C.A.R.S Pty Ltd v Brent - [2015] TASSC 23

[2015] TASSC 23

COURT: SUPREME COURT OF TASMANIA

CITATION: C.A.R.S. Pty Ltd v Brent [2015] TASSC 23

PARTIES:  C.A.R.S Pty Ltd
  v
  BRENT, John Charles
  BRENT, Peter Leonard

FILE NO:  793/2013
DELIVERED ON:  4 June 2015
DELIVERED AT:  Hobart
HEARING DATES:  3, 4 November 2014
JUDGMENT OF:  Blow CJ

CATCHWORDS:

Guarantee and Indemnity – Actions against surety – Generally – Other cases – Failure of co-guarantor to execute guarantee – Signature of co-guarantor forged – Express term that liability of each guarantor not contingent upon execution by any other guarantor.

Marston v Charles H Griffith & Co Pty Ltd (1982) 3 NSWLR 294; Keith Murphy Pty Ltd v Custom Credit Corporation Limited (1992) 6 WAR 332; Gattellaro v Westpac Banking Corporation (2004) 204 ALR 258, distinguished.
Vassos v State Bank of South Australia [1993] 2 VR 316, referred to.
Aust Dig Guarantee and Indemnity [35]

REPRESENTATION:

Counsel:
             Plaintiff:  S B McElwaine SC, E Judd
             Defendant:  G W Dietz
Solicitors:
             Plaintiff:  Rae & Partners
             Defendant:  S S Lawyers Pty Ltd

Judgment Number: [2015] TASSC 23
Number of paragraphs: 47

Serial No 23/2015
File No 793/2013

C.A.R.S. Pty Ltd v JOHN CHARLES BRENT and PETER LEONARD BRENT

REASONS FOR JUDGMENT BLOW CJ

4 June 2015

In this action, a creditor is suing two company directors, claiming that they are liable to pay substantial sums to it pursuant to a deed of guarantee and indemnity. The first defendant contends that he is not liable because his signature on the deed was forged. The second defendant admits signing the deed but contends that the other defendant's signature was forged, and that that must result in him not being liable.
The plaintiff company, C.A.R.S. Pty Ltd, has a well established business that involves growing, buying and selling vegetables. For many years one of its customers was a Queensland company named Bunjurgen Pty Ltd. The defendants, John Brent and Peter Brent, are the directors and shareholders of that company. The first defendant, John Brent, is involved in local government. He was the mayor of Boonah Shire from 1994 until 2008, and since then has been the mayor of Scenic Rim Regional Council. His daughter, Sally Brent, managed Bunjurgen's business from about 2004 or 2005 onwards. His son, Matthew Brent, was also involved in the management of Bunjurgen's business at all material times.
The directors and shareholders of the plaintiff company are a married couple named Glenn Moore and Dinah Moore. In late 2010, Bunjurgen had been slow to pay the plaintiff for substantial quantities of vegetables that had been sold and delivered to it. As a result, Mr Moore spoke to Sally Brent and told her that he required some security, preferably a first mortgage. She replied, "Well it ain't gunna happen." However she went on to offer a directors' guarantee. Mr Moore responded that he expected that that would be sufficient. On 14 December 2010 she sent an email attaching a draft deed of guarantee. Mr Moore responded to the effect that it appeared to be satisfactory. On 21 February 2011 Sally Brent emailed a signed version of the deed to Mr Moore. It was dated 20 February 2011. Its provisions were the same as the document that was sent to Mr Moore in December 2010. It appeared to have been signed by each of the defendants in the presence of a witness named Michelle Woodard, whose address was written under her signatures. Mr Moore printed the document, countersigned it on behalf of the plaintiff, and sent it back to Sally Brent.
Bunjurgen went into liquidation on 15 July 2013. At that time it owed the plaintiff company over $680,000 plus interest for vegetables that the plaintiff had sold and delivered to it. The defendants put the plaintiff to proof in relation to the quantum of its claim. The plaintiff proved at the trial that it had sold and delivered vegetables as alleged. At the end of the trial there was no longer any dispute as to the amount owing by Bunjurgen for goods sold and delivered, nor as to the claim for interest.
In addition to its claims for payment for goods sold and delivered, and for interest, the plaintiff is also claiming for the reimbursement of certain legal costs, accountants' fees, and expenses relating to Mr Moore's attendance at meetings of the creditors of Bunjurgen and meetings with the plaintiff's solicitors. The deed of guarantee provided that the plaintiff would be entitled to recover an indemnity against "all losses damages expenses and costs" incurred by it by reason of Bunjurgen's default. If the plaintiff is entitled to enforce the deed against the defendants or either of them, there is a dispute as to whether some of the expenses in question are recoverable pursuant to that provision.

