Crossley v Sea Trek Dive Services Pty Ltd - [2020] QCA 35

SUPREME COURT OF QUEENSLAND

CITATION:

Crossley v Sea Trek Dive Services Pty Ltd & Anor [2020] QCA 35

PARTIES:

DENNIS ALAN CROSSLEY
(appellant)
v
SEA TREK DIVE SERVICES PTY LTD
ACN 007 847 216
(first respondent)
PEPPI IOVANNELLA
(second respondent)

FILE NO/S:

Appeal No 8846 of 2019
DC No 185 of 2017

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

District Court at Cairns – [2019] QDC 126 (Morzone QC DCJ)

DELIVERED ON:

3 March 2020

DELIVERED AT:

Brisbane

HEARING DATE:

4 February 2020

JUDGES:

Sofronoff P and Morrison and Mullins JJA

ORDERS:

1. Appeal dismissed.

2. The appellant must pay the respondents’ costs of the appeal.

CATCHWORDS:

GUARANTEE AND INDEMNITY – CONTRACT OF GUARANTEE – PARTIES AND CAPACITY – where the respondents made progressive advances to the company of which the appellant was a director – where the appellant was named as a party to the loan agreement which recited that he agreed to guarantee the loan – where appellant disputed signing the loan agreement as the guarantor – where appellant asserted that it was an agreement to give a guarantee in the future – where there was only one place on the loan agreement for the appellant to sign and under his signature was his name and the description “director” – whether there was any error in the primary judge’s finding that the appellant liable under the loan agreement as the guarantor of the loan

GUARANTEE AND INDEMNITY – CONTRACT OF GUARANTEE – WHAT CONSTITUTES – GENERALLY – where the respondents demanded the repayment of the loan before the due date for repayment under the loan agreement – where the borrower took no action in response to the premature demand for repayment – whether the guarantor’s liability was discharged by the premature demand for repayment – whether the was any error in the primary judge’s finding that the premature demand for repayment did not breach the loan agreement

GUARANTEE AND INDEMNITY – CONTRACT OF GUARANTEE – WHAT CONSTITUTES – GENERALLY – where it was a condition of the loan agreement that the natural person who was one of the lenders was to have a major input into the running of the borrower – where that respondent resigned as a director before the due date for repayment under the loan agreement and ceased involvement in the running of the appellant – where appellant claimed the guarantee was discharged due to material variation in the terms of the agreement without his consent – whether it was a term of the loan agreement that that respondent would continue involvement in running the appellant – whether there was any error in the primary judge’s conclusion that the condition was for the benefit of that respondent

Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2004] HCA 28, considered
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; [1987] HCA 15, considered
Aquawest Pty Ltd v Twynham [2017] NSWSC 652,…

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: [2020] QCA 35
Decision Date: 3 March 2020

CaseChat Overview and Summary

The appellant, Crossley, was a director of Omega, a company that entered into a loan agreement with Sea Trek Dive Services Pty Ltd, the respondents. The dispute centred on whether Crossley was liable as a guarantor of the loan. The primary judge found Crossley liable, and this decision was appealed. The central legal issues were whether Crossley had signed the loan agreement as a guarantor, whether the premature demand for repayment discharged the guarantor’s liability, and whether a respondent’s resignation from the company's board amounted to a material variation that discharged the guarantee.

The court examined whether there was any error in the primary judge’s findings. Firstly, the court concluded that there was no error in finding Crossley liable as a guarantor. The loan agreements were entered into by businessmen, and the language used in the agreements was indicative of their intended legal effect. Although the third loan agreement used past tense and "whereas" clauses, the intention of the parties, as deduced from the entire agreement and the anticipation of further advances, was that the guarantee applied both prospectively and to existing advances. The court also found that Crossley’s liability as a guarantor was certain, as evidenced by the fact that further advances were made after each loan agreement was signed. Regarding the premature demand for repayment, the court determined that the demand did not breach the loan agreement, as Omega did not treat it as a breach capable of terminating the agreement. Consequently, Crossley’s obligation as a guarantor remained unaffected. Lastly, the court held that the condition regarding a respondent’s involvement in the company's operations was for the benefit of that respondent, not a term for the guarantor’s benefit, and thus, the resignation did not amount to a material variation that discharged the guarantee.

The court dismissed the appeal and ordered that the appellant must pay the respondents’ costs of the appeal.

