Busuttil v Hilton - [2013] SADC 28

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 28
Definitions
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”…

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: [2013] SADC 28
Decision Date: 7 March 2013

CaseChat Overview and Summary

In the matter of Busuttil v Hilton, the plaintiffs pursued a claim against the defendants seeking repayment of monies owed. The third defendant, who did not appear at trial or defend the claim, was found liable for $440,594.99. Hilton, a director of the third defendant, had agreed to guarantee repayment of the monies, but the plaintiffs alleged that the guarantee was conditional and had not been fulfilled. The central issue before the court was whether Hilton's promise constituted a binding guarantee or merely an agreement to provide one in the future, and if the guarantee was conditional upon the execution of other instruments securing repayment. The court held that Hilton's promise constituted a guarantee. The court further held that there was no requirement for the plaintiffs to exhaust their rights against the third defendant before suing on the guarantee, but since the other securities had not been executed, Hilton was relieved of his liability under the guarantee. The court also considered whether Hilton was in breach of his agreement if his "undertaking" was properly characterised as a promise to provide a guarantee. The plaintiffs' request for specific performance on the contract to execute such a guarantee was refused on the grounds of futility. Consequently, the claim against Hilton was dismissed.

The court examined the nature of Hilton's promise and its binding effect as a guarantee. It held that Hilton's "undertaking" was indeed a guarantee, not just a promise to provide one, and that the guarantee was conditional upon the execution of other instruments securing repayment. The court found that since these conditions were not met, Hilton was not liable under the guarantee. The court further determined that if Hilton's "undertaking" were to be considered a promise to provide a guarantee, Hilton would be in breach of his agreement. However, the plaintiffs' application for specific performance was dismissed as futile, given that the conditions for the guarantee had not been satisfied. As a result, the claim against Hilton was dismissed entirely.

Orders