The forgery issue

The second defendant, Peter Brent, gave evidence about signing the deed, to the following effect. He was in the habit of signing documents that he and his brother John both had to sign. His brother had always looked after the financial side of things. He always trusted his brother. He was in the habit of flicking through documents, seeing that his brother had already signed them, and then signing them, because he trusted his brother. In this case, his brother's signature was already on the document before he signed it. He would have glanced at the document, seen that his brother had signed it, and then signed it. He did not discuss with his brother any requirement that he was to sign a guarantee. He imagined that the person who handed him the document would have been Sally Brent. He could not think of anyone else who could have handed it to him.
John Brent, the first defendant, gave evidence that he did not sign the document and, in particular, that he did not sign the signature that purported to be his. He emphatically stated that the signature on the document was not remotely like his signature. He said he did not see the deed until it was emailed to him by his lawyer. I infer that that was after the plaintiff's solicitors demanded payment from him and his brother.
I disagree with the assertion that the signature on the document was not remotely like John Brent's signature. Specimens of his true signature formed part of the evidence. There is a resemblance between the challenged signature and his usual signature. It is likely that his brother was familiar with his usual signature. The brother looked at the signature in question and did not doubt its genuineness.
The plaintiff's solicitors wrote to the defendants on 29 April 2013 demanding the payment of over $900,000, inclusive of interest, pursuant to the deed. John Brent was cross-examined robustly about what he did and did not do as a consequence of that demand. As a result of that cross-examination, I am satisfied that he was a dishonest witness. I am not prepared to place any reliance on anything he said as to any matter of controversy unless his evidence is corroborated. Some of his evidence simply does not ring true. If it is true that his signature was forged without his knowledge, and that he first learned of the forgery after the plaintiff had demanded over $900,000 from him and his brother in reliance on the forged document, then one would expect him to have initiated enquiries as to who had forged his signature, to have notified Bunjurgen's liquidator of the forgery, and to have reported the matter to the police. However he gave evidence to the following effect:
·     Neither Sally Brent nor Matthew Brent ever mentioned to him a requirement from the plaintiff for a mortgage or a guarantee.
·     He did not authorise anyone to sign his name on the guarantee.
·     It distressed him when he found that there was a signature on a document that was allegedly his, but which was not his.
·     He did not ask his daughter Sally how it was that the document, which purported to have his signature, had come into existence.
·     He did not ask his son Matthew how it was that the document had come into existence.
·     He did not ask any other employee of Bunjurgen how the document had come into existence.
·     He did not ask his brother whether he knew anything about the guarantee. His brother had no knowledge of its existence until it was produced.
·     He did not speak to Michelle Woodard. She had left her job at his company's factory.
·     I asked him whether he enquired whether there were any other forged guarantees purportedly signed by him. He did not give me a direct answer, but responded, "I would have expected they would have surfaced by now should they have been – should they be out there."
·     The liquidator sold the business of Bunjurgen to another entity controlled by a man named Stephen German. Sally Brent and Matthew Brent were still employed in the business. He did not warn Mr German that he had better watch out for signatures that were not his.
·     He did not report to the police that his signature had been falsified.
·     He did not think of reporting the false signature to the police.
·     He was not covering up for Sally and/or Matthew.
·     He had not intentionally refrained from asking Sally or Matthew anything about the document, fearing that they might tell him that they had put his signature on the document.
·     He did not ask his daughter Sally how it was that a document purporting to bear his signature had come into existence because Bunjurgen was already in voluntary administration when he became aware of the document. He did not believe it was appropriate for him to go on a witch hunt about the document. He had both a family relationship and a business relationship with his daughter, but the business relationship was at an end. He had tried very diligently to keep his family functioning as a family.
·     He did not bring the question of the forged guarantee to the attention of Bunjurgen's liquidator.
·     When asked whether he had made enquiries about any other documents issued by the company purportedly bearing his signature, he replied, "I would expect if the liquidator has them, he would refer them to me."
·     It was not correct that he had turned a blind eye.
Neither Sally Brent nor Matthew Brent nor Michelle Woodard were called as witnesses. I infer that none of them could have given evidence that could have assisted the defendants: Jones v Dunkel (1959) 101 CLR 298.
However the defendants called an experienced handwriting expert, Mr Heath. His evidence was thorough, unshaken and uncontradicted. After comparing the signature on the deed of guarantee with John Brent's signature on a large number of original documents of different ages, he concluded that the signature on the deed was not in John Brent's handwriting. I accept that evidence.
There was no evidence that John Brent authorised the forging of his signature on the deed. It is possible that he did, but the plaintiff bears the onus of proof, and has not discharged it. I am not satisfied on the balance of probabilities that John Brent executed the deed or authorised anyone else to do so in his name. The plaintiff's claim against him must therefore fail.

