Cooper v Cwlth Bank; Marshall v Cwlth Bank No. Scgrg-95-242, Scgrg-95-240 Judgment No. S6585

[1998] SASC 6585

COOPER V COMMONWEALTH BANK OF AUSTRALIA

MARSHALL V COMMONWEALTH BANK OF AUSTRALIA

Full Court
Coram: Doyle CJ Cox & Williams JJ

Williams J

The respective defendants in two actions have brought these appeals against a decision of a Master whereby he ordered that summary judgment be entered for the plaintiff bank in accordance with SCR25.02.

On 29 November 1995 the plaintiff bank made an application in each action seeking summary judgment against the defendants as guarantors of a debt (the amount of which as at 14 February 1995 was alleged to be $1087814.80).  The two applications have been dealt with together.  On 23 February 1996 summary judgment in each case was obtained on a Master’s order. On 28 February 1997 the Full Court (Judgment NoS6028) allowed the defendants’ appeals ("the first appeals") against these orders and remitted the matters to the Master for further hearing ("the second hearing").  On 22 August 1997 the Master (after receiving further evidence and submissions) again ordered that judgment be entered for the plaintiff in each action; from those orders the defendants now appeal ("the second appeals").

As the orders of the Master finally determined matters at issue an appeal lies to the Full Court in accordance with SCR106.05(1).  That rule incorporates the provisions of SCR95.

The appellants contend that the reasons given by the Master on 22 August 1997 were insufficient in that they did not deal with all arguments which were addressed to the Master upon the second hearing.  Upon that basis, the appellants (having identified this flaw) argue that the applications should be sent back for further hearing or alternatively that the matters should proceed to trial in the ordinary course.

In my opinion, this submission is misconceived.

In this instance this Full Court is exercising an appellate jurisdiction in which, in order to succeed it is necessary for the appellants to demonstrate error on the part of the Master in reaching his decision.

In Wigg v Architects Board (1984) 36 SASR 111 Cox J at 112-116 reviewed the different kinds of appeal which may be created and he drew attention to the discussion of this topic by Mason J in Builder Licensing Board v Spurway Constructions (1976) 135 CLR 616.

It seems to me that an appeal in the present circumstances is probably an appeal by way of re-hearing upon the documents but with a special power to receive further evidence on appeal (see Wigg at 113). If the parties by consent had brought these appeals to a single judge pursuant to SCR106.05(2)(c) then in accordance with SCR97 the appeal would have been by way of re-hearing and I am inclined to the view that the situation should not be different before the Full Court. However, whether the appeal be a strict appeal or whether it is a re-hearing on the documents the result will not be different in the present case. The facts are not in dispute. It is apparent that the Master did address questions of accounting between the parties and his decision must be given appropriate weight (see In re Flinders Trading Co (1977) 20 SASR at 28 per Sangster J). There is a question of law which upon the face of the Master’s reasons has been left unresolved. It will be necessary for this Full Court to consider that question together with the other arguments of the appellants in order to decide whether there is appealable error in the Master’s decision.

These actions concern a mother (Mrs JH Marshall) and her adult sons Richard and Simon who were guarantors of moneys advanced to Rothmore Farms Pty Ltd.  Mrs Marshall executed a deed of guarantee dated 1 September 1986.  Richard and Simon executed another deed of guarantee of the same date together with their brothers Andrew and Martin who were then infants.

In action 240 of 1995 the Commonwealth Bank of Australia sued Mrs Marshall upon her guarantee and in action 242 of 1995 the Bank likewise sued Richard and Simon.  The form of guarantee used in each case is identical.  No action has been taken by the Bank against Andrew or Martin.

Upon the first appeals to the Full Court only one point was pursued.  The plaintiff had relied upon a certificate to establish the indebtedness of the principal debtor and hence the liability of each guarantor.  A clause in the guarantees made provision for the certificate to be prima facie evidence of the amount owing and of other matters.  Acting for themselves before the Master upon the first hearing, the defendants sought to show to the Master a letter from the Commonwealth Bank Kadina branch.  The defendants contended that this letter provided evidence which cast doubt upon the accuracy of the Bank’s certificate.  However, the Master did not look at this letter.  Upon the first appeal by the defendants the Full Court (having regard to the position of unrepresented litigants) took the view that the Master erred in entering judgment for the plaintiff without giving the defendants an opportunity to put their point properly with respect to the Bank’s letter.  Accordingly that appeal was allowed and the matter was remitted to the same Master for further hearing.
         Having regard to the way in which the first appeal was conducted by counsel for the defendants it is arguable that thereafter the defendants could have been confined to the only issue argued on the first appeal.  On that occasion, in the knowledge that other points were available, the appellants’ counsel expressly declined to argue other points to which attention had been drawn. 

