. I am also satisfied that despite the reference in Clause 8 to the phrase “will be secured”, the parties intended to be immediately bound to the performance of those terms. All that remained was for a guarantee document (articulating in more detail and arguably with some precision) the terms of the guarantee.
In my view this was a case falling into the first category identified in Masters v Cameron and constituted a binding contract of guarantee.
Void for Uncertainty
I am further satisfied that the guarantee, containing as it does, the essential ingredients for a valid guarantee (namely the identity of the parties, the principal debt, the rate of interest and the terms and duration of the security)[13] is sufficiently certain and otherwise valid.
[13] Thomson - Laws of Australia Guarantees 8.6.740.
Must the Plaintiffs Exhaust their Rights Against the Institute?
A contract of guarantee is a collateral contract to answer for the debt, default or miscarriage of another who is or is contemplated to be or to become liable to the person to whom the guarantee is given.[14] Whilst it is common to speak of the parties to a relationship as creditor, guarantor and principle debtor, the payment of a debt is but one instance of the wide range of obligations the performance of which may be made the subject of a guarantee.[15]
[14] Sunbird Plaza Pty Ltd v Maloney (1989) 166 CLR 245, 254.
[15] Sunbird Plaza Pty Ltd v Maloney p 255.
A creditor’s rights against a guarantor will depend on the terms of the guarantee and the nature of the obligation, performance of which is guaranteed. If the subject of the guarantee is the payment of a debt or a sum of money which has accrued due, the creditor may on default by the principal debtor, sue the guarantor for the debt or the sum of money, his claim being for a liquidated amount. [16]
[16] Ibid.
As Street J said in Re Standard Insurance Co Ltd (In liq) and Companies Act 1936[17]
The terms of the guarantee given by Standard extended to “the due payment of all moneys which shall become payable hereunder by way of principal and interest by the borrower to you”.
… The guarantor is both in terms and in substance sued upon the obligation of the principal debtor, this being the obligation the performance of which the guarantor has underwritten by guarantee. It is the due fulfilment of this obligation that the creditor is entitled to enforce against the guarantor.
[17] (1970) 1 NSWLR 392, 395
Applying these principles to the Agreement under consideration, I am satisfied that the subject of the guarantee was the payment of all the monies which shall become due and payable by the Institute to JSJB.
This being so, upon default by the Institute, there was no requirement on the plaintiffs to proceed first against the principal debtor before taking recourse against the guarantor.[18]
[18] Moschi v Lef Air Services Ltd [1973] AC 331, 348.
Did the Plaintiffs Waive Their Rights
If the guarantee is otherwise enforceable against Hilton have the plaintiffs waived their rights under the guarantee?
The High Court has acknowledged that the term “waiver” is a word applied in a variety of senses.[19] In the context in which it was raised by counsel for Hilton, I apprehend it to mean either an election between inconsistent rights or an abandonment of a right. In the former context, Hilton asserts that the plaintiffs did not pursue their rights to have the securities prepared and executed by Hilton, Kaur and the Institute whilst at the same time insisting on performance of other parts of the contract.
[19] Agricultural and Rural Finance Ltd v Gardiner (2008) 238 CLR 570.
As is apparent from the background factual history which I earlier recorded, there was little evidence presented in this case. Hilton did not give any. In essence, the Court was invited to reach this conclusion solely upon the basis of the Agreement. I am not persuaded that the material submitted by the parties is anywhere near sufficient to enable a conclusion to be reached that the plaintiffs made an election not to insist on the securities being executed. Similarly I cannot conclude, on the limited material before me, that the plaintiffs abandoned their right to insist on Hilton’s guarantee.
Was Hilton’s Liability Conditional Upon the Execution of the Other Securities
By its terms, if Hilton’s “undertaking” (to use a neutral expression) was to give a guarantee rather than promise to give one, it is clear that his guarantee was but one of a number of securities which were to be put in place in order to secure the Institute’s obligation to repay. These comprised, inter alia, a guarantee by any person who was a director of the Institute in August of 2009 and thereafter. There is no dispute between the parties that Barjinder Kaur was also a director of the Institute at that time and was a director who did not provide a guarantee at any time in relation to this Agreement.
In addition a charge over the Institute’s assets in favour of JSJB was to be prepared and registered. No such charge was prepared or registered. What then is the liability of a surety such as Hilton where the other securities contemplated by the parties are not put in place?
Where a guarantee contains an express or implied term that more than one guarantor shall execute it, then a single guarantor will be discharged from liability if the intended guarantor(s) fails to execute or execute validly.[20] In my view the guarantee in question arguably contains an express term that more than one security was to be executed.
[20] Prosilis v Double Bay Newspapers Pty Ltd [2000] NSWCA 30 para 21; also see Walter and Morris Ltd v Lymberis [1965] SASR 204, 211; James Graham & Co (Timber) Ltd v Southgate Sands (1986) 1 QB 80; Marston v Charles Griffiths & Co Pty Ltd [1985] NSWLR 294; Gattellaro v Westpac (2004) 204 ALR 258 paras 46 and 95.
In circumstances where the term is to be implied, it has been said that the question is to be determined in the light of the evidence as to the intention of the parties. There is no relevant evidence of the intention of the parties on this issue. In such cases the Courts have said that the form of the document itself can provide the basis for an inference that the parties’ intention was that all guarantors would sign.[21] When the Agreement is looked at in its entirety, I would be prepared to infer a common intention that securities in addition to Hilton’s were to be provided.
[21] Dimitrakipoulos & Anor v Farm Pride Foods Ltd [2000] QCA 80 paras 29-30.
Accordingly, in my view, if Clause 8(a) constituted a guarantee, the failure, of at least Kaur to execute a guarantee and the Institute to give a charge, relieved Hilton of any liability under his guarantee.
A Promise to Enter into Guarantee
In view of the conclusion which I have reached that Clause 8(a) is by its terms a guarantee, it is, strictly speaking, unnecessary for me to consider this issue.
If however I am wrong and Clause 8(a) is not a guarantee but rather a promise to execute a guarantee in the future, I am satisfied that subject to one matter it constituted a binding and valid agreement to execute a contract.
The one area of uncertainty surrounds the date by which such an agreement was to be executed. However any uncertainty in this regard is removed when one has regard to the provisions of Clause 16 which make it clear that any obligations under the Agreement had to be fulfilled by 21 August 2009.
Accordingly, in my view, if Clause 8(a) constituted only a promise to give a guarantee, Hilton breached what amounted to a binding and valid agreement by failing to execute a guarantee as promised.
Specific Performance
The question then arises as to whether this Court should now make an order that Hilton execute a guarantee.
In the exercise of my discretion, I would decline to make an order for specific performance upon the basis that to do so would be an exercise in futility.[22] For the reasons which I have already articulated, even if Hilton had actually executed his guarantee, the fact that the other securities were not put in place is the factor which relieves him of his obligations under his guarantee. That outcome would not change if the Court now ordered him to execute a guarantee.
[22] Meagher Gummow & Lehane Equity Doctrines & Remedies 4th Ed 20-145; Marks v CCH Australia Ltd & Anor (1999) 3VR 513.
Conclusion
I am satisfied that the plaintiffs’ claim for a debt due under the contract against the Institute is made out. There will be judgment for the plaintiffs against the Institute in the sum of $440,594.99.
The plaintiffs’ claim against Hilton for payment of that sum under his guarantee is dismissed as is their claim for specific performance that Hilton execute a guarantee.
I will hear the parties on the questions of interest and costs.
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