Ehrenfeld v Oriana Nominees Pty Ltd
[1999] WASCA 222
•13 OCTOBER 1999
EHRENFELD & ANOR -v- ORIANA NOMINEES PTY LTD [1999] WASCA 222
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [1999] WASCA 222 | |
| THE FULL COURT (WA) | |||
| Case No: | CIV:2085/1999 | 13 OCTOBER 1999 | |
| Coram: | MALCOLM CJ KENNEDY J PIDGEON J | 13/10/99 | |
| 9 | Judgment Part: | 1 of 1 | |
| Result: | Application refused | ||
| PDF Version |
| Parties: | GABRIEL EHRENFELD MICHEL ANN EHRENFELD ORIANA NOMINEES PTY LTD |
Catchwords: | Practice and procedure Application for leave to appeal from Local Court and District Court dismissing appeal against summary judgment Applicants failed to show discharge of guarantee |
Legislation: | Nil |
Case References: | Ex parte Jacobs [1875] LR, 10 Ch App 211 Hancock v Williams (1942) 42 SR(NSW) 252 Hill v Anderson Meat Industries Ltd [1972] 2 NSWLR 704 Jowitt v Callahan (1938) 38 SR(NSW) 512 Doherty v Murphy [1966] 2 VR 533 Duncombe v Australia & New Zealand Bank Ltd [1970] QR 202 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : EHRENFELD & ANOR -v- ORIANA NOMINEES PTY LTD [1999] WASCA 222 CORAM : MALCOLM CJ
- KENNEDY J
PIDGEON J
- MICHEL ANN EHRENFELD
Applicants (Second Appellants)
AND
ORIANA NOMINEES PTY LTD
Respondent (Respondent)
Catchwords:
Practice and procedure - Application for leave to appeal from Local Court and District Court dismissing appeal against summary judgment - Applicants failed to show discharge of guarantee
Legislation:
Nil
Result:
Application refused
(Page 2)
Representation:
Counsel:
Applicants (Second Appellants) : Ms N M Epis
Respondent (Respondent) : No appearance
Solicitors:
Applicants (Second Appellants) : Mossensons
Respondent (Respondent) : No appearance
Case(s) referred to in judgment(s):
Ex parte Jacobs [1875] LR, 10 Ch App 211
Hancock v Williams (1942) 42 SR(NSW) 252
Hill v Anderson Meat Industries Ltd [1972] 2 NSWLR 704
Jowitt v Callahan (1938) 38 SR(NSW) 512
Case(s) also cited:
Doherty v Murphy [1966] 2 VR 533
Duncombe v Australia & New Zealand Bank Ltd [1970] QR 202
(Page 3)
1 MALCOLM CJ: This is an application for leave to appeal from a decision of his Honour Judge Charters in the District Court by which his Honour dismissed an appeal from the Local Court.
2 Proceedings were commenced by the respondent in the Local Court against the applicants and a company, Joshua Corporation Pty Ltd ("Joshua") of which the male applicant was a director. The claim was for the sum of $12,633.45.
3 By a chamber summons, the respondent applied for summary judgment against the applicants and Joshua. On 27 February 1998 the learned Magistrate, Magistrate Lane, ordered that the applicants and Joshua have leave to defend the respondent's claim in the Local Court conditional upon the applicants and Joshua paying the sum of $9000 into Court within 21 days of the date of the order.
4 Subsequently, on or about 19 June 1998 an administrator of Joshua was appointed. It appears that subsequently the administration of Joshua was brought to an end by virtue of the provisions of a deed of company arrangement dated 5 November 1998, subject to the provisions of the deed being duly implemented.
5 In the meantime, by the issue of a chamber summons in the Local Court on 19 March 1999, the respondent sought orders that judgment be entered in favour of the applicants on their guarantee. On 19 March 1999 the application was adjourned and on 16 April 1999 the deed of arrangement between Joshua and its creditors was put before the Court.
6 The position then was that the order for payment into court had not been complied with. An application was heard by Magistrate Calder on 14 May 1999 to determine a preliminary issue; namely, whether the applicants were released from any liability to the respondent by virtue of the deed of arrangement between Joshua and its creditors. That application appears to have been dismissed. On 14 May 1999 Magistrate Bromfield ordered that judgment be entered in favour of the respondent against the applicants in the sum of $12,633.45 plus interest and costs.
7 In the meantime in February 1998 the applicants instructed their solicitors to appeal against the decision of Magistrate Lane. That appeal was commenced by a notice of appeal filed on 19 March 1998. It is said that as a consequence of the appointment of the administrator of Joshua on 19 June 1998 the District Court proceedings did not then proceed.