The liability of the second defendant

The second defendant, Peter Brent, contends that, because his brother's signature was forged, the deed cannot be enforced against him. He contends that this is the result of the application of both common law and equitable principles.
I will need to discuss a number of cases that were relied on by counsel for both sides in relation to this issue. When considering those cases, two important aspects of this case need to be borne in mind:
· No one associated with the plaintiff knew that the signature of John Brent was forged or did anything that tended to induce in Peter Brent a false belief as to the authenticity of his brother's signature.
· Clause (iv) of the deed contained a provision which read, "Each Guarantor executing this Deed agrees that the liability of such Guarantor is not contingent upon the execution of this or any other guarantee by any other Guarantor …".
Despite the wording of that provision, counsel for the defendants made submissions to the following effect:
·     That the authorities support the proposition that, at common law, the agreement is avoided against Peter Brent if John Brent has not executed it.
·     That there was evidence that it was intended that both directors of Bunjurgen would give guarantees, and that the giving of a guarantee by John Brent was considered significant; and that it followed that, at law, Peter Brent was discharged from liability because John Brent had not given a guarantee.
·     That, despite the provision quoted above, equity intervenes to discharge the liability of Peter Brent.
Counsel for the defendants relied on a number of cases in which guarantees were held to be unenforceable when individual guarantors had given guarantees expecting that one or more co-guarantors would guarantee the same liabilities and those expectations were not fulfilled: Marston v Charles H Griffith & Co Pty Ltd (1982) 3 NSWLR 294; James Graham and Co (Timber) Ltd v Southgate-Sands [1986] QB 80; Stramit Industries Limited v Reinhardt [1985] 1 Qd R 562; Keith Murphy Pty Ltd v Custom Credit Corporation Limited (1992) 6 WAR 332; Dimitrakipoulos v Farm Pride Foods Limited [2000] QCA 80; Gattellaro v Westpac Banking Corporation (2004) 204 ALR 258 (High Court); Barecall Pty Ltd v Hoban [2009] NSWSC 1104. Some of those cases involved forged signatures.
However there is no absolute rule that a guarantor will never have any liability on a guarantee if it was intended that one or more co-guarantors would execute guarantees and that has not occurred. That will commonly be the case, but whether it will be the case or not depends first of all on the terms of the contract of guarantee, and the ordinary principles of contract law must be applied in determining any dispute as to those terms.
The reasons why guarantors are so often held not to be liable in this sort of case were well explained by McPherson J in Taubmans Pty Ltd v Loakes [1991] 2 Qd R 109, where his Honour said, at 111-112:
"A guarantee may be given conditionally. It may be executed subject to a condition that it is to be binding only if another or others also execute it as guarantors. A condition to that effect may be express, or it may be capable of being inferred as the common intention of the parties. In judging whether there is such an intention, a cogent factor may be that the instrument of guarantee is in a form or in terms that imply it is to be executed by more than one guarantor who are to be jointly and severally liable. The underlying reason for regarding that factor as having, in the case of an instrument of guarantee, something more than ordinary importance is that, without execution by the other guarantor or guarantors, the signatory loses his right to contribution from the others as co-sureties in the event of his having to pay.
In some textbooks and judgments it is possible to find the matter stated in a broad and unqualified way almost as if to suggest that an instrument executed in the form referred to raises an irrebuttable presumption that all must sign before any is bound. That would make it tantamount to a rule of law to that effect. But that is plainly not so …".
One of the judgments in which the applicable principles were "stated in a broad and unqualified way" was that of Powell J in Marston v Charles H Griffith & Co Pty Ltd (above). In that case at 300-301 his Honour stated the applicable principles as follows (omitting case references):
