Cumace v Ioppolo
[2022] WASCA 171
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: CUMACE -v- IOPPOLO [2022] WASCA 171
CORAM: QUINLAN CJ
VAUGHAN JA
HALL JA
HEARD: 17 NOVEMBER 2022
DELIVERED : 17 NOVEMBER 2022
PUBLISHED : 20 DECEMBER 2022
FILE NO/S: CACV 91 of 2021
BETWEEN: ANTONIO STEFANO CUMACE
Appellant
AND
LEO ANTONINO IOPPOLO
Respondent
FILE NO/S: CACV 92 of 2021
BETWEEN: ANTONIO STEFANO CUMACE
Appellant
AND
PIERO CAMPEOTTO as trustee for THE CAMPEOTTO FAMILY TRUST
First Respondent
LEO ANTONINO IOPPOLO as trustee for THE ANNIMATT FAMILY TRUST
Second Respondent
ANTHONY PAOLINO
Third Respondent
LINA PAOLINO
Fourth Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram: LONSDALE DCJ
Citation: IOPPOLO -v- CUMACE [2021] WADC 86
File Number : CIV 4574 of 2020, CIV 4578 of 2020
Catchwords:
Contract - Whether primary judge erred in proper construction of agreements - Meaning of 'hereby guarantees' - Turns on own facts
Practice and procedure - Appeals against dismissal of applications to set aside default judgments - Whether primary judge erred in finding appellant had no reasonably arguable defence - Turns on own facts
Legislation:
Nil
Result:
Appeals dismissed
Category: B
Representation:
CACV 91 of 2021
Counsel:
| Appellant | : | A P Rumsley |
| Respondent | : | B Grubb |
Solicitors:
| Appellant | : | Westmont Legal |
| Respondent | : | Tudori Hager Grubb |
CACV 92 of 2021
Counsel:
| Appellant | : | A P Rumsley |
| First Respondent | : | B Grubb |
| Second Respondent | : | B Grubb |
| Third Respondent | : | B Grubb |
| Fourth Respondent | : | B Grubb |
Solicitors:
| Appellant | : | Westmont Legal |
| First Respondent | : | Tudori Hager Grubb |
| Second Respondent | : | Tudori Hager Grubb |
| Third Respondent | : | Tudori Hager Grubb |
| Fourth Respondent | : | Tudori Hager Grubb |
Case(s) referred to in decision(s):
Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219
CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Ioppolo v Cumace [2021] WADC 86
JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112
Moschi v Lep Air Services Ltd [1973] AC 331
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
TSW Analytical Pty Ltd v The University of Western Australia [2017] WASCA 67
REASONS OF THE COURT:
Overview
These reasons concern two appeals against orders made by a judge of the District Court of Western Australia (Lonsdale DCJ) dismissing appeals against decisions of a deputy registrar of that court (Hewitt DR) to dismiss applications to set aside default judgments obtained by the respondents against the appellant. The primary judge gave written reasons for dismissing the intermediate appeals against the decisions of the deputy registrar.[1]
[1] Ioppolo v Cumace [2021] WADC 86 (primary reasons).
The appeals in this court were heard together. The appeals concerned like legal instruments. At all times, both in the two primary proceedings and in the appeals, the parties proceeded on the basis that there was no difference as to the material facts and legal principles applicable to the claims made by the respondents against the appellant.
In substance, the critical issue on the appeals was whether the appellant had a reasonably arguable defence to the respondents' claims - the appellant contending that there was a defence based on his preferred construction of the legal instruments that grounded the respondents' claims.
After hearing from the appellant's counsel, the court determined that it did not need to hear from counsel for the respondents. That was because, as will be seen, the appeals were without substantive merit. The court made orders dismissing the appeals, saying that reasons for those orders would follow. These are our reasons for dismissing the appeals.
Background facts
The appellant, Mr Cumace, invested money with a man named Chris Marco - Mr Marco conducted business activities which included engaging investors to commit funds through what were known as 'private placement investments'.[2]
[2] Primary reasons [18] - [19].