Orders

Orders of the court

1. Appeal dismissed.

2. The appellant must pay the respondents’ costs of the appeal.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

It is part of the factual matrix which the primary judge was entitled to take into account that the loan agreements were entered into by businessmen who chose the language of their agreements. As the respondents submit, it is only after the usual aids to construction are exhausted and an ambiguity in the terms of a guarantee remains, that the principle in Ankar applies. There is no basis for the appellant to assert the third loan agreement was an agreement to agree, when it replaced the second loan agreement which replaced the loan agreement. The parties obviously intended the loan agreements to have legal effect, as they substituted the loan agreements, as further advances were being made by the respondents to Omega. Although the past tense and the word “whereas” was used in setting out that Mr Crossley had agreed to guarantee the loan, the intention of the parties from a consideration of the entire agreement and the fact that further advances were anticipated by the terms of each loan agreement was that the guarantee was prospective in part, but also applied to the existing advances, as found by the primary judge at [56] of the reasons.Uncertainty and/or want of consideration The question of whether there was a want of consideration is determined by the facts. It is apparent that further advances were made after each loan agreement was entered into and each loan agreement specified the maximum amount to be lent by the respondents. There was nothing uncertain about the extent of Mr Crossley’s liability as guarantor under the third loan agreement.The premature demand for repayment Repayment under the third loan agreement was not due when the demand was made by Mr Iovannella on 30 September 2013. It is therefore arguable that there was no breach of the loan agreement by the respondents’ making the premature demand for repayment. If it were a breach of the loan agreement that was of no consequence, as no action was taken by Omega in respect of the premature demand. Omega did not treat the premature demand as a breach that was capable of being accepted, in order to terminate the loan agreement: see Ankar at 555. The premature demand therefore did not have any effect on the guarantor’s obligation. The time for repayment eventually became due on 31 December 2013 and the loan was not repaid. There was therefore no error by the primary judge in failing to find that the demand for payment before the loan was due to be repaid was a breach of an essential term of the third loan agreement. Although the primary judge dealt with this argument based on the premature demand for repayment which was advanced at the trial, it was not an issue raised for decision by the appellant’s pleading. There was no pleading by the appellant that the premature demand for repayment was in breach of the third loan agreement. The appellant had merely pleaded the premature demand as a fact to support the allegation that Mr Iovannella’s resignation as a director amounted to a material variation to the loan agreements by increasing the risk to Mr Crossley as guarantor, because the demand for repayment was made.The effect of Mr Iovannella’s withdrawal from running Omega

CITATION:	Crossley v Sea Trek Dive Services Pty Ltd & Anor [2020] QCA 35
PARTIES:	DENNIS ALAN CROSSLEY (appellant) v SEA TREK DIVE SERVICES PTY LTD ACN 007 847 216 (first respondent) PEPPI IOVANNELLA (second respondent)
FILE NO/S:	Appeal No 8846 of 2019 DC No 185 of 2017
DIVISION:	Court of Appeal
PROCEEDING:	General Civil Appeal
ORIGINATING COURT:	District Court at Cairns – [2019] QDC 126 (Morzone QC DCJ)
DELIVERED ON:	3 March 2020
DELIVERED AT:	Brisbane
HEARING DATE:	4 February 2020
JUDGES:	Sofronoff P and Morrison and Mullins JJA
ORDERS:	1. Appeal dismissed. 2. The appellant must pay the respondents’ costs of the appeal.
CATCHWORDS:	GUARANTEE AND INDEMNITY – CONTRACT OF GUARANTEE – PARTIES AND CAPACITY – where the respondents made progressive advances to the company of which the appellant was a director – where the appellant was named as a party to the loan agreement which recited that he agreed to guarantee the loan – where appellant disputed signing the loan agreement as the guarantor – where appellant asserted that it was an agreement to give a guarantee in the future – where there was only one place on the loan agreement for the appellant to sign and under his signature was his name and the description “director” – whether there was any error in the primary judge’s finding that the appellant liable under the loan agreement as the guarantor of the loan GUARANTEE AND INDEMNITY – CONTRACT OF GUARANTEE – WHAT CONSTITUTES – GENERALLY – where the respondents demanded the repayment of the loan before the due date for repayment under the loan agreement – where the borrower took no action in response to the premature demand for repayment – whether the guarantor’s liability was discharged by the premature demand for repayment – whether the was any error in the primary judge’s finding that the premature demand for repayment did not breach the loan agreement GUARANTEE AND INDEMNITY – CONTRACT OF GUARANTEE – WHAT CONSTITUTES – GENERALLY – where it was a condition of the loan agreement that the natural person who was one of the lenders was to have a major input into the running of the borrower – where that respondent resigned as a director before the due date for repayment under the loan agreement and ceased involvement in the running of the appellant – where appellant claimed the guarantee was discharged due to material variation in the terms of the agreement without his consent – whether it was a term of the loan agreement that that respondent would continue involvement in running the appellant – whether there was any error in the primary judge’s conclusion that the condition was for the benefit of that respondent Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2004] HCA 28, considered Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; [1987] HCA 15, considered Aquawest Pty Ltd v Twynham [2017] NSWSC 652,…