Gadd v Australia Business Executive Investments Pty Ltd

[2019] NSWDC 798

District Court

New South Wales

Medium Neutral Citation:	Gadd v Australia Business Executive Investments Pty Ltd [2019] NSWDC 798
Hearing dates:	9, 10 and 11 October; 4 November 2019
Date of orders:	05 November 2019
Decision date:	05 November 2019
Jurisdiction:	Civil
Before:	P Taylor SC DCJ
Decision:	(1)   Judgment for the plaintiff against the defendants in the sum of $244,249.75. (2)   Defendants to pay the plaintiff’s costs of the proceedings with those costs incurred from 5 December 2018 to be payable on the indemnity basis.
Catchwords:	LOAN – whether partly repaid GUARANTEE AND INDEMNITY - whether signed – whether demand made on guarantor company by demand on guarantor – whether signature by guarantor on behalf of his company constituted personal acceptance – whether deed of guarantee replaced guarantee covenants in loan agreements
Cases Cited:	Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168 Commercial Bank of Australia Ltd v Colonial Finance, Mortgage, Investment & Guarantee Corporation Ltd (1906) 4 CLR 57 Druin Pty Ltd atf the Druin No 3 Trust trading as Harvey Norman Commercial Division v Corbin [2014] NSWSC 510 Hillam v Iacullo [2015] NSWCA 196
Category:	Principal judgment
Parties:	Mark Lawrence Gadd (plaintiff) Australia Business Executive Investments Pty Ltd (first defendant) Mark Alexander-Erber (second defendant)
Representation:	Solicitors: Lou Baker & Associates (plaintiff) Somerville Legal (defendants)
File Number(s):	2018/275247
Publication restriction:	None

Judgment

A. NATURE OF CLAIM

1. Mark Gadd lent $200,000 to Australian Business Executive Investments Pty Ltd under two short term loans in January 2018. Neither loan was repaid in accordance with the written loan agreements. Mr Gadd sues ABEI for the debt. Mark Alexander-Erber, the director of ABEI, is also sued pursuant to personal guarantees.

B. ISSUES

2. ABEI asserts that by Mr Alexander-Erber it paid Mr Gadd $90,000 in four cash repayments in January 2018. This is the only defence to the claim against ABEI; the residue of the debt is not disputed. Mr Gadd denied receiving any repayments.

3. As to the guarantee claim, Mr Alexander-Erber contends that the personal guarantees were ineffective because of their form in the loan agreements, because they were superseded, because, in the case of the Deed of Guarantee and Indemnity of a Loan, it was not signed by him, and because there was no demand upon ABEI for repayment.

4. Thus, the issues can be listed as:

1. Did the defendants make any, and what, cash repayments to Mr Gadd in January 2018;

2. Was the Deed of Personal Guarantee signed by Mr Alexander-Erber;

3. Was any obligation of guarantee in the loan agreements or Deed of Personal Guarantee ineffective because of a failure to make a required demand; and

4. Were any of the guarantees ineffective by reason of the form of the guarantee or because the Deed replaced the earlier guarantees.

C. THE AGREEMENTS

5. The first loan agreement dated 12 January 2018 was signed by Mr Gadd and Mr Alexander-Erber on behalf of ABEI and refers to:

1. a principal amount of $125,000;

2. an interest rate of 12%;

3. a term of one month;

4. loan funds to be provided by, among other methods, transfer to a nominated account of ABEI;

5. repayment to be of the full amount of principal and interest on the “day of expiration of the term” (in the absence of consent);

6. the funds to be used for developing the business operations of ABEI and creating working capital;

7. repayment would be by bank transfer; and

8. non-payment by the date set was an event of default, subject to an exception not presently relevant.

6. Clause 7 of the first loan agreement provided that “All principal monies lent under this agreement are guaranteed by the company director”. [1] Mr Alexander-Erber was the only company director of ABEI, the only company referred to in this agreement. The typed documents, including the agreements, were prepared by Mr Alexander-Erber with input from Mr Gadd. At the trial it was not contested, and I find, that the reference to “the company director” is a reference to Mr Alexander-Erber.