The appellant discussed the idea of investing with Mr Marco with some of the respondents (although one respondent, Mr Campeotto, was introduced to the possibility by another respondent). The appellant explained, however, that Mr Marco did not want to deal with many individuals. The appellant invited the respondents to give him funds to pool with other investors' funds to be invested with Mr Marco. Funds were paid by the respondents to the appellant for that purpose.[3]
[3] Primary reasons [20] - [24].
The amounts paid to the appellant by the respondents comprised:[4]
1.As to Mr Ioppolo - $250,000.[5]
2.As to Mr Campeotto as trustee for the Campeotto Family Trust, Mr Ioppolo as trustee for the Annimatt Family Trust and Anthony & Lina Paolino - a further $250,000.[6]
[4] Primary reasons [24], [27].
[5] Mr Ioppolo is the respondent in appeal CACV 91/2021 and the plaintiff in District Court of Western Australia action CIV 4574/2020. In Mr Ioppolo's capacity as trustee for the Annimatt Family Trust he is also the second respondent in appeal CACV 92/2021 and the second plaintiff in District Court of Western Australia action CIV 4578/2020.
[6] The parties so named are the respondents in appeal CACV 92/2021 and the plaintiffs in District Court of Western Australia action CIV 4578/2020.
Upon paying the money to the appellant, the respondents were presented with a document entitled 'Private Placement Investment' (PPI).[7] The PPI in relation to Mr Ioppolo is reproduced at annexure A to these reasons. The PPI in relation to the other respondents is reproduced at annexure B to these reasons. It will be observed that the salient terms of the two PPIs are materially the same.
[7] Primary reasons [25].
By the PPIs:
1.The appellant is described as the 'Principal' and declares that he holds the private placement investment as specified - in each case this is an 'investment amount' of $250,000 at a certain rate of return (2% per month) with a specified 'maturity date'. The appellant also declares that the 'beneficiary' is entitled to 'their proportion of the capital and interest of income therefrom as [a] single investment holder'.
2.The respondents are described as the 'investor'.
3.It is stated that:
The investor has agreed to advance to the Principal the sum specified in below schedule [ie the 'investment amount' of $250,000] upon the terms and conditions here contained.
4.Below the heading 'Guarantee' the following appears:
By the execution of this declaration, the Principal hereby guarantees to the investor the repayment of the principal sum in the event of investment loss.
The appellant made several payments to the respondents for their returns on investment between 8 May 2018 and 9 November 2018.[8]
[8] Primary reasons [28].
Separately, the appellant was party to an investment agreement with Mr Marco. Among other things this recorded that the appellant had agreed to advance an amount of $4,995,000 to Mr Marco. The investment agreement between the appellant and Mr Marco provided for a 3% monthly rate of return.[9] In a finding that was unchallenged in the appeals, the primary judge concluded that the documentation appeared to establish that the appellant had been 'skimming' profits from the respondents. In other words the primary judge was satisfied that the amounts advanced by the respondents to the appellant (which attracted a 2% monthly rate of return) were on-advanced by the appellant to Mr Marco (for which the appellant received a 3% monthly rate of return).
[9] Primary reasons [33].
In November 2018 the Australian Securities & Investments Commission sought and obtained a freezing order over Mr Marco's accounts. Mr Marco was unable to make any further payments to the appellant. The appellant, in turn, ceased making any payments to the respondents. Thereafter the respondents made demand on the appellant for repayment of principal and interest. The appellant did not comply with the demands.[10]
[10] Primary reasons [30] - [32].
On 14 December 2020 the respondents commenced proceedings against the appellant.
The appellant was served with writs on 22 December 2020.[11] He did not enter an appearance in accordance with the prescribed time limit. On 8 February 2021 the respondents sought and obtained default judgment. As already mentioned, applications to a deputy registrar to set aside the default judgments were dismissed. The appellant appealed to the primary judge against the dismissal of his applications to set aside the default judgments.
