Edlin and Edlin v Williams
[1998] QCA 439
•22/12/1998
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 171 of 1998
Brisbane
[Edlin & Anor v. Williams]
BETWEEN:
RICHARD JOHN EDLIN and JULIA KAY EDLIN
(Plaintiffs) Appellants
AND:
NOEL RICHARD WILLIAMS
(Second Second Defendant) Respondent
DAINTREE PALMS DEVELOPMENTS PTY LTD
ACN 069 716 347 formerly BATUM PTY LTDACN 069 716 347
(First Defendant)
GEOFFREY BENTON RAYMOND
(First Second Defendant)
McMurdo P Thomas JA Shepherdson J
Judgment delivered 22 December 1998
Joint reasons for judgment of McMurdo P and Thomas JA, separate reasons of Shepherdson
J concurring as to the orders made.
APPEAL ALLOWED.
JUDGMENT BELOW OF 17 DECEMBER 1997 SET ASIDE AND IN LIEU
THEREOF ORDER APPELLANTS RECOVER AGAINST RESPONDENT THE
SUM OF $154,397.46 PLUS INTEREST AT 10% PER ANNUM FROM 15 MARCH
1996 UNTIL 22 DECEMBER 1998.
ORDER RESPONDENT PAY APPELLANTS’ COSTS OF AND INCIDENTAL TO
THE APPEAL AND ACTION, INCLUDING RESERVED COSTS, TO BE TAXED.
CATCHWORDS: CONTRACT - construction and interpretation of loan agreementand guarantee - whether terms of repayment of loan agreed by
parties - whether terms of guarantee agreed by partiesCONTRACT - consideration - whether forebearance to sue without explicit request can amount to consideration - no other meaningful consideration
Crears v Hunter (1887) 19 QBD 341
McKay v National Australia Bank Ltd [1998] 1 VR 173Murphy v Timms [1987] 2 QdR 550
Counsel: Mr D.J. Jackson Q.C. with him Mr R. Jackson for the appellants
Mr D. Cooper for the respondentSolicitors: McCullough Robertson for the appellants
Purcell Chadwick & Skelly for the respondentHearing Date: 15 September 1998 IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No 171 of 1998
Brisbane
Before
McMurdo P Thomas JA Shepherdson J
[Edlin & anor v Williams]
BETWEEN:
RICHARD JOHN EDLIN and JULIA KAY EDLIN
(Plaintiffs) Appellants
AND:
NOEL RICHARD WILLIAMS
(Second Second Defendant) Respondent
DAINTREE PALMS DEVELOPMENTS PTY LTD
ACN 069 716 347 formerly BATUM PTY LTDACN 069 716 347
(First Defendant)
GEOFFREY BENTON RAYMOND
(First Second Defendant)
JOINT REASONS FOR JUDGMENT - McMURDO P AND THOMAS JA
Judgment delivered 22 December 1998
Daintree Palms Development Pty Ltd (“Daintree Palms”), the first defendant below,
wished to purchased an existing hotel and land, with a view to constructing units at Wonga
Beach, near Cairns. The respondent, the second-named second defendant below, and
Geoffrey Benton Raymond, the first-named second defendant below, were the directors of Daintree Palms. The appellants, the plaintiffs below, claim they lent money to Daintree
Palms to finance the development in a written agreement dated 26 July 1995. The appellants
claim the respondent, together with Raymond, guaranteed Daintree Palms’ indebtedness to
the appellants under a guarantee dated 29 January 1996. They sued the respondent on his
guarantee, the action proceeding only against the respondent.
The respondent denied that any money was loaned to Daintree Palms pursuant to the
agreement of 26 July 1995. He admitted that he executed a document styled ‘Guarantee and
Indemnity’ but claimed there was no agreement between the parties as to the guarantee , the
document was not intended to have the effect of a deed, and that the guarantee was of no
legal effect. The respondent also claimed that the document styled deed of guarantee and/or
indemnity was unenforceable as it was unsupported by consideration. The matter of the
attestation of the respondent’s signature on the guarantee was not raised on the respondent’s
pleading.
This appeal is from the findings of the learned District Court Judge below that:
“The terms of repayment of the loan were not agreed by the parties.
The terms of guarantee were not agreed by the parties.
The Guarantee is not a Deed because of lack of attestation.
The Guarantee is not enforceable as a contract as there was no valuable
consideration.”[1][1] Reasons for judgment, 13.
As this Court is asked to draw inferences from the testimony and exhibits different from those drawn by the learned trial judge, it is necessary to fully review the evidence.
The evidence
The written agreement between the appellants and Daintree Palms on 26 July 1995
(ex 1) provided that the appellants would borrow approximately $95,500 from First
Provincial Building Society (“First Provincial”) which, together with their existing loan with
First Provincial of approximately $34,500 was to be secured by a mortgage on their home (cl.
1). The loan was to assist Daintree Palms to finance its purchase of the land, after deducting
costs and repaying the appellants’ existing secured home loan (cl. 3). Daintree Palms was
to meet all repayments to First Provincial until the loan was discharged (cl. 3). Daintree
Palms was to “be responsible for payment of the balance of the mortgage debt and all costs
of and incidental to the release of mortgage by 31st December, 1995 or out of the proceeds
of sale of the first twelve (12) units to be sold by the borrower at the borrower’s project at
Wonga Beach aforesaid (whichever shall be the earlier) with the result that the lenders will
have delivered to them an unencumbered Title in respect of their said property” (cl. 4). The
agreement was signed by the appellants and sealed with the seal of Daintree Palms under its
former name.
On 26 July 1995, the appellants completed a First Provincial loan application form
on which it was noted in an area marked “For Office Use Only”: “Additional funds of
$95,500 to be lent to company Daintree Palms Developments P/L which will use funds for
purchase land at Wonga Head Development is to construct 66x2 bedroom units in stage Units
to be sold to investors with a guaranteed 10 yr lease” (ex. 16).
| 7 | First Provincial wrote to the appellants on 1 August 1995 stating: “We hereby certify that the Society is prepared to consider your Interest Only application for finance for $137,000.00 to enable you to refinance your mortgage on the above property.” (ex 25). |
In a letter dated 3 August 1995, First Provincial wrote to the appellants informing
them that the Society had approved an “Interest Only Loan of $138,486.00 over three years.
This loan is to enable you to discharge your mortgage to First Provincial Building Society
Limited on property situated at the above address. ...” (ex. 15).