   1. Affidavit of Mark Gadd, 27/3/19, Annexure A.

7. The second loan agreement is in the same form as the first loan agreement, save that it is dated 23 January 2018, is for a principal amount of $75,000 and is for a term of three months. It is likewise executed in the same way and contains an identical cl 7.

8. The evidence also contained a document titled “Deed of Guarantee and Indemnity of a Loan”. It is also dated 23 January 2018 and listed as parties Mr Gadd (as lender) and ABEI and Mr Alexander-Erber (as guarantors). It recited that, “The Lender has at the request of the Guarantor/s lent or agreed to lend the sum of up to $250,000.00”, [2] that the debt comprises all monies owing to the lender by the debtor, ABEI. It also recited that “the Lender has relied upon the Guarantors guarantees, indemnities and all the other undertakings and promises made in this Deed”. [3]

   2. Recital A.

   3. Recital B.

9. By cl 2 of the Deed, the guarantors guaranteed to the lender the due and punctual payment of the debt, together with all monies which may become payable by the debtor to the lender. The guarantee contained other clauses, including clauses in respect of demands. Notices were deemed to have been received in various circumstances, including if sent by email to the email address of the recipient.

10. The first loan amount of $125,000 was transferred by Mr Gadd to the ABEI bank account on 12 January 2018. The second loan amount of $75,000 was transferred by Mr Gadd to the ABEI bank account on 24 January 2018. [4]

    4. Courtbook pp 263-264; affidavit of Mark Gadd, 27/3/19, Annexure D, pp 27-28.

D. THE ALLEGED CASH PAYMENTS

11. Mr Alexander-Erber asserted that he made four cash payments to Mr Gadd in repayment of the loans. Although not specified in the defence, first filed 11 October 2019, or in a subsequent defence filed 30 May 2019, he deposed in an affidavit dated 12 June 2019 to having paid a total of $90,000 cash in four payments: $40,000 on 15 January 2018; $10,000 on 20 January 2018; $30,000 on 25 January 2018; and $10,000 on 28 January 2018. Mr Alexander-Erber accepted that ABEI owed the residue of $110,000, plus 12% interest under the agreements ($24,000), plus interest after the date of the expiration of the agreements at the statutory rates.

12. The evidence in favour of the cash payments being made comprises three documents, Mr Alexander-Erber’s affidavit where he deposes to these payments, and his oral evidence.

13. The affidavit of Mr Alexander-Erber does not depose to the circumstances of the repayments, how the repayments came to be made, or where they occurred. The absence of these matters in his affidavit tends to militate against the reliability of his evidence.

14. The first document relied on by Mr Alexander-Erber to establish the cash payments was a bank statement of ABEI. [5] It showed a balance of 16 cents prior to the deposit of the first tranche of the loan funds in the sum of $125,000 on 12 January 2018. Thereafter, on 13 and 15 January 2018, about $37,000 was withdrawn in eight “internet withdrawals” and a further $28,000 was transferred to another account or accounts in two transactions on 15 January 2018. Also on 15 January, $60,000 was debited as a “cash withdrawal”, leaving negligible funds in the account. Mr Alexander-Erber deposed to the $60,000 being used to make cash payments of $40,000 on 15 January 2018 and $10,000 on 20 January 2018.

    5. Courtbook pp 263-264; affidavit of Mark Gadd, 27/3/19, Annexure D, pp 27-28.

15. Similarly, the ABEI bank statement records a deposit of $75,000 by Mr Gadd on 24 January 2018, three “internet withdrawals” of $10,000, $5,000 and $5,000, and a transfer of $20,000 all on 25 January 2018. Also on 25 January 2018, there is a “cash withdrawal” of $35,000, again returning the balance to 16 cents. The $35,000 cash withdrawal, together with the residual funds from the earlier $60,000 withdrawal, was deposed by Mr Alexander-Erber to have been used to fund cash payments to Mr Gadd of $30,000 on 25 January 2018 and $10,000 on 28 January 2018.