"1     if it is a term, whether express or implied, of the arrangements pursuant to which a parol contract of guarantee is executed, that there will be another co-surety or other co-sureties, or that the principal debt, or the guarantee, will be secured in an identified way, then, unless the intended surety who has executed the guarantee consents to the other co-surety or co-sureties not thereafter executing the guarantee or to the contemplated security not being provided then the intended surety never becomes liable under the guarantee despite his execution of it — the failure of the other co-surety or co-sureties to execute the guarantee, or the failure to provide the intended security, thus affords the intending surety who executed the guarantee a defence at law to an action on the guarantee;
2     if a parol contract of guarantee which is executed by an intending surety is drawn in a form showing another or others as intended joint and several sureties, it will be presumed, in the absence of acceptable evidence to the contrary, that the execution of that other, or those others, was a condition precedent to the surety who signed the guarantee becoming liable under it, and his, or their, failure to execute the guarantee will afford to the intending surety who executed the guarantee a defence at law to an action on the guarantee;
3     where an intending surety has executed a guarantee under seal which is drawn in a form showing another or others as intended joint and several sureties, and has thereafter delivered the guarantee to the principal otherwise than as an escrow, then, because of the special rules as to deeds, the intending surety will be bound at law even though that other, or those others, does not, or do not, thereafter execute the guarantee; however, the fact that that other, or those others, does not, or do not, thereafter execute the guarantee gives rise to an equity in the intending surety to be relieved against the guarantee, which equity could be enforced by a suit in equity seeking a declaration of discharge in equity and an order for delivery up ;
4     where, upon its proper construction, a guarantee under seal reveals an intention that an intending surety who executed it is not to be liable under it unless another, or others, execute it as joint co-sureties, or unless the principal debt, or the guarantee, is secured in a particular way the surety who executed it is not liable under the guarantee unless that other, or those others, execute it, or unless the security is provided; the failure of that other, or those others, to execute the guarantee, or the failure to provide the security, affords the intended surety who executed the guarantee a defence at law to an action on the guarantee …".
The first and second of those four principles were cited with approval by Gleeson CJ, McHugh, Hayne and Heydon JJ in Gattellaro v Westpac Banking Corporation (above) at [31]. However neither Marston nor Gattellaro concerned a contract that contained an express provision as to the situation where the guarantee was not given by all intended co-guarantors.
There are a number of cases that make clear that there is no absolute rule that "all must sign before any is bound".
In Coyte v Elphick (1874) 22 WR 541, which concerned an argument about pleadings on a demurrer, a defendant had pleaded that one intended guarantor had not executed a deed. At 544 Blackburn J said:
"If, I say, as a matter of law, where there are more than one surety on the face of a deed, one is not bound by his signature unless the others sign, then the fact of Mrs Rea not having signed would be a good defence. But that is not the law, and unless either the parties expressly stipulated that one surety should not be bound unless the others were, or the defendant delivered the deed as an escrow, the fact that she did not sign is no defence."
Those comments were obiter, and concerned a very narrow question as to a pleading. But it is significant that Blackburn J observed that, as a result of an express stipulation, one surety could be bound when others, named as sureties in the same instrument, were not.
That passage was referred to by Williams J, with whose reasons Demack J agreed, in Taubmans Pty Ltd v Loakes (above) at 117, where his Honour said:
"The intention of the parties can, in my view, be established in many ways, and 'express stipulation' is but one means by which such intention may be made manifest. Looked at in that light the reasoning in Coyte supports the proposition that the form of the document will be relevant to the determination of the question of intention, but will not necessarily be determinative thereof."

