Credential Acceptance Corporation Pty Ltd v Ongley - [2006] SASC 367

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
CREDENTIAL ACCEPTANCE CORPORATION PTY LTD v ONGLEY
[2006] SASC 367
Judgment of The Honourable Chief Justice Doyle
7 December 2006
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSIDERATION - PAST CONSIDERATION
MORTGAGES - MORTGAGES AND CHARGES GENERALLY - RIGHTS AND LIABILITIES OF MORTGAGOR AND MORTGAGEE - POSSESSION - RIGHTS AND LIABILITIES OF MORTGAGEE IN POSSESSION
Claim for monies advanced by Credential Acceptance Corporation Pty Ltd to Willbox Pty Ltd - defendant sued as guarantor of monies - defendant did not appear at trial - defendant pleads by way of defence that guarantees are illusory for past consideration - evidence that consideration was not past consideration and in any event that the defendant was under contract to offer guarantees - defendant pleads that land sold by Credential Acceptance Corporation Pty Ltd as mortgagee was not sold for the best price reasonably attainable - evidence that the land was sold for the best price reasonably attainable - judgment for the plaintiff.
Corporations Act 2001 (Cth) s 420A, referred to.

CREDENTIAL ACCEPTANCE CORPORATION PTY LTD v ONGLEY
[2006] SASC 367
Civil

DOYLE CJ: Credential Acceptance Corporation Pty Ltd (“CAC”) is a credit provider.
CAC has brought proceedings against Mr Ongley and others claiming the payment of monies advanced by CAC to Willbox Pty Ltd (“Willbox”).
Mr Ongley is sued as a guarantor of the payment of monies owing or unpaid by Willbox.
The action came on for trial before me on Monday 20 November 2006. Mr Ongley was not present or represented, but had sent to court a certificate from a medical practitioner stating that he was not fit to attend court. I adjourned the trial of the action to Tuesday 21 November 2006. Mr Ongley was not present or represented, but had sent in a further medical certificate. After hearing some evidence from Mr Crotti, a solicitor acting for CAC, I directed that the trial proceed. I gave reasons for that decision at the time, and it is not necessary to repeat them now.
I took the view that the claim made by CAC was not a claim for a debt or a liquidated demand. In its Statement of Claim CAC claimed a declaration that Mr Ongley and the other defendants were liable to CAC under two guarantees, and an order that the defendants pay “such amount as may be assessed”. Having regard to the form of the claim, my view was that CAC was not entitled to a default judgment.
In any event, Mr Dal Cin, counsel for CAC, was prepared to present CAC’s evidence in proof of its claim, and proceeded to do so.
I allowed CAC to amend the Statement of Claim to claim judgment in the sum of $2,239,318.99.
By a Defence filed in July 2005 (when Mr Ongley had solicitors acting for him) Mr Ongley admits the incorporation of CAC and admits signing the two guarantees in question.
In the Defence Mr Ongley denies liability on the grounds that the consideration for the guarantees was illusory, because CAC had already made the advance in question to Willbox when Mr Ongley signed the guarantees. Mr Ongley also claims that his signature to the guarantees was procured by “economic duress”, because CAC threatened not to advance the full amount of the proposed advance unless Mr Ongley and the other guarantors sign the relevant guarantees. Mr Ongley also pleads that when CAC sold land over which it held a mortgage granted by Willbox, it failed to discharge its duty as mortgagee “to obtain the best price reasonably able to be obtained for the Land.”
I accept the truthfulness and general reliability of the witnesses called by CAC.
I make the following findings.
I find that Mr Ongley signed the two guarantees in question no later than 12 December 1997, and probably at the very latest no later than a day or so prior to that date.
Settlement of the transaction took place, and the funds were advanced, on Friday 12 December 1997. The evidence of witnesses involved in the settlement satisfies me that the solicitors for CAC would not have arranged for settlement of the transaction on Friday 12 December, and would not have prepared an Application for the Opinion of the Commissioner of State Taxation (all of which was done on Friday 12 December 1997) if the two guarantees had not by then been in their possession and duly executed.
Although the documents were not stamped for stamp duty purposes until Tuesday 16 December, I am quite satisfied that the guarantees had been executed, as I have already said, when settlement took place on Friday 12 December 1997.