[11] Primary reasons [9].
Primary judge's reasons
The primary judge found that the appellant had failed to establish a credible explanation for his delay in entering appearances to the primary proceedings.[12] However, her Honour was not persuaded that this would be fatal to the applications to set aside the default judgments provided that the appellant was able to demonstrate a reasonably arguable defence on the merits.[13] Accordingly, the finding that there was not a credible explanation for the appellant's delay was immaterial to the proper disposition of the present appeals.
[12] Primary reasons [6], [14].
[13] Primary reasons [14].
Two matters were raised before the primary judge by way of suggested arguable defences:[14]
1.First, the appellant submitted that he was a mere volunteer or conduit between the respondents and Mr Marco and was not a party to any investment with the respondents.
2.Second, the appellant submitted that in the events that had happened the PPIs did not establish any obligation on his part to repay the plaintiffs. In this respect it was said that the terms of the PPI were ambiguous.
[14] Primary reasons [34] - [36].
The first contention was abandoned in argument before the primary judge.[15] It was an argument without merit. As the primary judge observed, with respect correctly, the PPIs showed that the appellant had agreed to pay the respondents 2% per month and repay the amount invested on the maturity date.[16] Also, the PPIs recorded that the respondents were advancing the investment amount to the appellant.
[15] Primary reasons [44] - [45].
[16] Primary reasons [43].
As to the second argument, the primary judge stated:
I do not accept that there is any reasonable basis for arguing that the PPI document is in any way ambiguous or that it did not represent an agreement between [the appellant] and the four [respondents]. The PPI document, being [the appellant's] own document, must be read contra proferentem. It was an agreement whereby [the appellant] (the principal) agreed to pay the [respondents] (the investors) a return of 2% and to guarantee repayment of the principal. The terms of the agreement are, with respect, clear and unambiguous.
Counsel for [the appellant] submitted that it was not clear who 'the investor' was from the document but that argument has no merit. The only sensible reading of the documents leads to a conclusion that the [respondents] are the investors.
Counsel for [the appellant] further submitted it was not clear that [the appellant] had guaranteed the investment because the signatures appeared above the paragraph about a guarantee. However, there was no evidence from [the appellant] or anyone else that the guarantee was referable to some other feature of an agreement between the parties. The submission is devoid of merit.
The only reasonable interpretation is that by his signature on the document, [the appellant] had agreed to guarantee the [respondents] against the loss of their investments.[17]
[17] Primary reasons [46] - [49].
For these reasons the primary judge concluded that the appellant had not established a reasonably arguable defence on the merits.[18]
[18] Primary reasons [6], [50].
Grounds of appeal
There are notionally four grounds of appeal:
1.The primary judge erred in law and in fact, in finding that the defendant had no arguable defence on the merits [50].
2.The primary judge erred in law and in fact, in finding that the appellant agreed to pay the respondents a return of 2% and to guarantee repayment of the principal [46].
3.The primary judge erred in law and in fact in failing to find that the respondents had not established an event of investment loss, for the purposes of the guarantee [30], [46] and [50].
4.The primary judge erred in law and in fact in dismissing the application to set aside default judgment.
The grounds are simply and shortly stated. That is to be encouraged. However, the grounds fail to identify in any meaningful way precisely how the primary judge is alleged to have erred in fact or in law.[19] It is necessary to read the grounds of appeal with the appellant's written submissions to understand the appellant's essential contentions.
[19] Compare Supreme Court (Court of Appeal) Rules 2005 (WA) r 32(4)(b).
It appears from the appellant's written submissions that grounds 1 and 2 are to be considered together.[20] Essentially, they raise a point as to the proper construction of the PPIs. Accordingly, despite the allegation that the primary judge erred in fact, the contention is simply that the primary judge erred in law in her Honour's construction of the agreements. The appellant contends that, on their proper construction, the PPIs provide for: (1) the respondents to invest with Mr Marco (ie Mr Marco was the person who owed the principal obligation); and (2) the appellant to guarantee repayment of the principal amount in the event of investment loss.[21]
[20] Appellant's submissions pars 18, 28 - 38 WAB 13, 15 - 17.