On 13 February 1996, McCullough Robertson, the appellants’ solicitors, wrote by
facsimile to the respondent, Raymond and Daintree Palms informing them of the default
under the loan agreement:
“... we are instructed that Mr Raymond advised Mr Edlin this morning that the full amount outstanding would be paid within 48 hours. Given that advice, our clients are prepared to hold off on any action until 5.00 p.m. Friday, 16 February 1996. ...
Should the total amount not be paid by the prescribed time our clients will have no option but to take the appropriate action to enforce their rights. ... In the meantime, our clients reserve all their rights.” (ex 3)
On 16 February 1996, the respondent, who was a principal of Ebert & Williams,
Daintree Palms’ solicitors, sent a facsimile to the appellants’ solicitors informing them that
Daintree Palms was able to borrow sufficient funds to reimburse the appellants for “all
monies paid by them to date and to continue with the payments to First Provincial” but was
unable to borrow money at this time to pay out the debt in full. Daintree Palms was
endeavouring to enter into a fresh arrangement with the vendor which would enable Daintree
Palms to pay:
“if not all, then at least the bulk of the debt to First Provincial.
Our clients are fully aware of your clients position and are acutely embarrassed at not being in a position to meet their obligations.
We shall let you have further information as soon as it comes to hand and, in the meantime, we seek your client’s (sic) indulgence.” (ex 4)
On the same day, a letter marked “without prejudice” was delivered by courier from
the appellants’ solicitors, to the respondent, Raymond and Daintree Palms:
“We have received further instructions from our client’s (sic) this morning to the effect that you will not, as previously advised, be repaying the money outstanding to our client today. We are instructed that you will be making payment to our client early next week.
Although the delay in payment is of concern to our client’s (sic), they are
prepared to grant you some indulgence and extend the time for payment on
the following terms:
...
3. that you both sign the enclosed Guarantee and Indemnity (in duplicate) and
return one (1) copy to us by Wednesday 21 February 1996 ...We are instructed that these terms are not negotiable and in the event they are not accepted our clients will be pursuing their rights under the original Agreement against the Company and/or against both of you personally.” (ex 5)
On 20 February 1996, the respondent, on Ebert & Williams’ letterhead, wrote to the
appellants’ solicitors by facsimile as follows:
“We refer to your letter of 16.2.96.
In our letter of 16.2.96 we did not mean to convey to you that the settlement would be no later than today but that we were expecting to be advised of the settlement date by today.
We have today been advised by the solicitors for our clients’ financier that they have instructions to prepare the mortgage documents and we are presently awaiting their further advices as to the expected date of settlement, which we have been verbally advised will be next week.
...
Our clients are agreeable to executing the Guarantee and Indemnity and this will be attended to as soon as possible. ...” (ex 6)
On 22 February 1996, the appellants’ solicitors wrote by facsimile to the respondent,
Raymond and Daintree Palms as follows:
“We have obtained further instructions from our clients and require:-
...3. that we receive the executed Guarantee and Indemnity no later than 4.00 p.m. Monday, 26 February 1996.
We are instructed that our clients will require, in the event that all money to them are not repaid by 31 March 1996 that you meet all mortgage repayments to First Provincial until the matter is finalised.
Our clients reserve all their rights under the agreement dated 26 July 1995. Please confirm in writing no later than 5.00 p.m. Friday 23 February 1996 that these terms are acceptable.” (ex 7)
On 29 February 1996, the appellants’ solicitors wrote to the respondent, Raymond and
Daintree Palms in the following terms:
“We refer to our letter dated 22 February 1996. None of our client’s requirements have been met nor have our facsimiles dated 23 February 1996 and 27 February 1996 been responded to.
Our client has been more than reasonable and has on a number of occasions acceeded (sic) to your request for extensions of time. Our client is no longer in a position to grant you any further indulgence.
Unless we receive your written response by 3.00 p.m. this afternoon our client may have no option but to proceed.” (ex 8)
A slightly amended guarantee was executed by the respondent and Raymond and delivered to the appellants’ solicitors by Raymond on 29 February 1996 (ex 9). The amendments were entirely favourable to the position of the respondents. The fact that
amendments had been made was not mentioned. The appellant's solicitors forthwith advised
the appellants that they had received the deed of guarantee and indemnity.
In a letter dated 12 March 1996 to the respondent, Raymond and Daintree Palms from
the appellants’ solicitors, it was noted that the appellants’ “mortgage repayment is due on 25
March 1996. In the event that settlement does not occur prior to that date, you will need to
make some arrangements to ensure that this repayment is met. ...” (ex 10)
A letter dated 15 March 1996 from the appellants’ solicitors informed the respondent,
Raymond and Daintree Palms that “In the event that our client is forced to sell his house, he
will hold you responsible for all loss and damage incurred by him as a result. We have been
instructed to draft proceedings against you in respect of your guarantees and against the
company in respect of the loan agreement. ...” (ex 10)
A letter dated 19 March 1996, signed by the respondent from Daintree Palms’
solicitors Ebert & Williams, to the appellants’ solicitors, attached correspondence from
Saxby Goethe Finance Pty Ltd setting out Daintree Palms’ good prospects of obtaining
finance from them. The respondent’s letter also stated:
“... should any legal proceedings be instituted against the company or either of its directors, it is very likely that the finance money would not be made available and the company would not be in a position to meet its obligations to your clients.
We shall keep you informed of the position at every opportunity and we seek your clients’ indulgence pending settlement of the transaction. ...” (ex 11)
In a letter dated 20 March 1996, the appellants’ solicitors wrote by facsimile to the
respondent, Raymond and Daintree Palms noting:
“Our client has been left with no alternative but to require you to pay $2,500 to us by Bank Cheque made payable to McCullough Robertson Trust Account no later than 5.00 p.m. Friday, 22 March 1996. If we do not receive that payment, our instructions are to proceed against you both personally pursuant to our client’s rights under the guarantee and indemnity. ...
In the event that you default in payment of the money requested, our client will be proceeding against you both personally for the full amount owing under the agreement dated 26 July 1995 reserving his rights against the company.” (ex 12)
The male appellant gave evidence to the following effect. Raymond was his brother,
a fact unknown to him until 1994. The appellants lent $95,500 to Daintree Palms, pursuant
to the loan agreement of 26 July 1995 (ex 1) to purchase land at Wonga Beach to construct
66 2-bedroom units. To do this, the appellants borrowed a total of $138,000 from First
Provincial, comprising their current home loan of approximately $34,000, about $1,900 for
processing the loan, and the remainder of $100,000 was lent to Daintree Palms. As at 26 July
1995 no units had been built at Wonga Beach. Prior to obtaining finance from First
Provincial, Raymond put in a loan application to Fullmark Finance as agents for Collins
Securities. This loan was not proceeded with whilst the First Provincial loan did proceed.