However, upon the second hearing before the Master the defendants (who were now represented by counsel) took a number of points - including arguments which counsel had previously declined to pursue upon the first appeal. The defendants continued (as a matter of accounting) to dispute the guaranteed debt (which was the issue argued on the first appeal) but counsel’s preliminary written argument also dealt with other matters including: (i) an alleged breach of s55b of the Law of Property Act, 1936 (ii) the effect of the presence of the infant guarantors in a transaction where (upon one reading of the documents) the liability of the guarantors was expressed to be joint and several, and (iii) an allegation (as pleaded) of a misrepresentation (or misleading and deceptive conduct).

Additional affidavit evidence was received by the Master at this second hearing and there is no criticism now made of the opportunity afforded the defendants to support their case with appropriate evidence.

In the course of the second hearing before the Master the Bank in fact replied comprehensively to the written and oral contentions opened up by the defendants.  It is understandable that the Bank chose to proceed in this way.  Any attempt by the Bank to restrict the appellants by reference to their counsel’s conduct of the first appeal would have invited further disputation.

In giving his reasons on 14 August 1997 for his second decision, the Master noted that the only point argued on the first appeal had been the accuracy of the Bank’s certificate of indebtedness.  The Master seems to have treated that point as being all that remained in the case although the submissions made to him on the second hearing embraced the other matters which I have noted.

Apart from a commentary upon the further material which had been placed before him relating to the existence and amount of the principal debt the Master’s reasons of 14 August 1997 were expressed as follows:

"On the basis of the material now presented to me, I am satisfied that the defendants do not have an arguable defence in relation to the plaintiff’s claim."

Upon the second appeal Mr Hevey of counsel for the present appellants argued (as already noted) that these reasons were inadequate and he submitted that the matter should be returned to the Master for decision or else the actions should proceed to trial.  Alternatively he submitted that this court should determine the questions which had been argued.  In my opinion the court should follow the lastmentioned course.

Reading the reasons as a whole it is evident that the Master was satisfied that the prima facie force of the Bank’s certificate had not been displaced by any material placed before him.  Mr Hevey was prepared to accept that analysis of the reasons.  It was not suggested upon the present appeal that the Master was wrong in reaching that conclusion.  Error has not been demonstrated in the Master’s reasons as regards the accounting details and as to the continued existence of the debt to the Bank.

It remains then to consider other arguments which were before the Master.

Relying upon s55b of the Law of Property Act 1936 the defendants pointed to collateral mortgage securities which they had given to the Bank; as mortgagors thereunder the defendants claimed to be entitled to "reasonable particulars" of the amount constituting the mortgage debt. As this amount was one and the same amount as that claimed under the guarantees the full accounting given in the course of the second hearing before the Master must have satisfied any obligation by the Bank to supply particulars. The point is really not arguable.

The accounting given by the Bank was in a form which incidentally also disposed of other related questions involving alleged repayments on account of the principal debt.

Before the Master the defendants pointed to the onus of proof which lay upon the plaintiff to establish its case and asserted that the position was sufficiently obscure as to justify a full trial.  That submission was bound to fail in the face of fully reconciled bank records coupled with an explanation as to how the Bank had applied monies upon the written authority of Mrs Marshall.

There is only one matter of substance raised by way of possible defence to the claim which was ventilated before the Master and also put forward by the appellants on the second appeal.  It is a short point which may be conveniently disposed of under SCR25.02.

The appellants argue that the guarantees were signed on the understanding that there would be five persons who would be responsible upon the engagement.  However of that number, two signatories (Andrew and Martin as abovementioned) were infants; as the guarantees are unenforceable against the minors the appellants argue that a condition precedent to the liability of the other guarantors has not been established.

The appellants adopted the language used in Walter and Morris v Lymberis (1965) SASR 204 at 211 for the proposition that:

"In such circumstances it is a condition precedent to the liability of the guarantor that all who are to participate with him should be likewise bound, and, if that condition is not satisfied, then the guarantee fails to become effective."

They also relied upon the statement in Phillips & O’Donovan The Modern Contract of Guarantee (2nd ed) at 168:

"If the liability of guarantors is joint and several this carries with it the implication that all guarantors must execute the agreement before it becomes legally binding.  On this basis it has been held that if the signature of one or the joint and several guarantors is forged, so that as regards that guarantor the guarantee is void and of no effect, all guarantors are discharged, even if they did not know of the forgery.  The same conclusion has been reached where the guarantee is void as against one guarantor because of a failure to comply with statutory requirements regarding execution."

Upon the construction of the instruments of guarantee and upon the evidence I would reject this argument.  Nevertheless the appellants are entitled to have reasons for this decision - as they should have received from the Master.