[21] Appellant's submissions pars 29, 34 WAB 15 - 16.
Ground 3 asserts that, accepting the primary judge's construction, it was nevertheless necessary to establish 'an event of investment loss' - and such loss was not established on the evidence.[22] As so stated in the appellant's written submissions, the suggestion appears to be that ground 3 could provide an independent basis for the establishment of a reasonably arguable defence. Counsel for the appellant retreated from that position in oral submissions. It was accepted that ground 3 could not take the appeal any further if the appellant was unsuccessful in sustaining his preferred construction as agitated by grounds 1 and 2. Rather, the point in relation to investment loss only arose if the appellant was successful in relation to grounds 1 and 2.[23]
[22] Appellant's submissions par 19 WAB 13.
[23] Appeal ts 15.
The appellant's counsel's concession as to the operation of ground 3 was properly made. Plainly, if grounds 1 and 2 failed, any question of investment loss was a false issue: the appellant had a primary obligation to repay the investment amount. Ground 3 identified an additional matter to be established should the appellant succeed on grounds 1 and 2 insofar as, properly construed, the PPIs did no more than provide for the appellant to guarantee repayment of the principal amount in the event of investment loss.
Ground 4 is a conclusion that relies on the success of grounds 1 ‑ 3.[24] Accordingly, it has no independent operation. If grounds 1 - 3 succeed then ground 4 follows. Without success on grounds 1 - 3, ground 4 fails. On that basis ground 4 may be put to one side.
[24] Appellant's submissions par 20 WAB 13.
So understood, the grounds of appeal raise two issues for determination, namely, whether the appellant had a reasonably arguable defence because:
1.On the proper construction of the PPIs the appellant did not assume a personal (ie primary) obligation to repay the principal amount - the appellant merely provided a guarantee to repay the principal in the event of investment loss.
2.On the evidence it was reasonably arguable that there had been no event of investment loss.
At the appeal hearing, counsel for the appellant confirmed that the summation in [26] above encapsulated the matters raised in the appeals.[25] It is evident that the first issue is an attempt to re-agitate, in a different form, the contention abandoned before the primary judge (see [16] - [17] above).
[25] Appeal ts 4 - 5.
Disposition grounds 1 and 2: the proper construction of the PPIs
It was not in issue that the default judgments were regularly entered. Nor were the parties in dispute as to the principles that applied on an application to set aside a default judgment. For present purposes it is enough to state that, among other things, it was necessary for the appellant to show a reasonably arguable defence on the merits. That is not a high threshold.[26]
[26] TSW Analytical Pty Ltd v The University of Western Australia [2017] WASCA 67 [46].
The appellant's written submissions addressed the applicable principles of contractual construction.[27] It is not necessary to rehearse those principles. The general principles to be applied in construing commercial instruments are well established and have been referred to in numerous decisions of this court.[28] In broad summary, the text used is to be interpreted objectively by considering what the language adopted would mean to a reasonable person in the position of the parties. The text used is to be considered in its relevant context, including the surrounding circumstances known to the parties at the time of the transaction, and having due regard to the purpose or object of the transaction as revealed by the text and context. The instrument must be read as a whole.
[27] Appellant's submissions pars 23 - 24 WAB 14.
[28] See in particular Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] - [52]. In this court see eg: Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219 [42]; CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31 [51] - [54]; JKC Australia LNG Pty Ltd v CH2M Hill Companies Ltd [No 2] [2020] WASCA 112 [67] ‑ [72].