In The City Bank v Reynolds (1889) 5 WN (NSW) 64, a bank agreed to lend money to a company on condition that its seven directors were to sign a guarantee; five of them executed it; and four of those five requested the bank to advance the loan monies before the two remaining directors executed it, which the bank did. A jury held that the five directors who had executed the guarantee were liable on it. On a motion for a new trial, the Full Court of the Supreme Court of New South Wales held that the four directors who had made the request were liable on the guarantee, despite the final two directors never having signed it. The director who had executed the guarantee but not participated in the request was held not to be liable on it.
In Vassos v State Bank of South Australia [1993] 2 VR 316, an instrument referred to as a "guarantee and indemnity", executed by five individuals, was provided to a bank. Two of the five signatures were forged. The instrument included a clause that provided as follows:
"That in the event of this guarantee or any of the provisions hereon being unenforceable or void or voidable against any one or more of the persons included in the expression 'the guarantor' this guarantee may nevertheless be enforced against the other or others of such persons and such other or others shall remain fully liable to the bank ... and the provisions of this guarantee shall bind such one or more of the persons included in the expression 'the guarantor' who shall have validly executed the same notwithstanding that any one or more of such persons may not have validly executed this guarantee."
At 321, Hayne J said (omitting references):
"Such a provision would appear, at least at first sight, to preclude the argument that the valid signature of all guarantors is a prerequisite to the liability of any of them … and suggest that the agreement is enforceable against those who signed it notwithstanding the forgery of the signatures of others."
His Honour did not express a concluded view as to that point, but decided the case on the basis of other issues. However there is no reason to doubt the correctness of his first impression as to the effect of the relevant clause.
In Harvey v Dunbar Assets Plc [2013] EWCA Civ 952, the English Court of Appeal set aside a bank's statutory demand against a guarantor as a result of a co-guarantor's signature having been forged. However Gloster LJ, with whom Longmore and Black LJJ agreed, made it clear that the express terms of a guarantee can displace the proposition that all must sign in order for any to be bound. At [26], her Ladyship referred to that proposition as "the starting point", and continued:
"The next stage is to construe the Guarantee as a whole, as part of one unitary exercise, against the admissible factual matrix, to ascertain whether any of its express or implied terms operated to exclude or disapply that prima facie result."
At [32] her Ladyship went on to conclude that there was no express or implied provision in the guarantee that displaced the prima facie position arising from the fact that all four intended guarantors were intended to sign one composite joint and several guarantee.
As I have said, the deed in this case contained an express term that the liability of each guarantor was "not contingent upon the execution of this or any other guarantee by any other Guarantor". There is no reason not to give that provision its ordinary literal meaning. There is no reason not to give it full force and effect, subject to the availability of any equitable defence or remedy. The two defendants were intended to execute the deed. One did. The other did not. By reason of the express term in cl (iv) of the deed, the one who executed it is liable on it at common law, despite the other intended guarantor not having executed it.
Counsel for the defendant argued that, despite the terms of the deed, this was a case in which equity must intervene to discharge the liability of Peter Brent, the defendant who executed the deed. He relied on the third of the four propositions formulated by Powell J in Marston (above): "… the fact that that other, or those others, does not, or do not, thereafter execute the guarantee gives rise to an equity in the intending surety to be relieved against the guarantee, which equity could be enforced by a suit in equity seeking a declaration of discharge in equity and an order for delivery up".
Marston was a case in which such relief was granted. One intended guarantor had executed a guarantee but the other had not. The creditor sued on the guarantee in the District Court of New South Wales. Doubts arose as to whether an equitable defence could be pleaded. An action was therefore brought in the Supreme Court for an injunction restraining the creditor from continuing the District Court proceedings, and for orders for the delivery up and cancellation of the guarantee. Powell J made it clear that the equitable defence was available in the District Court, but granted the relief sought in the Supreme Court. However no question arose as to whether there was an express provision in the deed of guarantee that entitled the creditor to succeed.
In Marston, Powell J cited Evans v Bremridge (1856) 8 DeGM&G 100; 44 ER 327 as authority for the third of his four propositions. That was a Chancery appeal. It is more fully reported at (1856) 25 LJCh 334. It concerned a deed that had been executed by one of two intended co-sureties. It was held, in the words of Turner LJ at 25 LJCh 335, that "the plaintiff having entered upon this obligation on the faith of having a co-surety, he ought to be relieved in equity".