16. The second document was a copy of a “Business Income and Expenditure Cashbook”. [6] That contained five relevant entries interspersed amongst a greater number. Those five entries are:

    6. Exhibit 1, p 5 or Exhibit 2.

DATE	PARTICULARS	OTHER RECEIPTS (Give Details)	PARTICULARS	CASH PAYMENTS
15/1	M.G (PB)	(Another $10 to go)	58	loan repay	$40k (CASH PAID)	(PB) [tick]
20/1/18	M.G (PB)	(Quick T)	60	Repay Loan	$10,000	-Paid cash-
24/1/18	MG (PB)	Extra to Turn Quick	T & F in	$75,000	T&F account (STG)
25/1/18	M.G (Palm B)	61	Turnaround CASH (no %)	$30,000	PB/ done [tick]
28/1	M.G (PB)	65	Cash loan [illegible]	$10,000-	DONE CASH PAID

17. Apart from the evidence of the payment amounts and dates, the items in the “Cashbook” were not further explained by Mr Alexander-Erber.

18. A third set of documents were four receipts, [7] deposed to be “contemporaneous receipts created when the funds were paid to the Plaintiff”, apparently created by Mr Alexander-Erber and were, in each case, signed by him. They bear a date of the alleged cash repayments, the amounts, and speak of “RECEIVED FROM M.G” and “CASH PAID”, save for one dated “25.1.18” which says “RECEIVED FROM PAID at” and being for “MG LOAN repay $30,000”.

    7. Exhibit 2.

19. Mr Alexander-Erber gave oral evidence that Mr Gadd asked at the time of the signing of the first agreement if the repayments could be made in cash, a matter denied by Mr Gadd. The difference from the terms of the agreement being signed on the same date - which provided for payment of principal and interest to be by bank transfer - was not the subject of further explanatory evidence.

20. In oral evidence, Mr Alexander-Erber testified that the cash repayments were made in the common carport used by Mr Gadd and Mr Alexander-Erber. That location was upstairs from both residences, in an apparently open and unprotected location. Its use, in circumstances where Mr Gadd and Mr Alexander-Erber frequently attended each other’s residences, was not explained by Mr Alexander-Erber other than to assert that Mr Gadd did not want his partner, Louise Phegan, to know of the loans.

21. I did not understand it to be disputed that Ms Phegan was present with Mr Gadd at their residence when Mr Alexander-Erber attended and signed the second loan agreement, a matter which lessened any force in Mr Alexander-Erber’s explanation.

22. The form of the cashbook and the receipts raised unanswered questions about what they were actually recording, assuming they were contemporaneous records. I did not find them to be persuasive of themselves.

23. A number of matters were raised by Mr Gadd against the existence of the cash repayments.

24. First, Mr Gadd and Mr Alexander-Erber regularly texted one another in January 2018, and in the month or so thereafter. None of these texts mention any repayment at any time, although reference was made from time to time to the loans. [8]

    8. Exhibit B, pp 3/122-133/252. (The pages in Exhibits A and B have two sets of page numbers, one at the bottom right-hand corner of the page and one at the bottom centre of the page. The following format has been used to reference these pages: bottom right-hand corner page number/bottom centre page number).

25. Secondly, when the texts did refer to the loan, it was to the amount of 200,000, not to any lesser amount. [9] The text messages contain no response by Mr Alexander-Erber disputing this amount owing.

    9. Exhibit B, pp 75/194-77/196, 89/208, 106/225.

26. Thirdly, the text messages indicated that Mr Alexander-Erber left on Sunday 14 January and “will be back mid week”. [10] On Tuesday, 16 January in the evening, or possibly Wednesday, 17 January, Mr Alexander-Erber texted “See you tommw”. [11] The texts indicate that Mr Gadd and Mr Alexander-Erber met between about 5.15 and 7.58pm that evening, Wednesday, 17 January 2018, [12] and that Mr Alexander-Erber was not present in Palm Beach and had no meeting with Mr Gadd on 15 January 2018, the date of the alleged first cash repayment.

    10. Exhibit B, p 20/139.

    11. Exhibit B, p 28/ 147.

    12. Exhibit B, p 29/ 148.

27. When asked about this matter, Mr Alexander-Erber answered that he would come and go regularly, but I found this explanation unsatisfactory to explain the texts.