The present appeals are not primarily concerned with the proper construction of a particular word or term of the PPIs. The appellant accepted that the appeals raised a characterisation issue. The question raised by grounds 1 and 2 requires characterisation of the legal relationship between the parties by reference to the PPIs, objectively construed in context having due regard to the purpose and object of the transactions.[29]
[29] Appeal ts 10.
In that respect the question of contractual construction raised by grounds 1 and 2 arises in an interlocutory context - the appellant seeks to set aside default judgments entered in favour of the respondents.
The proper construction of a legal instrument is a question of law. While it is not the norm, there are cases where the court considers it appropriate to determine questions of law in an interlocutory context. For example, on an application under O 16 of the Rules of the Supreme Court 1971 (WA) there may be summary judgment for a defendant if the facts are undisputed and the law is clear. In general, however, an interlocutory context is not the occasion to dispose of difficult or substantial questions of law which cannot be determined without full argument. It will usually be appropriate to leave the determination of such questions for trial.
The appellant did not suggest that the interlocutory context in which the appeals arose had any bearing on how this court should approach the constructional task presented by grounds 1 and 2. The PPIs are simple one-page documents. There was no material dispute between the parties as to the relevant factual context. Nor was it suggested that there was any further extrinsic evidence which might bear on the proper construction of the PPIs. The question of construction was fully argued by reference to the PPIs and the agreed factual context. In all the circumstances this was an occasion where it was appropriate to consider and determine the proper construction of the PPIs. That was all the more so since, on examination, only one construction was reasonably open.
In support of grounds 1 and 2, the appellant advanced the proposition that, properly construed, the PPIs did no more than identify the investor respondents and the amounts they paid to the appellant to invest with Mr Marco; and that the appellant provided a guarantee to the respondents for repayment of the principal amount in the event of investment loss - there was no assumption by the appellant of any primary obligation to repay the principal.[30] Thus, on the appellant's construction, the primary obligation was owed by Mr Marco and the guarantee given by the appellant was a secondary ancillary obligation to that primary obligation.[31] The appellant argued that, given the guarantee obligation, construing the PPIs as imposing a primary obligation would be duplicitous and would render the guarantee redundant.[32]
[30] Appellant's submissions pars 29 - 38 WAB 15 - 17.
[31] Appeal ts 6 - 7; Appellant's submissions pars 32, 34 WAB 16.
[32] Appeal ts 13 - 15; Appellant's submissions pars 35 - 36 WAB 16.
In explaining how Mr Marco's alleged primary obligation to the respondents arose, counsel for the appellant said that this was not answered by the PPIs. It was said to occur outside of the PPIs so far as it was understood by the parties that the respondents' money was to be on-paid to Mr Marco as an investment with Mr Marco (although the appellant's counsel also said that the PPIs contemplated that the respondents' investments would be made with Mr Marco). According to the appellant's counsel, if Mr Marco defaulted, the appellant, as trustee for the respondents, could sue Mr Marco (and, if the appellant failed to do so, the respondents as beneficiaries could take proceedings against Mr Marco and the appellant). In that respect the appellant's counsel focused on the textual references to 'declare' (appearing twice), 'hold' and 'beneficiary' in the initial two paragraphs of the PPIs - there being later reference to both 'beneficiary' and 'declaration' in the body of the PPIs.[33]
[33] Appeal ts 6 - 12, 14 - 15.
Implicit in these submissions was a contention on behalf of the appellant to the effect that, by the PPIs, the appellant held part of his investment with Mr Marco on trust for the respondents. This suggestion on behalf of the appellant was the only identified means by which it might be said that Mr Marco had a primary obligation to the respondents - albeit an indirect primary obligation so far as it was a primary obligation owed by Mr Marco to the appellant which the appellant held on trust for the respondents.
While, in these respects, pressing the contention that Mr Marco (rather than the appellant) had the primary obligation to repay the principal amount, the appellant's counsel accepted that Mr Marco was not a party to the agreements evidenced by the PPIs (those agreements being the only agreements to which the respondents were a party).[34]
[34] Appeal ts 2 - 3, 4.