Evans v Bremridge was considered by the English Court of Appeal in James Graham and Co (Timber) Ltd v Southgate-Sands (above). That case concerned a deed of guarantee in which three guarantors were named. One of their signatures was forged. The Court of Appeal held unanimously that the other guarantors were therefore not liable at common law. Browne-Wilkinson LJ (as he then was) said the following as to the availability of an equitable defence, at 94:
"In my judgment, the fact that the plaintiffs had no notice of the invalidity of Mr Whitfield's signature is fatal to any claim by the defendant for relief in equity on the principle of Evans v Bremridge. Equitable rights and defences operate, and operate only, on the conscience of the plaintiff. If the plaintiff has neither actual nor constructive notice of the relevant circumstances, it is not 'inequitable' for him to enforce his strict rights at law; his conscience is not affected. Therefore, the equitable principle relied on by the defendant in argument is of no avail to him. His defence, if any, must be on the basis that at law, as opposed to equity, he was not contractually bound by his signature unless and until all the other parties signed."
A somewhat different view of the basis for equitable relief was taken in the Supreme Court of Western Australia by Anderson J in Keith Murphy Pty Ltd v Custom Credit Corporation Limited (above) at 342-343, where his Honour said (omitting case references):
"... sometimes it is important to appreciate that in the case of a partially executed document, the position at law is quite distinct from the position in equity. At law the failure of one of the named parties to an instrument to sign it may nullify the contract in the sense that no contract will come into existence at all. Whether that is the consequence of incomplete execution in any particular case will almost always depend on a proper construction of the instrument. Equity plays no part in that procedure. The question for the court of law is whether on its proper construction the instrument is intended to have effect absolutely as against each party who executes it or whether it should be regarded as incomplete and inoperative unless and until executed by all parties … The equitable principle is resorted to when it is not possible to say as a matter of construction that the instrument is, in its terms, conditional. Then, if it is the case that nevertheless the signatory executed the instrument 'on the faith of' the other parties executing it, and they failed to do so, relief in equity may be available. This is not because of any incompleteness in the formation of the contract or the failure of a condition nullifying the bargain, but because equity will intervene to prevent the signatories being unjustly held to the bargain actually made … Equity regards it as unconscionable to enforce the contract against an obligor who entered the obligation on the understanding and in the belief that others were entering it jointly with him and they do not do so. In the absence of the other signatories, the obligor would be deprived on valuable rights of contribution. Equity recognises that it is therefore a different obligation, and presumes that it was one which it was not intended he should assume and grants relief by not holding the contract a nullity at law, but by restraining the obligee from taking any proceedings at law under the instrument against the obligor …".
In relation to the proposition that "equity will intervene to prevent the signatories being unjustly held to the bargain actually made", Anderson J referred to a number of authorities including Commissioner of Taxation (Cth) v Taylor (1929) 42 CLR 80 at 87; and Lady Naas v Westminster Bank Limited [1940] AC 366 per Lord Russell of Killowen at 391 and per Lord Wright at 405. There is a maxim that "equity looks to the intent, rather than to the form". According to the learned authors of Meagher, Gummow and Lehane's Equity Doctrine & Remedies, 5^th ed, LexisNexis Butterworths, 2015, at [3-170], this maxim can apply when a deed is executed not by all parties, but by some only. There is a line of authority that establishes that when a deed is delivered absolutely, rather than in escrow, and is immediately operative despite the executing party having delivered it on the faith that other parties would execute it, equity will grant relief if those other parties do not execute it: Luke v South Kensington Hotel Co (1879) 11 Ch D 121 at 125; Commissioner of Taxation (Cth) v Taylor (above); Lady Naas v Westminster Bank Limited (above); Wilson v Frost (1935) 35 SR(NSW) 521 at 525.
However the parties to a guarantee no doubt have the power and freedom to make a contract whose terms displace the equitable principle that is discussed in those cases. That is what the plaintiff and the second defendant did. They entered into a contract, in the form of a deed, that expressly provided in cl (iv) that the liability of any guarantor who executed the deed was not to be contingent upon its execution upon any other guarantor. There was no suggestion of any similar provisions in any of the deeds or instruments considered in any of the relevant reported cases other than Vassos v State Bank of South Australia (above). If one "looks to the intent, rather than to the form", it is clear that the parties' intent was that, in the event that only one guarantor executed the deed, that guarantor would be bound. It must follow that the executing guarantor does not have an equity to be relieved from his deed. There is no room for equity to make a presumption, as discussed by Anderson J in Keith Murphy Pty Ltd v Custom Credit Corporation Limited (above) at 343, that the obligation as a sole guarantor was one which it was not intended that the executing guarantor should assume.
The plaintiff's claim against the second defendant must therefore succeed.