The fees for the Fullmark Finance application were to be paid by the respondent and
Raymond but were not paid until the appellants paid the $500 fee and $34 court fees, upon
a court order.
After First Provincial informed him that a number of mortgage payments had not been met, he spoke to the respondent and Raymond about the failure to make payments, but without satisfaction. The appellants paid a number of mortgage payments which should have
been paid by Daintree Palms, in all totalling $11,839. The appellants consulted their
solicitors, who advised that the respondent and Raymond should sign a deed of guarantee and
indemnity. On about 29 February, the appellants’ solicitors informed them that the deed of
guarantee and indemnity had been delivered to their offices. Prior to receiving the guarantee,
the appellants wanted to take court action against Daintree Palms, but once they knew that
a deed of guarantee and indemnity had been signed by the respondent and Raymond, they
decided to give Daintree Palms a chance to get alternative finance and the appellants
continued making the monthly payments:
“Now, prior to receiving that document was is - were you and Mr and Mrs
Edlin (sic) going to take any action against First Provincial - against Daintree
Palms Developments? --- Yes.
What did you intend to do? --- We were getting so many stories when we tried
to get it straightened out so we wanted to take them to court. It is as simple
as that.
After you had been informed that a deed of guarantee and indemnity had been
signed by Mr Williams and Mr Raymond and delivered to the offices of
McCullough Robertson what did you and Mrs Edlin decide to do again? ---
We decided - at the same time they were giving us information of getting
approval for finance and so we said, right, let’s give them a chance to get thefinance, so we continued to pay the monthly payments.”[2]
Only the first mortgage payment was made by Daintree Palms, although the respondent
personally made three further payments after signing the guarantee.
[2] Record, 18.
In order to meet their commitments to First Provincial, the appellants sold their home
to their son and repaid the debt of $142,370.46.
Raymond gave evidence for the appellants. In 1995 he was an undischarged bankrupt
and entered into an arrangement with the respondent to purchase Daintree Palms Resort
which comprised a trading hotel on land sufficient for about 200 units and approvals and
plans for development. He intended to fully repay his creditors over a three year period.
With that in mind, the respondent paid $2,000 to Raymond’s trustee in bankruptcy and
Raymond’s bankruptcy was annulled. The units were to be sold progressively to investors
and then leased back by the operators of the resort. Daintree Palms sought future finance
from Saxby Goethe and other financiers and also borrowed money from the appellants.
On 18 July 1995, the appellants and Daintree Palms had entered into an agreement
with some similar terms to the agreement of 26 July 1995, but with the finance to be provided
by Collins Securities (ex 31). This finance did not eventuate and alternative finance was
arranged through First Provincial, resulting in an amended agreement (ex 4).
He was present when the respondent executed the deed of guarantee and indemnity
at the office of Ebert & Williams, Beerwah. Raymond’s signature on the guarantee was
witnessed at the time he executed the deed of guarantee and indemnity. He and the
respondent “had quite extensive discussions about it (the guarantee). We both acknowledged
that there was a responsibility and a liability to the Edlins and this document gave the Edlins
a greater degree of security than they had without the document.” (transcript, 42) Raymond
had no assets with which he could repay the appellants. He delivered the guarantee to
McCullough Robertson in Brisbane on about 29 February 1996. He put no capital into the
venture, although he paid for some expenses. The respondent put in over $100,000 towards
the purchase price and made some mortgage repayments, all of which has been lost.He has had no significant recent contact with the appellants or the respondent. He is
now an undischarged bankrupt again.
The respondent did not give evidence. Sandra Browning, the respondent’s secretary,
was the only witness on his behalf. She gave evidence that the guarantee and indemnity was
shown to her by the respondent after he had signed it. She checked his signature, with which
she was familiar and, having been asked to witness his signature, did so, without looking
through the contents of the document, which states: “SIGNED SEALED AND DELIVERED
by Noel Richard Williams in the presence of: S. Browning.”
We turn now to the findings of the learned trial judge below.
As the findings were based largely on inferences drawn from the documents that
passed between the parties, this Court is in, in most respects, as good a position as the trial
judge to decide the proper inference to be drawn. Proper respect and weight must be given
to the conclusion of the trial judge but if this Court’s conclusion differs, this Court will not
shrink from giving effect to its own conclusion.[3]
The terms of the repayment of the loan were not agreed by the parties.
[3] See Warren v. Coombes (1979) 142 CLR 531, 551.
The primary judge noted:
“The terms of repayment of the loan by the Edlins to the company is not clear
from the various documents (e.g. exhibits 1, 15, 16, 25, 30, 31) which were
prepared at or about the time the Edlins obtained the funds from the building
society.
For example, the agreement of 26 July 1995 refers to payment by the
borrower by 31 December 1995 or out of the proceeds of sale of the first 12
units to be sold, whichever shall be the earlier. The application form to the
building society dated 21.8.95 signed by the Edlins has a notation by Mr
Edlin:‘At the end of 6 months they can choose either an unencumbered unit value $135,000 which would be leased back to resort staff @ $150 per week or Daintree Palms will repay first mortgage debt.’
In early 1996 there was exchange of correspondence between the borrower and the second defendants and solicitors, concerning the failure to make the mortgage payments to the building society and how the loan might be repaid.”[4]
[4] Reasons for judgment, 2-3.
The learned judge then referred to the exchange of correspondence between the appellants
and the respondent and Raymond about the failure to make mortgage payments and
negotiating how the loan might be repaid, culminating with the execution and delivery of the
guarantee. The trial judge then concluded: “I find the terms of repayment of the loan by the
(appellants) to (Daintree Palms) were never agreed by the parties.”[5] In both this and the
preceding passage the learned trial judge wrote in terms of repayment of the loans by the
appellants to Daintree Palms, but as the appellants were the lenders, the primary judge must
have intended these references to refer to repayment by Daintree Palms to the appellants. The
substantial issue then is whether the terms of repayment were agreed.
[5] Reasons for judgment, 2-3.
Exhibit 1 is the agreement of 26 July 1995; ex. 15 is a letter from First Provincial to
the appellants dated 3 August 1995 referring to approval of an interest only loan of $138,486
repayable over three years; ex. 16 is a First Provincial Loan Application Form on which an
officer of First Provincial has noted “additional funds of $95,500 to be lent to company
Daintree Palms Developments P/L which will use funds for purchase land at Wonga Head
Development is to construct 66x2 bedroom units in Stage. Units to be sold to investors with
a guaranteed 10 yr lease.” Exhibit 25 is a copy of a letter from First Provincial to the
appellant dated 1 August 1995 stating: “We hereby certify that the Society is prepared to
consider your Interest Only application for finance for $137,000 to enable you to refinance
your mortgage on the above property.”; and ex. 31 is the agreement of 18 July 1995. Exhibit
30 does not form part of the record and no reference has been made to it by either party on
the appeal.