That concession was properly made. Plainly the agreements evidenced by the PPIs are agreements between the appellant, as 'principal', and the respondents, as 'investors'. That is expressly provided for in the PPIs. The designation of the appellant as 'principal' is significant. Textually the use of the term 'principal' is consistent with the appellant assuming a primary obligation in relation to the respondents.
In addition to the use of the term 'principal', there are other significant textual indicators in the PPIs that are consistent with the instruments providing for a debtor and creditor relationship as between the appellant and the respondents:
1.Paragraph 2 refers to 'interest or income' (this being the 2% monthly rate of return). Interest is commonly associated with a lending transaction between lender and borrower. So far as the language used is 'interest or income' the word 'income' is used as an alternate for the word 'interest'.
2.Paragraph 3 (see [9.3] above) refers to the respondent investors agreeing to advance the amount of $250,000 to the appellant principal. Two things may be taken from the text: (a) the word 'advance' is the language of a lending transaction; and (b) the advance is to the appellant principal - there is no mention of Mr Marco. The appellant principal receives the $250,000 investment amount.
3.Within the schedule, particular (e) refers to 'maturity date'. Again, that is the language of a lending transaction.
4.The guarantee section refers to 'repayment of the principal sum'. That too is the language of a lending transaction.
The appellant sought to read down that language by focussing on the references to 'declare', 'hold', 'beneficiary' and 'declaration'. Those references must, however, be understood in the context that the instrument was described as a 'Private Placement Investment' rather than a declaration of trust. In any case, the implicit suggestion that the appellant held property on trust for the respondents - that property consisting of part of the $4,995,000 advanced by the appellant to Mr Marco - cannot be reconciled with the use of the term 'principal' and the language of a lending transaction as used in the PPIs. Nor is it compatible with the fundamental disconformity between the two investments. As between the appellant and the respondents the PPIs provided for a 2% monthly rate of return. As between Mr Marco and the appellant the investment agreement provided for a 3% monthly rate of return. In those circumstance counsel for the appellant accepted, with respect correctly, that there were two different investments.[35]
[35] Appeal ts 12.
The investment described in the PPIs between the appellant and the respondents was the investment that the investor respondents were making with the principal appellant. It was not the investment that the appellant was going to make (and which was made) with Mr Marco - which was on different terms. It follows that, contrary to the appellant's contention, no primary obligation was owed by Mr Marco to the respondents.
Nothing in the use of the word 'guarantee' in the PPIs affects the preceding analysis.
The appellant relied on the technical legal meaning of the word 'guarantee'.[36] The appellant argued that, so far as he 'guarantee[d] to the investor the repayment of the principal sum', he only undertook a secondary ancillary obligation. By thereby purportedly eliminating any primary obligation on his part, and there being no other logical candidate, the appellant pointed to Mr Marco as having a primary obligation. There are two difficulties with this contention. First, for the reasons given previously the appellant has not identified any basis on which it may be concluded that Mr Marco undertook a primary obligation vis-à-vis the respondents. None is apparent. Mr Marco was not a party to the PPIs. Second, the contention assumes that the word 'guarantee' is used in its technical legal meaning. We do not accept that this is the case.
[36] Appeal ts 10; Appellant's submissions pars 32 -33 WAB 16.
It is wrong to think that the word 'guarantee' has only one immutable meaning. As Lord Diplock stated in Moschi v Lep Air Services Ltd:[37]
Whether any particular contractual promise is to be classified as a guarantee so as to attract all or any of the legal consequences to which I have referred depends upon the words in which the parties have expressed the promise. Even the use of the word 'guarantee' is not in itself conclusive. It is often used loosely in commercial dealings to mean an ordinary warranty. It is sometimes used to mis-describe what is in law a contract of indemnity and not of guarantee. (emphasis added)
[37] Moschi v Lep Air Services Ltd [1973] AC 331, 349.