28. Fourthly, Mr Alexander-Erber and Mr Gadd exchanged a number of emails in about May 2018 in connection with repayment of the loans. On no occasion was it asserted that some repayments had been made, or that the principal amount was other than $200,000. [13] Thus, the emails in two respects support the absence of any repayments: inferentially containing admissions that the $200,000 principal remained outstanding, and silence as to any repayments having been made.

    13. See Exhibit A, pp 4/82, 22/100, 27/105, 33/111, 35/113.

29. Moreover, Mr Alexander-Erber’s emails assert that moneys were transferred from a Los Angeles office to Hong Kong, from there to be transferred to Sydney. [14] There was no evidence that documented any part of this transfer or any evidence of the amount that was supposedly being transferred from Los Angeles, or why a transfer to Sydney never occurred. The form of transfer or proposed transfer recorded in the relevant email made little, if any, commercial sense and aspects of the form of the correspondence caused me to doubt whether it was genuine. For example, in the correspondence, Mr Charles Frost is described as:

“Charles Frost

ABEI CFO

Los Angeles Office”.

Mr Alexander-Erber admitted that Mr Frost was not an employee. The form of the email reciting “ABEI CFO” I find to be less than persuasive of its genuineness.

14. Exhibit A, p 30/108.

30. Fifthly, the issuing of receipts is an odd way to evidence a repayment. Mr Alexander-Erber was not “receiving” anything by making a repayment. Receipts may be appropriate if they were issued by Mr Gadd, or perhaps even if Mr Gadd had signed them, but there was none of that. But Mr Alexander-Erber having receipts and a record in the cashbook suggests that he was aware of the importance of confirmatory contemporaneous records, but yet he had nothing signed, created or acknowledged by Mr Gadd. In circumstances where the loan documents were created by Mr Alexander-Erber and signed by the parties and loans were being made by electronic transfer pursuant to signed written agreements, the absence of any acknowledgment by Mr Gadd of receiving, at the same time, substantial sums of cash moneys militates against Mr Alexander-Erber’s account of having made repayments.

31. Sixthly, the asserted cash repayments were said to have come from funds Mr Alexander-Erber had just received from Mr Gadd. There is no explanation as to why funds Mr Gadd provided, at relatively high interest rates for a short term one-month loan, should be repaid to him only three days, and also a week, after he had provided the loan, directly from the cash he had earlier deposited. Even less is it explained why Mr Gadd would then loan another $75,000 for a three-month term, by way of bank transfer, only for significant parts of this sum to be repaid in cash the next day and three days thereafter. There was no evidence or explanation by Mr Alexander-Erber as to what was done by, or discussed with, Mr Gadd concerning the cash payments totalling $90,000.

32. Seventhly, as indicated earlier, Mr Alexander-Eber gave no affidavit evidence of any request for repayment by Mr Gadd. The absence of any affidavit evidence from Mr Alexander-Erber of the circumstances of a request for repayment, or of the repayment itself, including location, time of day or content of conversations, weakens the claim that these repayments in fact occurred.

33. Eighthly, Mr Gadd gave evidence in a measured, reasonable fashion, making concessions where appropriate, such as in respect of a possible inconsistency between a need for a deed of guarantee given the presence of cl 7 in the loan agreements, and in other matters. [15] A further document signed by Mr Alexander-Erber on 2 April also evidenced $200,000 principal outstanding and an earlier oral promise to pay a higher interest rate. That document is dealt with further below. [16] There was nothing in the manner or content of Mr Gadd's evidence that caused me to doubt that he was doing his best to be honest and had a good memory of events.

    15. T75/22, T76/7, T95/3.

    16. Affidavit of Mark Gadd, 27/3/19, Annexure I.

34. One particular relevant concession by Mr Gadd was that he gave evidence that he was promised a greater return by Mr Alexander-Erber than that provided in the loan agreements. Mr Gadd accepted that the promise was not recorded in the formal part of the agreement, and he made no claim based on it. There was, Mr Gadd testified, attached to the first agreement, a written acknowledgment by Mr Alexander-Erber of a higher interest rate payable to Mr Gadd. It was signed by Mr Alexander-Erber and attached as a final page to the first agreement document and tended to confirm what Mr Gadd asserted. Mr Alexander-Erber's explanation that it was "rough numbers" he discussed with Mr Gadd left unexplained why he signed it, why he wrote a date range in April 2018, why he calculated as 145,000 profit to "MG" (Mr Gadd) in respect of a $125,000 loan and why the page had his bank details on it. Mr Gadd's email referred to this promise. [17] Mr Alexander-Erber did not deny it in his subsequent email. [18] I found Mr Alexander-Erber's explanation for this signed document to be a matter supporting why Mr Gadd's evidence may be preferable to that of Mr Alexander-Erber.