With respect, the learned judge’s finding seems to be against the evidence. It is not
disputed that the parties signed the agreement dated 26 July 1995. That agreement is clear
in its terms. The appellants were to borrow approximately $95,500 from First Provincial in
addition to their existing loan of approximately $34,500 (cl 1). The additional loan of
approximately $95,500 was to be used to pay the costs and expenses associated with the loan
and the mortgage and the balance was to be loaned to Daintree Palms to assist in financing
its purchase of the property (cl 2). Daintree Palms was to be responsible for all repayments
of the appellants’ mortgage debt of the appellants during the currency of the loan (cl 3).
Daintree Palms was also to be responsible for payment of the balance of the mortgage debt
and all costs of and incidental to the release of the mortgage by 31 December 1995 or out of the proceeds of sale of the first 12 units sold at Wonga Beach, whichever shall be earlier (cl
4).
The respondent in his pleadings denied that any money was loaned to Daintree Palms
under the agreement of 26 July 1995. It is difficult to see how the other exhibits referred to
by the primary judge, which involved a third party, First Provincial, could have affected this
written agreement. Exhibit 16, the application for finance from Fullmark Finance (Collins
Securities), is of no consequence as the application for finance to First Provincial was the one
acted upon and referred to in the agreement of 26 July 1995.
The written agreement of 18 July 1995 (ex 31) could only be effective if the appellants
successfully secured a loan from Collins Securities. The uncontroverted evidence from
Raymond and the male appellant was that that finance was not obtained. That agreement
consequently was ineffective and was replaced by the subsequent agreement of 26 July 1995.
The fact that no units had been built at 26 July 1995 does not negate the contract of 26 July
1995.
It was not disputed that Daintree Palms failed to repay the loan and make the required
mortgage payments. The ensuing correspondence between the parties were attempts by the
appellants, through their solicitors, to make Daintree Palms meet its commitment under the
agreement of 26 July 1995. That correspondence did not displace the expressly agreed terms
of payment set out in the agreement. There is no evidence that agreement was reached
between the parties to amount to a variation of the agreement. Indeed, the correspondence
sent by the appellants’ solicitors made it clear that the appellants were relying on the agreement of 26 July 1995, specifically reserving the appellants’ rights under that agreement.
The respondent, a solicitor, at no time claimed on behalf of Daintree Palms that the
agreement of 26 July 1995 was not effective.
The appropriate conclusion on the evidence is that the written agreement of 26 July
1995 set out the terms of the repayment of the loan: Daintree Palms would meet all
repayments to First Provincial in respect of the appellants’ loan and would repay the balance
of the loan and all costs and obtain a release of the mortgage, by 31 December 1995, as no
units had been sold.
The terms of guarantee were not agreed by the parties.
The learned District Court Judge found that “the guarantee signed by the defendants
was part of the proposal outlined by them and never expressly agreed to by the plaintiffs”. [6]
The primary judge treated the signed document as an offer to the appellants and was not
satisfied on the evidence that the appellants had, by their conduct, impliedly accepted that
offer.
[6] Reasons for judgment, p. 4.
The correspondence set out earlier in these reasons clearly demonstrates that the
respondent and Raymond were trying to satisfy the demands for repayment made by the
appellants’ solicitors to ensure the appellants did not take action to enforce “their rights”.[7]
[7] Exhibit 3, 13 February 1996.
The appellants would be “pursuing their rights under the Agreement against the company
and/or against both of you personally.”[8] A facsimile of 29 February 1996 threatened that
[8] Exhibit 4, 16 February 1996.
unless McCullough Robertson received the respondent’s “written response by 3 p.m. this
afternoon our client may have no option but to proceed.”[9] The respondent on behalf of
[9] Exhibit 8.
Daintree Palms requested the appellants’ indulgence on 16 February 1996[10] and on 20
[10] Exhibit 4.
February 1996 told the appellants’ solicitors that the respondent and Raymond were
“agreeable to executing the Guarantee and Indemnity and this will be attended to as soon as
possible”.[11] The most probable inference to be drawn from the evidence is that the delivery
of the executed guarantee in its amended form to the appellants’ solicitors was an offer from
the respondent and Raymond, impliedly requesting the appellants not to sue, but to allow
further time for Daintree Palms to perfect its refinancing arrangements, in return for the
directors’ guarantees. The uncontested evidence of the male appellant, which was not
rejected by the judge below, supports the conclusion that the appellants’ conduct shows
acceptance of that request. The appellants’ threats of imminent proceedings immediately
ceased upon the delivery of the executed amended guarantee and the appellants refrained
from commencing proceedings until late May 1996.
[11] Exhibit 6.
The appellants’ acceptance of that offer should be implied from the correspondence
between the parties and from the testimony of the male appellant. After delivery of the
guarantee, they took no action against Daintree Palms for some months. The correspondence
from the appellants’ solicitors to the respondent on 12 March 1996 (ex 10) confirms they
were no longer contemplating legal action at that time. The letter of 15 March 1996 from the
appellants’ solicitors to the respondent noted concern that no progress towards settlement had
been made:
“We have been instructed to draft proceedings against you in respect of your
guarantees and against the company in respect of the loan agreement.”
It is to be inferred that, at least by 15 March 1996, the appellants had accepted the offer of
the guarantee and communicated that to the respondent and Raymond. The terms of the
guarantee were, therefore, agreed by the parties. This is further supported by the appellants’
solicitors’ letter of 20 March 1996 (ex 12).
The guarantee is not enforceable as a contract as there was no valuable consideration
The learned judge below found that the guarantee was not enforceable as there was
no valuable consideration. The appellants contend their forbearance to sue constitutes
valuable consideration.
The principles relating to forbearance to sue as consideration are set out in 20
Halsbury 4th ed. para. 161, cited with approval in Murphy v Timms [1987] 2 QdR 550 at 551:
“The consideration may take the form of forbearance by the creditor at the surety’s request, to sue the principal debtor, or of the actual suspension of pending legal proceedings against him. The mere fact of forbearance is not, however, of itself a consideration for a person’s becoming a surety for the payment of a debt. There must be either an undertaking to forbear, or an actual forbearance at the surety’s express or implied request. An agreement to forbear for a reasonable time will provide sufficient consideration to support a surety’s promise. So will an agreement to forbear for an indefinite period, at least when a reasonable time can be inferred or where the surety has received the advantage contemplated. Whilst the mere fact of forbearance, as opposed to an express promise to do so, will not supply the necessary consideration, an act of forbearance following a request at the time the guarantee was entered into, so to act will do so, even if the request was not expressly agreed.”