The reason why the word 'guarantee' is sometimes used in the sense of 'warranty' is explained in Black's Law Dictionary (6th ed):
Guaranty and warranty are derived from the same root, and are in fact etymologically the same word, the 'g' of the Norman French being interchangeable with the English 'w'. They are often used colloquially and in commercial transaction as having the same signification, as where a piece of machinery or the produce of an estate is 'guaranteed' for a term of years, 'warranted' being the more appropriate term in such a case.[38]
[38] Black's Law Dictionary (6th ed) (1990) page 705.
The Macquarie Dictionary Online gives the following non-legal meanings for the word 'guarantee':
2.a promise or assurance …
…
13.to promise.
The one-page PPIs are little more than commercial terms sheets. There is nothing on the face of the instruments to suggest that they were prepared by a lawyer. In context we do not read and construe the word 'guarantees' in the PPIs as being used in its technical legal sense (as might more readily be inferred had the PPIs been prepared by a lawyer). Rather, the word 'guarantees' is used colloquially in the sense of warrants, promises or assures. When that is understood the use of the word 'guarantees' is harmonious with the remainder of the language in the PPIs and the tenor of the PPIs as a whole.
We do not accept that this understanding of the 'guarantee' clause renders the provision redundant.[39]
[39] Compare the appellant's submission as recorded at [34] above.
Obviously enough, as the PPIs evidence a debtor and creditor relationship as between the appellant and the respondents, there is a repayment obligation irrespective of the guarantee provision. That is dealt with, implicitly, in the particulars of the maturity date - the investment amount is repayable on the maturity date. It can therefore be suggested that, should it bear the construction we prefer, the guarantee clause duplicates an obligation found elsewhere on a proper construction of the PPIs. This overlooks two matters. First, the repayment obligation inherent in the specification of a maturity date is somewhat oblique. It is unsurprising that the matter should also be addressed more expressly in the 'guarantee' provision. Second, allied to the first matter, it was appreciated by the appellant and the respondents alike that the funds invested by the respondents with the appellant were to be on-invested by the respondents with Mr Marco. Necessarily that carried with it a degree of risk. In those circumstances the guarantee provision simply provides a further assurance that even though the appellant is to apply the funds in the intended venture with Mr Marco that does not compromise his obligation to repay the investment amount advanced to him in the event of investment loss.
In any event, as we have mentioned, the PPIs were not prepared by a lawyer. There are a number of infelicities in the PPIs. In the circumstances the fact that the contrary construction gives rise to some duplication is not a reason to give a strict legal meaning to the word 'guarantee' where it is not possible to identify a primary obligation on the part of Mr Marco to which the suggested guarantee is ancillary.
For these reasons, on the proper construction of the PPIs the appellant did not merely, as surety, guarantee to the respondents that he would repay the principal amount in the event of investment loss. The appellant was a principal debtor rather than a mere guarantor. On the proper construction of the PPIs the appellant undertook a primary obligation to repay the investment amount and interest thereon. The primary judge was not in error in finding, in substance, that this was the effect of the PPIs.
Grounds 1 and 2 failed.
Disposition ground 3: the alleged necessity to establish an event of investment loss
Ground 3 only arose for determination if the appellant succeeded on his preferred construction the subject of grounds 1 and 2 (see [23] ‑ [24] above). The failure to establish the appellant's preferred construction meant that ground 3 raised a false issue which could have no material effect on the proper disposition of the appeals. In those circumstances, and for that reason, ground 3 should be dismissed.
Conclusion and orders
It was for these reasons that the court made orders dismissing the appeals. Costs followed the event.
Accordingly, at the conclusion of the appeal hearing orders were made in both appeals to the effect that:
1.The appeal is dismissed.
2.The appellant is to pay the respondents' costs of the appeal, to be assessed if not agreed.
Annexure A: PPI in relation to Mr Ioppolo
Annexure B: PPI in relation to other respondents
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MH
Research Associate To The Honourable Justice Vaughan
20 DECEMBER 2022
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