(Page 4)
8 Following the entry into of the deed of arrangement between Joshua and its creditors, the applicants instructed their solicitors to proceed with the appeal. The appeal was heard by his Honour Judge Charters on 27 August 1999. In his reasons for judgment delivered on 10 September 1999 his Honour set out the grounds of appeal, which were that her Worship:
(1) erred in failing to take into account the first appellant's claim for loss and damage in the sum of $2736 in respect of the loss of a carpark bay from 24 December 1994 to 24 June 1997;
(2) erred in failing to take into account that the first applicant was not reimbursed for the value of partitioning erected upon the leased premises which value was claimed to be $10,700 and that the respondent had converted the partitions to its own use and that such had been unjustly enriched;
(3) erred in failing to take into account the respondent had denied the first defendant access to the premises in order to remove fixtures, fittings and chattels valued at $11,118;
(4) erred in law by failing to take into account that the appellants had a valid set-off to the respondent's claim; and
(5) erred in fact and in law in failing to take into account that the appellants had by affidavit satisfied the court that they had a good defence to the respondent's claim on the merits and that unconditional leave to defend should have been granted to the appellants.
9 At the hearing of the appeal the appellants sought leave to amend the notice of appeal so as to appeal against the subsequent orders of Magistrates Calder and Bromfield and also sought to introduce fresh evidence, namely, the entry into of the deed of arrangement by Joshua. Again, it was contended that the effect of that deed was to release the applicants from any debt owed to the respondent. Leave to amend to deal with these matters was declined. There is no appeal from that decision.
10 The grounds upon which it is sought to appeal against the decision of his Honour Judge Charters are:
"1. The learned Judge erred in law in failing to admit additional evidence adduced by the Appellants, namely, the Affidavit of Natasha Marie Epis, filed in the Local Court Proceedings … on 16 April 1999, which evidence
(Page 5)
- shows that the Appellants have a good defence to the Respondent's claim in the Local Court Proceedings.
- 2. The learned Judge erred in law in failing to apply the principles of law by:
(a) Finding that the evidence contained in the Affidavit of Natasha Marie Epis, namely, the Deed of Company Arrangement dated 5 November 1998, was insufficient to release the Appellants from their liability for the principal debt; and
(b) Failing to find that the Deed of Company Arrangement was sufficient to show a triable issue, entitling the Appellants to unconditional leave to defend the Respondent's claim in the Local Court."
"[T]he presenting of fresh evidence by the deed of arrangement raises areas which would be required to be investigated by the respondent. This deed of arrangement is an annexure to an affidavit of 16 April 1999 of a solicitor for the appellants. The purpose of the evidence is to support a submission that the respondent has discharged the debtor, and having discharged the debtor from its liability the appellants are absolutely discharged from their liability. The deed of arrangement by itself does not evidence a discharge by the respondent and the principal debtor, the first defendant, for there was no evidence of the part taken by the respondent in the steps leading to the making of the deed of arrangement.
Had I admitted the deed of arrangement in evidence I would in any event find that it is insufficient by itself to discharge the appellants from their liability."
12 When this application came before us, while the deed of arrangement was included in the application book, the Court had before it no evidence of the guarantee. There has been tendered before this Court, marked
(Page 6)
- SMW1, a lease dated 7 January 1992 between Joshua and the respondent in respect of which the applicants are joined as party guarantors. Their guarantee was contained in cl 13 of the lease, which provided that the applicants guaranteed:
"The due and punctual payment to the lessor of any moneys which may become due and payable to the lessor by the lessee, directly or indirectly, pursuant to the terms of this lease and any variation thereof."
"(d) the liability of the Guarantor shall not be abrogated prejudiced or affected by the granting of time, credit or any indulgence or concession to the Lessee or by any compounding compromise release abandonment waiver variation relinquishment or renewal of any contractual rights duties guarantees or indemnities on the part of the Lessee or by any omission or neglect or by any other dealing matter or thing which but for this provision which could or might operate to abrogate prejudice or affect the guarantee it being the intention of the parties hereto that the guarantee and obligations of the Guarantor herein shall be absolute and unconditional in any or all circumstances."
14 Further, it is provided in cl 13.2(g):
"this guarantee is to continue to be binding upon the Guarantor notwithstanding:
(i) the death bankruptcy insolvency or liquidation (as the case may be) of the Lessee or the Guarantor or any one or more of them;
(ii) any change or alteration in the constitution of the Lessor, the Lessee or the Guarantor;
(iii) the happening of any matter or thing which under the law relating to sureties would but for this provision have the
(Page 7)
- effect of releasing the Guarantor from this guarantee or of discharging this guarantee."