A request for forbearance to sue may be implied from the circumstances: see Crears
v Hunter,[12] where Lord Esher MR said:
“It is quite clear on the other hand that a binding promise to forbear would be a good consideration for a guarantee. The question is whether, if the guarantor requests the creditor to forbear from suing and the creditor on such request, although he does not at the time bind himself to forbear, does in fact afterwards forbear to sue, there is a good consideration for the guarantee. It seems to me that it was laid down in Oldershaw v. King [(1857) 157 E.R. 213] that there would in such a case be a good consideration. ... if at the request of the guarantor the creditor does in fact forbear, there is a sufficient consideration to bind the guarantor, who has promised to pay the debt. It was argued that the request to forbear must be express. But it seems to me that the question whether the request is express or is to be inferred from the circumstances is a mere question of evidence. If a request is to be implied from the circumstances, it is the same as if there were an express request.”
The appellants had threatened to initiate proceedings unless they received a written response
to their letter of 22 February 1996 by 3 pm.[13] This was repeated in the appellants’ solicitors’
letter of 29 February, extending the deadline until 3 pm that day.[14] The response of Daintree
Palms was to deliver an executed guarantee, albeit in slightly altered form from that
originally submitted to it by the appellants on 29 February 1996. In return for the executed
and delivered guarantee, no legal action was taken for some months.
[12] (1887) 19 QBD 341, 344.
[13] Exhibit 6.
[14] Exhibit 7.
It is not necessary for the forbearance to be for any definite or particular time. See
Fullerton & anor v. Provincial Bank of Ireland.[15] The appellants refrained from commencing
legal proceedings against Daintree Palms for some months. This constituted forbearance for
a reasonable time, after an implied request for forbearance so that refinancing could be
arranged.
[15] [1903] AC 309, 313 and 315-6.
The learned judge below, relying on, but without particularising, Raymond’s evidence,
found that this case was similar to McKay & anor v National Australia Bank Ltd.[16] It is
[16] [1998] 1 VR 173.
useful to review that case in some detail. The appellants, Mr and Mrs McKay, through their
company Caprid Pty Ltd (“Caprid”) borrowed substantial sums from the respondent bank to
buy, develop and sell land. The state of Caprid’s accounts was causing concern to the bank
as the debt was beginning to outstrip the value of securities which the bank held. The bank
decided it required further security and the McKays agreed to give a further guarantee to the
bank in the sum of $1.5 million in order to “perfect the bank’s securities”. The bank brought
its action against the appellants based on the guarantee. Winneke P noted:[17]
“It was not contended by the respondent, either before the learned judge or on appeal, that any consideration by way of ‘forbearance to sue’ was given by the bank to support this guarantee. No demand had been made by the bank for repayment of the existing debt and no request had been made by the debtor or the appellants for any such forbearance. As the instrument of guarantee itself recognises, the mere fact of forbearance is not of itself sufficient consideration for a person becoming surety for an existing debt. There must be either an undertaking to forebear or an actual forbearance at the surety’s request: (Halsbury's Laws of England Vol 20 (4th Edition Re-Issue) para 142; Murphy v Timms [1987] 2 QdR 550 at 551, per Kneipp, J).
His Honour, however, concluded that, notwithstanding that the debt had been incurred prior to the signing of the guarantee, the respondent bank had, none the less, provided valuable consideration by permitting Caprid to maintain its account in debit, thereby providing the opportunity to it and, it seems, to the appellants to get their affairs in order. In his Honour's view, by allowing the account to remain open and the debt to continue to exist, the respondent had provided ‘banking accommodation’ within the meaning of that expression as contained in the guarantee.
I find myself unable to agree with his Honour’s conclusion in this regard. We were not referred to, nor have I been able to find, any authority as to the meaning of ‘provision of banking accommodation’ where used to support the taking of a bank guarantee. In common parlance, the term suggests the making of advances or the provision of credit in some form by the bank to the debtor. But whatever meaning is to be given to those words, they cannot in their context embrace, in my view, a mere suffering by the bank of the continued existence of an unpaid debt in an unclosed account. The adoption of such an attitude by a bank does not, as it seems to me, amount to the ‘provision of banking accommodation’. At the most it amounts to a postponement by a creditor of his right to call in a debt; an inaction which smacks of a forbearance to sue; but in this case a forbearance of a kind insufficient to afford valuable consideration.”
Ormiston JA noted[18] that the bank did not:
“offer or suggest that the bank would forbear to enforce any of its existing rights or its rights under the new guarantee if the McKays signed (the new guarantee).
Consequently the McKays and Caprid sought nothing and obtained nothing from the bank and the bank offered nothing and gave nothing as the price for the McKays’ guarantee. Moreover, this was not a case where some such consideration for the guarantee could be inferred from the whole of the circumstances, whether that be by way of some new ‘banking accommodation’ or merely by way of impliedly requested and granted forbearance by the bank.
... It should be emphasised that at no time did the bank contend that consideration was given in this case by its forbearing to enforce its existing securities largely because ... it could not point to any request from the McKays, a ‘request’ being expressly required by the terms of the guarantee.”
[17] at 177-8.
[18] at 185-6.
McKay should properly be distinguished from the situation for this Court’s
consideration: the appellants here indicated an intention to exercise their rights under the
agreement of 26 July 1995 unless, along with other things, the respondent and Raymond
executed a guarantee and indemnity.[19] In response to this, the respondent and Raymond
offered the executed guarantee, with minor amendments, acceptance of which is implied from
the facts. The appellants then delayed exercising their rights under the agreement of 26 July
1995. By contrast, in McKay the bank obtained the security from the appellants for the
purpose only of ensuring there was sufficient security for the existing banking
arrangements.[20] The bank had not threatened to take action and the McKays had not
requested the bank’s forbearance. It was unnecessary for the court there to consider the issue
before this Court, namely whether the evidence supports forbearance to sue, sufficient to
constitute valuable consideration.
[19] Ex 7.
[20] See Winneke P at 174 and Ormiston JA at 184.
With respect, the learned trial judge’s finding that the guarantee is not enforceable as
a contract as there was no valuable consideration is incorrect. The respondent is therefore
liable under his contract of guarantee.