    17. Exhibit A, p33/111.

    18. Exhibit A, p 38/116.

35. Mr Alexander-Erber, on the other hand, was unconvincing in his evidence. He failed to give satisfactory explanations for why the repayments were made in the carport, why he made no mention in any text or email of the repayments and why he gave no detail in his affidavit of the circumstances of the repayments. He provided no detail of what use was made of the other $110,000 lent to him that he accepts was not repaid.

36. Mr Alexander-Erber also texted to Mr Gadd on 14 January, "Haven't even touched your money yet, but will be doing our deals tommw". [19] Yet the bank statement indicated that almost $22,000 of funds provided by Mr Gadd had by the day previous (13 January) been withdrawn from the account. This matter does not support Mr Alexander-Erber's honesty in dealing with Mr Gadd. Mr Alexander-Erber also gave no explanation for why he repaid $90,000 so promptly in the few days following the loan and well before the date the funds were due to be repaid, but failed to make any payment thereafter. No excuse for his acknowledged failure to honour the loan agreements was provided at any stage.

    19. Exhibit B, p 22/141.

37. The reasons set out in this eighth point, in the context of the other matters, cause me to prefer the evidence of Mr Gadd.

38. Ninthly, I accept Ms Phegan's evidence of Mr Alexander-Erber signing the Deed, a matter I will deal with below. Mr Alexander-Erber denying his signature on the Deed thus militates against him being a credible witness.

39. Tenthly, the circumstances of the alleged cash repayments are in several respects not to be expected. According to Mr Alexander-Erber, Mr Gadd did not count or view the cash in Mr Alexander-Erber's presence, but was merely handed an envelope (which Mr Alexander-Erber asserted contained the cash) and departed. Mr Alexander-Erber, on his account, received no oral acknowledgment from Mr Gadd that the amounts Mr Alexander-Erber asserted to be in the envelopes were in fact there. Mr Alexander-Erber gave no evidence about himself at any time counting out the amounts. It seems to me to be an unlikely account without some greater detail or explanation, which was absent.

40. Finally and perhaps most significantly, Mr Alexander-Erber signed a note in front of Mr Gadd confirming on 2 April 2018 that the principal of $200,000 remained outstanding. [20] Mr Gadd sent a text copy of the signed note to Mr Alexander-Erber that same day. In his responsive affidavit, Mr Alexander-Erber referred to the paragraph of Mr Gadd’s affidavit dealing with this event, but Mr Alexander-Erber made no reference to the document and his signing of it.

    20. Affidavit of Mark Gadd, 27/3/19, Annexure I.

30. Taken as a whole I find these reasons against the existence of the cash repayments to be convincing. I was not persuaded that Mr Alexander-Erber made any cash repayments; rather I was persuaded that he made no cash repayments.

31. It follows that Mr Gadd is entitled to judgment against ABEI in the total sum of $244,249.75, calculated as follows:

On the $125,000 loan:

$125,000 plus 12% interest ($15,000) equals $140,000, plus statutory interest from 12 February 2018 to 5 November 2019 ($13,209.86) totals $153,209.86.

On the $75,000 loan:

$75,000 plus 12% interest ($9,000) equals $84,000, plus statutory interest from 23 April 2018 to 5 November 2019 ($7,039.89) equals $91,039.89.