Miscellaneous expenses

As I have said, there is a dispute as to whether the plaintiff company is entitled under the provisions of the deed to be indemnified in respect of various expenses. The deed provides as follows:
"AND if the Customer shall make default in payment to the Supplier of such monies the Guarantors hereby covenant and agree to pay to the Supplier, and indemnify the Supplier against, all losses damages expenses and costs which the Supplier shall incur by reason of any such default".
Mrs Moore undertook calculations as to the interest payable by Bunjurgen, but she included GST in relation to the interest by mistake. The plaintiff's accountants were subsequently engaged to recalculate the interest payable by Bunjurgen. Those accountants also provided services relating to the quantification of the plaintiff's claim and the creditors' meetings. They charged for their services. Their fees totalled $1,100 inclusive of GST.
The plaintiff's solicitors charged fees totalling $14,724.59. Some of those fees related to creditors' meetings. Others related to attempts to recover from Bunjurgen the amounts payable for goods sold and delivered and interest.
Mr Moore attended the creditors' meetings relating to Bunjurgen in Brisbane, and meetings with his company's solicitors in Launceston. The expenditure in relation to those meetings comprised air fares, accommodation and meal expenses, as follows:
Jetstar  $160.49
Qantas  $427.00
Hotel Ibis  $481.31
Il Centro Italian Restaurant  $43.00
Cha Cha Char Grill  $22.50
Royal Oak Hotel  $29.10
Virgin Australia Airlines  $585.70
Launceston Airport  $52.00
McDonalds Melbourne Airport  $9.35
M2 Commander Pty Ltd, Southbank  $123.97
Virgin Australia Airlines  $106.70
Total  $2,041.12
Counsel for the defendant submitted that the accountants' fees, the solicitors' costs in relation to the creditors' meetings, the air fares, and the accommodation and meal expenses did not amount, within the meaning of the relevant provision in the deed, to losses, damages, expenses or costs which the plaintiff had incurred by reason of Bunjurgen's default. He relied upon Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235. One issue in that case concerned the meaning of the words "as a result of". The Court of Appeal had to decide whether the appellant in that case had ceased to carry on business "as a result of" a vacancy in the office of trustee under a deed. Spigelman CJ held at [100] that the meaning of the words was "to be determined in accordance with the reasonable person's understanding of the words in their context". At [102] he concluded that the context indicated "that what is required is a direct and immediate cause, rather than identification of some ultimate or 'real' cause".
In this case the critical words must of course be interpreted in accordance with the hypothetical reasonable person's understanding of the words in their context. But the context is different from that under consideration in Gardiner, which concerned the control of an investment project. In the deed in this case, the words, "all losses damages expenses and costs which the Supplier shall incur by reason of any such default" are deliberately wide. The parties to the deed chose not to confine its operation to monies payable for vegetables, interest thereon, and legal costs and disbursements, as they could have done. The intention plainly was to protect the creditor in relation to all categories of expenditure and losses incurred as a consequence of Bunjurgen defaulting.
In my view any reasonable person would regard the accountants' fees, the legal costs relating to creditors' meetings, and the expenses relating to Mr Moore attending creditors' meetings and meetings with solicitors as having been incurred "by reason of" Bunjurgen having defaulted in the payment of moneys payable for vegetables sold and delivered, as well as interest. The plaintiff's claim against the second defendant must therefore succeed in full.

Conclusion

It was agreed between the plaintiff company and Bunjurgen that Bunjurgen would pay compound interest in relation vegetables sold and delivered by the plaintiff if it did not pay for them when it was required to. There was no agreement for such interest to be payable in relation to solicitors' costs, accountants' fees, or other expenditure. It is common ground that, as at 3 November 2014, Bunjurgen owed the plaintiff $684,845.07 for goods sold and delivered, plus $793,992.37 for interest, and that compound interest was continuing to accrue at 2.5% per month, compounding monthly.
It follows that the plaintiff is entitled to judgment against the second defendant for $684,845.07 plus compound interest to the date of judgment, as well as the following:
Solicitors' fees as per par4.8 of the statement of claim   $14,724.59
Accountants' fees  $1,100.00
Expenses relating to meetings  $2,041.12
I will defer the making of final orders to give the parties an opportunity to undertake interest calculations. I propose that the plaintiff will have judgment against the second defendant, and that judgment will be entered for the first defendant against the plaintiff.