The guarantee is not a deed because of lack of attestation
Because of the findings already made, namely that the guarantee was in terms agreed
by the parties and was an enforceable contract for valuable consideration, it is unnecessary
for this Court to decide this matter. Nevertheless, we wish to make some comments about
the way this issue was litigated.The issue was whether the guarantee was a deed, if the respondent’s signature, which
must be “attested by at least one witness” under s 45(2) of the Property Law Act 1974, was
not witnessed at the time the respondent signed the guarantee. This issue should have been
pleaded but was not. The defence gave no intimation of the point until after the close of the
plaintiff’s case, when defence counsel Mr D Cooper annouced that he would call only one
witness, Mrs Browning, the respondent’s secretary. The opening of her evidence was brief:
“she will give your Honour brief evidence about the circumstances in which she came to execute - sorry - to purportedly witness the signature of Mr Williams on the guarantee and she will say what happened was Mr Williams not in her presence signed the document, she knew his signature and he brought it to her and asked her to witness it which she did and the relevance of that will become apparent during submissions about the effect of the document.”[21] (emphasis added)
Her evidence was then given without objection, although its potential significance would not
necessarily have been readily apparent. Defence counsel raised the issue clearly for the first
time at the trial in his concluding address.
[21] Record, 43.
On this issue the appellants and their counsel were plainly ambushed. They had
pleaded the deed and its execution had been admitted. In such circumstances any need for
proof of attestation was waived.[22] The document which the respondent (and other signatory
parties) caused to be delivered unconditionally to the appellant's solicitor alleged on its face
that it was a deed, that it was "signed, sealed and delivered" by Noel Richard Williams "in
the presence of" Sandra Joyce Browning and the signatures of both of those persons appeared
in the appropriate places. The only issues raised in the defence concerning its validity were
its effect in the light of the letter of 16 February 1996, alleged absence of intention on the
defendants' part for the document to have the effect of a deed, and the question whether the
"offer" was accepted.
[22] Whyman v Garth (1853) 8 Exch 803 at 807; 155 ER 1578, 1579; Halsbury's Laws of England, 4th edition, vol 17 para 128.
After Mr Cooper submitted for the first time during final address that the document
was not a deed, counsel for the appellants pointed out that the issue of non-attestation had not
been pleaded and that unless the respondent applied to amend his pleading such a defence
was not available. He foreshadowed that if such an application were made he might seek
leave to file a reply pleading estoppel, intimating that there was already sufficient evidence
to support estoppel. Mr Cooper objected stating that it was “really outrageous to try to do this
now”, that his opponent had closed his case and “didn't bother to put in a reply then” and suggested that the application was the result “perhaps ... my friend's inexperience”. He
objected to the issue of estoppel being considered because he had not cross-examined Mr
Edlin on issues of reliance and detriment. Counsel for the appellants repeated the position
of surprise in which he found himself and indicated that in the event of an amendment being
made to the plaint he would apply for leave to file a reply. Mr Cooper responded by
describing the suggestion that he needed to amend his pleading as “complete rubbish” and
that amendment of his pleading was unnecessary “because the case has been conducted as
though that was an issue, because it was an issue”. The learned primary judge was inclined
to agree with that submission and, erroneously in our view, considered that “on the strict
pleading rules you have gone further in some ways than you needed to”.
The primary judge then indicated to counsel for the appellants that he had raised an
issue "which would necessitate an adjournment rather than a re-opening and hearing further
evidence". Counsel for the appellants indicated that his clients did not want an adjournment
and that all that would be necessary would be re-opening of the cases on issues of attestation,
estoppel and detriment. The learned primary judge then gave what was tantamount to a
ruling. “I don't think Mr Cooper needs to amend, because the failure to attest has come out
in the evidence, but the case will now proceed on the basis that, that is, the defendant's case
as is obvious from Mr Cooper's address, but the failure to plead the inadequate attestation
necessitates you being given leave to file a reply raising estoppel, but that, of course, has the
potential to prejudice Mr Williams, so the leave would only be given on the condition that
his rights were preserved.” (sic). In the event after a short adjournment counsel for the
appellants returned and withdrew his application to file a reply, but adhered to his submission
that while this issue remained unpleaded on the defence it was not open to the respondent to
rely on it.There is little doubt that the primary ruling to the effect that the respondent had no
need to amend his pleading was erroneous and, in the event that the document fails to bind
the parties as a contract, the appellants have been seriously prejudiced by the ruling.
On the evidence already given in this trial there was to say the least a substantial case
of estoppel against the respondent raising this plea. The respondent executed this document
in the form of a deed and caused it to be delivered, without comment, to the appellant's
solicitors. The document contained the express representation that it had been signed by Mr
Williams in the presence of the witness Browning. This misrepresentation was never
corrected until what has been referred to as the ambush at the trial. A natural inference would
be that but for the misrepresentation the appellants would have insisted upon valid re-
execution and their failure to do so will occasion detriment if the respondent is now permitted
to withdraw the misrepresentation[23]. The evidence of Mr Edlin is that he was informed that
a deed of guarantee and indemnity has been signed by Mr Williams and Raymond and
delivered to his solicitors and that he and his wife then decided “right, let's give them a
chance to get the finance” and they thereupon continued to make the monthly payments.
[23] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428-429; cf. S & E Promotions Pty Ltd v Tobin Brothers Pty Ltd (1994) 122 ALR 637, 652-655.
It is unnecessary to resolve the difficult legal question as to whether valid attestation
may occur under s45(2) of the Property Law Act 1974 by a person who is familiar with the
signature of the party whose signature is attested, but who was not physically present whilst
the signature was written. A deal of authority in the UK would support an affirmative
answer, but there is substantial authority in Australia to the contrary. Resolution of this point
can be left to another day, because it is enough to indicate that in the circumstances of this
particular trial the respondent ought not to have been permitted to deny attestation and on that
basis allege invalidity as a deed without pleading such an issue and abiding the consequences
of such a late plea. The respondent by counsel chose not to do so. Banque Commerciale SA,
In Liquidation v Akhil Holdings Ltd[24] may be distinguished, as the present case is not one
where the parties can be said to have deliberately chosen some basis different from the
pleadings for the determination of their rights and liabilities. In my view, on the case that has
been litigated if contrary to the view earlier expressed the document failed to take effect
between the parties as a contract, it took effect as a deed.
Conclusion
[24] (1990) 169 CLR 279, 286-287.
The terms of the loan were set out in the agreement of 26 July 1995. The delivery of
the amended, executed guarantee was an implied request to the appellants from the
respondent and Raymond, the sureties under the guarantee, to forbear from suing Daintree
Palms. The appellants agreed to accept the offer of the guarantee by their actual forbearance
for some months, a reasonable time in the circumstances. They communicated their
acceptance to the respondent. The appellants’ actual forbearance was valuable consideration.