It follows that I reject the plea by Mr Ongley in his Defence that the guarantees were signed on about 14 December 1997.
In any event I find that by an agreement in writing dated 31 October 1997, Mr Ongley (and others involved) agreed with CAC that in consideration of CAC advancing $1,370,000 to Willbox, Mr Ongley, in his capacity as a director of Woodstock Resources Pty Ltd and of Countrywide Management Pty Ltd would provide a guarantee to CAC in respect of the liability of Willbox to CAC as a result of the contemplated advance.
By accepting an offer to that effect by CAC, Mr Ongley agreed that if the advance was made (as it was) he would provide the required guarantee.
It follows that even if he signed the guarantees after the advance was made, he is bound by the guarantees. He is bound because he was legally obliged to execute the guarantees, having agreed to do so in consideration of the advance to be made by CAC to Willbox. Mr Ongley’s claim that there was no consideration for the giving of the guarantee is unsound.
I find that at settlement CAC advanced to Willbox, or paid at its direction, the sum of $1,120,000.
The agreement between CAC and Willbox provided for an advance to Willbox of $1,370,000 but by special condition 15(2) of the agreement to make the advance CAC had the right to arrange for part of the amount to be advanced to be provided by other lenders whose lending would be secured by a first mortgage, with CAC holding a second mortgage behind that first mortgage.
I find that CAC arranged for other lenders to advance the balance of the agreed amount, and that Willbox received, or had paid at its direction, the full amount of the agreed advance.
There is no evidence before me to support Mr Ongley’s claim that he signed the guarantees as a result of “economic duress”. The evidence before me tends to negate that claim, but as there is no evidence to support it, it can be disregarded.
In due course Willbox failed to repay the monies advanced, defaulted under the loan, and CAC took steps as mortgagee in possession to sell land over which it held a mortgage.
On the evidence before me I am satisfied that, for the reasons explained by the witnesses, the land was difficult to sell.
I find that CAC took all reasonable care to sell the land for “the best price that is reasonably attainable, having regard to the circumstances existing when the property is sold”: s 420A of the Corporations Act 2001 (Cth).
I am satisfied that the directors of CAC gave proper consideration to the sale of the land, and took all reasonable efforts to obtain the best price for the land that could be obtained.
I find that CAC appointed a competent agent, with appropriate local experience and expertise, for the purpose of selling the land. I find that the agent made appropriate efforts to market the land, and to advertise the two unsuccessful auctions that took place. I find that the agent handled the sale in a proper and competent manner.
In particular I accept the evidence of Mr Templeton relating to the attempts to sell the land, and explaining the difficulties that were experienced in finding a buyer. I accept the evidence of Mr McClaren relating to the attempts by the directors to sell the land. I accept, on the basis of all the evidence before me, that the sale of the land by contract for $375,000 was a proper exercise of the power of sale and, as I have already said, I am satisfied that in the circumstances this was the best price that was reasonably obtainable at the time, or in the foreseeable future.
There is no evidence to support Mr Ongley’s plea that CAC failed to obtain the best price reasonably able to be obtained. In any event, I am affirmatively satisfied, on the evidence before me, to the contrary.
To the extent that it may be necessary, I also find that the price at which the land was sold represented its market value at the time.
In short, I am satisfied that CAC did all that it reasonably could, and that its approach (and the approach of its agent) was a proper exercise of its power.
For those reasons I find that Mr Ongley is liable to CAC on each of the guarantees that he signed.
I accept the evidence of the calculation made by Mr McClaren, which demonstrates that as at 30 June 2006 the balance owing by Willbox to CAC was the amount of $2,239,318.89. That amount allows for various amounts recovered by CAC along the way.
I order that judgment be entered for CAC against Mr Ongley for that amount, and that Mr Ongley pay the costs of the action against him.