15 The guarantee was executed as a deed. It is common ground that Joshua entered into the deed of company arrangement dated 5 November 1998 with one Anthony Hayes Douglas-Brown, a chartered accountant and official liquidator, as administrator of Joshua. The other parties were Joshua itself and the first-named applicant in these proceedings.
16 The deed of arrangement is one which appears to have been entered into pursuant to the provisions of s 439A of the Corporations Law in that on 15 October 1998, as recited in recital 2.2, the creditors of the company resolved that the company enter into a deed of company arrangement upon the terms and conditions of the deed. Clause 11 of the deed provides:
"The Distribution Property received by the Administrator shall be applied (except as modified or varied by the terms of this Deed) as if the company was wound up as at the Relevant Date and in accordance with section 544 Corporations Law."
17 Clause 14 deals with release of debts and provides:
"On payment of the Distribution Property to unsecured creditors in accordance with clause 11 of this Deed the Company shall be released from all claims of unsecured creditors save and except any claims by the Related Creditors."
18 Clause 9 provided that the first-named applicant was required to make certain payments to the administrator pursuant to cl 9 of the deed in the total sum of $50,000 to be applied towards the payment of the unsecured creditors. The Court has been informed that the creditors were paid the amounts payable under the deed of arrangement on or about 5 November 1998. It is contended that the effect of that payment was to release the applicants from any obligation under the guarantee.
19 It is a general rule in relation to the law relating to guarantees that if the creditor, without having received full payment or performance from the debtor, nevertheless agrees to discharge the debtor from any further liability, the guarantor will be absolutely discharged. There are a number of authorities which support that conclusion, including Jowitt v Callahan (1938) 38 SR(NSW) 512 at 518; Hancock v Williams (1942) 42 SR(NSW) 252 at 256; Hill v Anderson Meat Industries Ltd [1972] 2 NSWLR 704 at 707 - 708. In circumstances where the creditor accepts
(Page 8)
- part of the debt in satisfaction of the whole, it must be clear that the creditor is agreeing to discharge the whole debt rather than merely relieving the debtor from paying a proportion of the debt. See Phillips and O'Donovan: The Modern Contract of Guarantee, 2nd Ed, and the authorities cited at p 250.
20 In the context of a deed of arrangement it seems clear that a scheme of arrangement or composition agreement made within the context of a bankruptcy or winding-up and sanctioned by the Court will not release the guarantor: see Hill v Anderson Meat Industries, supra, at 874 - 876, per Street J, and on appeal [1972] 2 NSWLR 704 at 708 per Jacobs P. It has been held that there is no necessity for the guarantor's liability to be expressly preserved by a clause in the guarantee, although in practice such a clause is invariably inserted. This is such a case. It is also irrelevant that the creditor whose debt is guaranteed votes in favour of the scheme of arrangement: Ex parte Jacobs [1875] LR, 10 Ch App 211 at 214.
21 According to Phillips and O'Donovan, op cit, at 267 this principle has been extended to compositions and schemes of arrangement not made within formal bankruptcy or winding-up proceedings, which have nevertheless been approved by the Court in pursuance to statutory powers. Hill v Anderson Meat Industries Ltd, supra, is an example. It seems to me that there is no reason why the same principles should not apply to a deed of arrangement entered into between an administrator and a company under s 439A of the Corporations Law. It would be quite consistent with the express provisions of the guarantee, to which I have referred, which expressly preserves the liability of the guarantor in such circumstances.
22 It is for these reasons that I have concluded that his Honour Judge Charters was correct in his view that the deed of arrangement did not itself evidence a discharge by the respondent of the principal debtor, and also that the deed of arrangement in itself was insufficient to discharge the applicants from their liability under the guarantee. It is for those reasons that I would dismiss this application for leave to appeal.
23 KENNEDY J: I agree with the reasons just given by the Chief Justice and have nothing further to add.
24 PIDGEON J: I also agree. As I see it his Honour Judge Charters, for the reasons referred to by the Chief Justice, saw that the proposed appellants were not discharged from their liability, and consequently were liable on the guarantee, and as they would have no defence to the claim he
(Page 9)
- saw that as a reason for not interfering with the order that there be leave to defend on condition that $9000 be paid in, and for the reasons stated by the Chief Justice I consider that he was correct.
25 There were some other matters in regard to a discretionary defence and counterclaims on other accounts. I consider that that was discretionary with the Magistrate to weigh that up. That was reviewed again on appeal in the District Court and I do not consider sufficient has been shown for this Court again to review that area. I too would refuse leave to appeal.
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