In action no.240 of 1995 the Bank relies upon a guarantee to which only Mrs Marshall is a party by way of guarantor.  The document upon its face establishes the liability of Mrs Marshall and there is no extrinsic evidence to suggest that Mrs Marshall entered upon the engagement based upon some "understanding" that the deed had been signed in escrow or subject to some qualification.  There is no basis for such an argument insofar as it is put forward on behalf of Mrs Marshall.  Mrs Marshall’s defence alleges certain representations by the Bank but that assertion is not supported by evidence.

In action no.242 of 1995 argument arises upon a defence which relevantly is expressed as follows:

"The defendants admit that they executed forms of guarantee to the plaintiff for payment of advances made to ROTHMORE FARMS PTY LTD but did so in circumstances which render the guarantees given by the defendants void or voidable at the option of the defendants.

PARTICULARS

The plaintiff by its servants or agents RAY SAUNDERS manager at the Commonwealth Bank of Australia Kadina at the relevant time represented to the defendants that their guarantees would be supported by at least two other guarantors namely ANDREW COOPER and MARTIN COOPER of the same sums of money on the same terms as guaranteed by the defendants.  The plaintiff did not obtain guarantees from two other guarantors as represented by the plaintiff’s servants or agents to the defendants.  If any such supporting guarantees were obtained (which is denied) those supporting guarantees were invalid and unenforceable in law and gave no support to the guarantees of the defendants."

As in action no.240 of 1995 there is no evidence of any relevant representation having been made by the Bank and the matter falls to be resolved by reference to the terms of the instrument of guarantee to which the two defendants together with their infant brothers became parties.

The instrument of guarantee is expressed to be made between the four brothers by name -Richard and Simon (the defendants) and Andrew and Martin (the infants) - on the one part and the Bank of the other part.  The four brothers are referred to as "the guarantor".  An extract from cl19 of the mortgage reads as follows:

"Except to the extent that such interpretation shall be excluded by or be repugnant to the context whenever the same are used herein the words the Guarantor shall mean and include the Guarantor and the executors and administrators of the Guarantor and (if the Guarantor is a corporation) the Guarantor and its successors and when two or more Guarantors are parties hereto shall mean and include the Guarantors or any of them their and any of their executors and administrators........  And when two or more Guarantors.....are parties hereto this Guarantee and the obligations and agreement on their part herein contained shall bind them and every two or more of them jointly and each of them severally."
(Emphasis added)

Clause 9 provides as follows:

"As a separate and independent stipulation the Guarantor hereby agrees and declares that all or any sums of money which may not be recoverable from the Guarantor on the footing of a guarantee whether by reason of any legal limitation disability or incapacity on or of the Debtor or any other fact or circumstance and whether known to the Bank or not shall nevertheless be recoverable from the Guarantor as sole or principal debtor in respect thereof and shall be paid by the Guarantor on demand together with interest at the rate or rates aforesaid from the date of demand until payment."

The combined effect of these clauses is that each of the four brothers is encompassed by the term "guarantor" (see cl19) and that each individual so named is to be liable as a debtor on his own account in the event that the monies (for some reason) are not recoverable upon the footing of a guarantee (see cl9).

Upon a fair reading of the document, each of the four brothers signed the instrument of guarantee upon the basis that his liability may stand alone irrespective of and independently of the position of all or any of his brothers.  This is not a case where there is room for argument that the liability of any one guarantor is dependent upon the existence of concurrent liability on the part of others.

Mr Lunn of counsel for the Bank relied upon s5(1) of the Minors Contracts (Miscellaneous Provisions) Act 1979 which provides:

"5(1) When a person (other than a minor) guarantees the performance by a minor of his obligations under a contract, the guarantee shall be enforceable against the guarantor to the same extent as if the minor had, before entering into the contract to which the guarantee relates, attained his majority."

This reference reinforces my conclusion as to the liability of the adult guarantors.

The defendants’ written argument before the Master upon the second hearing referred to an alleged misrepresentation and there is a pleading as to a breach of the Trade Practices Act 1974 (Cwlth).  There is no evidence before the Court to support any argument which might be based thereon.  The defendants were on notice at the time of the second hearing before the Master that the Court was being asked to enter summary judgment upon the basis that there was no issue which justified a trial.  It was incumbent upon the defendants to put forward some evidence in support of their pleaded assertions as to misrepresentations if they were to preserve their position.  However, nothing was forthcoming.

In my view no error is demonstrated in the decision of the Master. 

In my opinion the appeals should be dismissed.

Doyle CJ:

In my opinion both appeals should be dismissed.  I agree with the reasons of Williams J.

Cox J:

In my opinion both appeals should be dismissed.  I agree with the reasons of Williams J.