The respondent is liable under the guarantee.Under the agreement of 26 July 1995, Daintree Palms was to “be responsible for
payment of the balance of the mortgage debt and all costs of and incidental to the release of
the mortgage”. The undisputed evidence establishes that amount is $142,370.46. Under that
agreement, Daintree Palms was “responsible for all repayments to the mortgagee in respect
of the total amount of the said mortgage debts from time to time during the currency of the
loan”. The undisputed evidence is that the appellants made repayments under the mortgage
of $11,839. The respondent is liable to the appellants for these amounts under the guarantee.
The appellants also claim $534 paid by them in respect of a loan application to
Fullmark Finance which arose out of the abandoned agreement of 18 July 1995 (ex 31). The
undisputed evidence is that the Fullmark Finance application was put in at the request of
Raymond and that the loan fees were to be paid by Daintree Palms. The male appellant sent
the account to the respondent and Raymond for payment but it remained unpaid until he paid
upon a court order. As the guarantee was given in respect of all Daintree Palms’ debts, the
respondent is also liable for the amount of $534. The amount owing to the appellants by the
respondent under the guarantee is:
(a) Repayment of loan by the appellants 142,370.46 (b) Repayments paid by the appellants 11, 839.00 (c) Fullmark Finance fees paid by the appellants 534.00
Sub total 154,743.46
Less the refund of the mortgage insurance premium 346.00
Total $154,397.46
The appellants also claim interest at the rate of 10% per annum from 15 March 1996,
the date on which the appellants’ solicitors wrote to the respondent indicating that they would
be issuing legal proceedings in respect of the guarantees. That claim is appropriate.
We would order as follows: The appeal is allowed. The judgment below of 17
December 1997 is set aside and in lieu it is ordered that the appellants recover against the
respondent the sum of $154,397.46 plus interest at the rate of 10% per annum from 15 March
1996 until 22 December 1998. The respondent is to pay the appellants’ costs of and
incidental to the appeal and the action, including reserved costs, to be taxed.
IN THE COURT OF APPEAL [1998] QCA 439 SUPREME COURT OF QUEENSLAND
Appeal No.171 of 1998
Brisbane
Before
McMurdo P. Thomas J.A. Shepherdson J.
[Edlin & anor v Williams]
BETWEEN:
RICHARD JOHN EDLIN and JULIA KAY EDLIN
(Plaintiffs) Appellants
AND:
NOEL RICHARD WILLIAMS
(Second Second Defendant) Respondent
DAINTREE PALMS DEVELOPMENTS PTY LTD
ACN 069 716 347 formerly BATUM PTY LTDACN 069 716 347
(First Defendant)
GEOFFREY BENTON RAYMOND
(First Second Defendant)
REASONS FOR JUDGMENT - SHEPHERDSON J.
Judgment delivered 22 December 1998
I have read the reasons for judgment prepared by the President and Thomas J.A. I agree
that the appeal should be allowed and generally for the reasons which their Honours have given.
I agree in the orders proposed.
There are a number of matters on which I wish to add my comments:
Finding that the terms of repayment of the loan were not agreed by the parties
The President and Thomas J.A. have set out part of the learned trial judge’s findings
(para.30 of their reasons). In that quoted part the learned trial judge erred in making the findings
by reference to matters occurring subsequent to the loan agreement dated 26 July 1995, pleaded
by the appellants. The loan agreement (Exhibit 1) clearly designated the appellants as lenders and
Daintree Palms Developments Pty Ltd as borrower. All the express terms of the loan agreement
are contained in one page. There are five express terms in all and I now set them out:
“1. The lenders propose to borrow a sum of approximately NINETYFIVE THOUSAND FIVE HUNDRED DOLLARS ($95,500.00) from First Provincial Building Society Ltd, which amount in (sic) additional to the existing loan of the lenders with First Provincial Building Society of approximately $34,500.00 will be secured by a mortgage on the lender’s house property at 4 Kingsvale Street, Regents Park aforesaid and which will result in a total debt owing by the lenders to the said Building Society of approximately $130,500.00. 2. The proceeds of this additional loan will be utilised as follows: (a) in payment of the various costs and expenses associated with the loan and mortgage; (b) the balance of the loan (being approximately $95,500.00) will then be loaned to the borrower to assist the borrower in the financing of its purchase of land at Wonga Beach in the said State from JAVALON PTY. LTD.; 3. The borrower will be responsible for all repayments to the mortgagee in respect of the total amount of the said mortgage debts from time to time during the currency of the loan. 4. The borrower will also be responsible for payment of the balance of the mortgage debt and all costs of and incidental to the release of mortgage by 31st December, 1995 or out of the proceeds of sale of the first twelve (12) units to be sold by the borrower at the borrower’s project at Wonga Beach aforesaid (whichever shall be the earlier) with the result that the lenders will have delivered to them an unencumbered Title in respect of their said property. 5. The borrower agrees to execute any further documents as may be required by the lenders from time to time for the purpose of securing or further securing the monies hereby agreed to be loaned by the lenders to the borrower.”
These clauses make clear the intention of the parties; that intention was that:
(a) the appellants, after borrowing an additional sum of about $95,500 from First Provincial Building Society would, after adding their existing debt of
about $34,500 to the same Society secured by a mortgage on their house,
owe the Society about $130,500.
(b) the additional loan would be used in paying various costs and expenses
associated with the additional loan and mortgage on their house and the
balance of about $95,500 lent by the appellants to Daintree Palms
(c) Daintree Palms was responsible for payment by 31 December 1995 at the latest
of the balance of the mortgage debt and all costs and incidental to the release of
mortgage with the result that the appellants were to have delivered to them an
unencumbered title in respect to their property at 4 Kingvale Street, Regents Park.
In the view which I take of the matter Exhibit 1 did set out the terms of repayment of the
loan agreed by the parties.
I would add that the extract from the learned trial judge’s reasons quoted by the President
and Thomas J.A. in para.30 of their reasons shows that the learned trial judge attributed to the male
appellant what she called “a notation” on an application form signed by the appellants after the date
of the loan agreement. That application is Exhibit 16 and the notation quoted appears in Exhibit 16
under “comments made by interviewer”. I do not understand the interviewer mentioned in Exhibit
16 to have been the male appellant. In my respectful view the learned trial judge incorrectly
attributed that notation to the male appellant. This error appears to have contributed to Her
Honour’s erroneous conclusion that the terms of the repayment of the loan were not agreed by the parties.
It is in my view clear that by the agreement of 26 July 1995 the parties intended that by 31
December 1995 at the latest Daintree Palms Developments Pty Ltd was to repay the whole of the
moneys borrowed by the appellants so that the title to the appellants’ house would no longer be
encumbered. The evidence showed that in respect of the debt of about $95,500 the appellants’
house was to be security for that debt
Finding that the terms of the guarantee were not agreed by the parties
The President and Thomas J.A. have set out the relevant facts. I have difficulty in
understanding this finding by the learned trial judge. On the unchallenged evidence before her, the
matter of a guarantee was first raised by the appellants’ solicitors in their letter dated 16 February
1996 written to the respondent and Raymond (Exhibit 5). A form of guarantee and indemnity was
enclosed with that letter and the signing by the respondent and by Raymond of that document (as
guarantors) was one of the stated conditions on which the appellants were prepared to grant “some
indulgence and extend the time for payment”.
The letter of 20 February 1996 (Exhibit 6) signed by the respondent and addressed to
McCullough Robertson, (solicitors for the appellants) said (inter alia):
“Our clients are agreeable to executing the guarantee and indemnity and this will be
attended to as soon as possible”.In the event, it was not until 29 February 1996 that the guarantee and indemnity were signed
by the respondent and by Raymond and also by Daintree Palms Developments Pty Ltd. It is true
to say that the guarantors did amend the form of guarantee and indemnity sent them by McCullough
Robertson. The guarantee and indemnity document included a quite lengthy clause 19 headed
“TRUSTS”. This clause was crossed out at the time the respondent signed the guarantee and was one of the amendments made. It is quite apparent this clause was irrelevant and must have been
carelessly included in the document. One could speculate that its presence was the result of careless
use of a precedent in a computer.
Before the learned trial judge there was clear unchallenged evidence by Raymond that he
was present and saw the respondent sign the guarantee, that he Raymond signed the document on
29 February 1996 and that next day the guarantee and indemnity document was delivered to
McCullough Robertson. I should add that the consideration clause in the guarantee, which I shall
shortly mention was not amended by the signatories.
Subject to the learned trial judge’s comments concerning consideration as stated in that
guarantee and indemnity to which I shall shortly turn, I do not accept the finding of the learned trial
judge that the terms of the guarantee and indemnity were not agreed by the parties. In my view that
finding was incorrect. This Court is in as good a position as was the learned trial judge and I would
set that finding aside.
Finding that the guarantee is not enforceable as a contract as there was no valuable consideration
The guarantee document dealt with the matter of consideration in the following manner:
“2.1 In consideration of the Financier at the request of the Guarantor making available or agreeing to make available to the Debtor credit, advances or accommodation, the Guarantor unconditionally and irrevocably guarantees to the Financier the Debtor’s punctual payment to the Financier of the Guaranteed Money.”
The learned trial judge described the consideration stated in this clause as “illusory or a
sham”. In my respectful view that description was incorrect. The Shorter Oxford English
Dictionary on Historical Principles defines “sham” in a number of ways including:
1. a trick, hoax, fraud, imposture
2. something that is intended to be mistaken for something else; spurious imitation, a
counterfeit.
In my view the clause 2.1 was not a sham, although it is true to say it was incorrect. The
Deed of Guarantee and Indemnity makes clear that “Financier” means the appellants, “Guarantor”
means the respondent and Raymond and “Debtor” means Daintree Palms Developments Pty Ltd.
“Guaranteed money” was relevantly defined as follows:
“means all money which is now or may from time to time in the future be owing or payable by the Debtor to the Financier or for which the Debtor may now or in the future be indebted or liable to the Financier on any account or in any manner, whether alone or jointly with any other person and whether as principal debtor, surety or otherwise and whether that indebtedness or liability is present or future, actual or contingent, fixed or fluctuating and whether in the nature of principal, interest, damages or otherwise including (without limitation):
(a) all money which the Financier has advanced, lent or paid or may now or in the future advance, lend or pay to the Debtor (whether alone or jointly with any other person) or to any other person at the request or under the authority of the Debtor. ....................................... .”
“Guaranteed Money” was therefore apt to cover the advance made by the appellants to
Daintree Palms. While it is true to say that cl. 2.1 speaks in terms of future events and to that extent
was incorrect, nevertheless the drafting of the clause may have been an attempt to describe in future
form events which had already occurred; alternatively the drafting may have been purely careless
copying from a precedent. It was possibly an attempt by the draftsman to avoid what was in fact
a past consideration - the advance to the debtor had already been made. Exhibit 2 which is a
photocopy of the trust account ledger in the name of Daintree Palms Developments Pty Ltd re
Javalon held by the respondent’s solicitors firm shows that on 8 August 1995 the sum of
$100,220.45 opened that account and it is described in the ledger as “loan fr. R.J. & J.L. Edlin”.
The inclusion of an incorrectly stated consideration in the document does not in the
circumstances of this case vitiate the guarantee. If the only consideration for the guarantee were a
past consideration, then, if the guarantee were not a deed, the judge’s finding that there was no
valuable consideration would be correct. However the consideration stated in cl.2.1 was not the
only consideration.
In my view, when one considers the circumstances in which the guarantee came to be signed
by the respondent and Raymond it becomes quite clear that the guarantors, by signing the amended
document and sending it to the appellants solicitors were in effect asking the appellants not to sue
Daintree Palms Developments Pty Ltd for moneys owed to the appellants. The history of events
between the parties shows an actual forbearance to sue for several months at the implied request
of the respondent and Raymond. This forbearance was the valuable consideration given by the
appellants in return for the guarantee.
In my view the decisions of Crears v Hunter (1887) 19 QBD 341 and Murphy v Timms
[1987] 2 Qd.R 550 support the view that the request to forbear to sue can be implied from the
circumstances. I agree with the President and Thomas J.A. that in effect the evidence disclosed the
appellants refrained from commencing legal proceedings against Daintree Palms Developments Pty
Ltd for some months and that this constituted forbearance for a reasonable time after an implied
request for forbearance so that refinancing could be arranged.
Finding that the guarantee was not a deed because of a lack of attestation
It is strictly unnecessary to consider this aspect of the case. I agree with what the President
and Thomas J.A. say concerning the matter of surprise and the need for the respondent to have
pleaded reliance on s.45(2) of the Property Law Act 1974 and alleged lack of attestation. The manner in which this aspect of the case was dealt with by the respondent was far from satisfactory.
It was not until the final address of counsel that the appellants were first made aware of the rather
technical defence. The appellants were taken by surprise by the failure of the respondent to plead
that the guarantee and indemnity had not been attested as prescribed by the statute.
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