E. SIGNED PERSONAL GUARANTEE

43. The primary defence raised by Mr Alexander-Erber against his liability under the Deed is that he did not sign it.

44. The evidence from Mr Alexander-Erber signing the Deed of Personal Guarantee is threefold.

45. First, Mr Gadd gives evidence of being present when Mr Alexander-Erber signed the Deed.

46. Secondly, Louise Phegan gives evidence to similar effect, and signed it as a witness to the Deed. Ms Phegan's evidence was like Mr Gadd's, cogent and persuasive. I could find no reason why I should not accept it. It was supported by a photograph of the event, which she must have taken, which showed Mr Alexander-Erber holding a pen and having some documents in front of him in the presence of Mr Gadd on 23 January 2018. The photograph was texted to Mr Alexander-Erber that same day.

47. Thirdly, the purported signatures and initial of Mr Alexander-Erber bear a plain resemblance to his admitted signatures on the two loan documents and his affidavit. There is no dispute that Mr Alexander-Erber initialled the deed on the page prior to the execution page.

48. There was no satisfactory explanation by Mr Alexander-Erber to explain away his apparent signature to the Deed. His affidavit asserted that "[a] personal guarantee was never signed with the Plaintiff" but gave no further details. [21]

    21. [16].

49. When asked about these matters in cross-examination, Mr Alexander-Erber admitted that the signature on the execution page was his signature, although he asserted that the execution page was taken from another document, an earlier version of the Deed that was signed by him. This explanation does not explain why Mr Alexander-Erber initialled the penultimate page of the Deed, nor why the matter was not referred to in his affidavit, and contradicts his affidavit evidence that he never signed a personal guarantee. No call was made for the original Deed, and no point raised about the evidence containing a copy only.

50. Mr Alexander-Erber offered in oral evidence to produce earlier signed deeds and the next day he produced three other versions of the Deed, two of which were signed. None of the signed pages matched the execution page of the Deed relied upon. When this fact was drawn to Mr Alexander-Erber's attention, he claimed that there were yet further signed versions of the Deed not produced. Whether those versions were identical to the Deed relied upon by Mr Gadd or in what respect they might be different could not be determined. I did not accept this evidence as a satisfactory explanation for the signature of Mr Alexander-Erber being on the Deed. [22]

    22. No issue was raised about a page (page 6 of 8) being missing from the copy Deed relied upon, which was annexed to Mr Gadd’s affidavit, perhaps because the missing page was in evidence in the unsigned copy (identical in all other respects, including initialling) which Mr Alexander-Erber produced, see Exhibit D).

51. Further, on 29 January 2018 Mr Alexander-Erber referred in a text message to Mr Gadd potentially putting in up to an additional "50 bananas", inferentially $50,000, and says, "The PG covers it as well, so your all good there". This appears to be a reference to the borrowings at that stage being $200,000 with a further $50,000 still within the $250,000 borrowings contemplated by the Deed. When asked in reference to "The PG covers it as well, so your all good there" the question, "What are you saying in that text?... what do you mean by that?" Mr Alexander-Erber’s answer uses the terms "personal guarantee" and "PG" interchangeably, [23] and indicated to me that Mr Alexander-Erber then understood there was a validly executed personal guarantee in place. He was however not willing to make that concession.

    23. See 11/10/19, T131/13-27.

52. Finally, Mr Alexander-Erber's evidence in respect of the Deed suffers because of the adverse view I took of his evidence for the reasons listed earlier (apart from this aspect of his evidence). His false assertion of cash repayments militates against the reliability and honesty of his assertion that he did not sign a document that bears his apparent signature, but that he did sign another similar but unproduced document containing unknown differences. Nor did he give any satisfactory explanation as to why he did not sign the deed relied upon by Mr Gadd, in circumstances where he accepts it was drafted, discussed and that he signed, on his account, three versions (two produced, one not) of it. None of the four versions of the Deed in evidence appear to have differences of substance, although the three versions he produced do not contain his signature as guarantor.

53. For these reasons, I find on the balance of probabilities that Mr Alexander-Erber did sign the Deed of Guarantee and Indemnity of a Loan and is liable under it.

F. THE CLAUSE 7 GUARANTEES

54. Whether Mr Alexander-Erber was liable under the personal guarantee in cl 7 of the agreements may be of less significance if he is, as I have found him to be, a signatory to the Deed. Mr Alexander-Erber argued that if he signed the Deed then it replaced the guarantee clauses (cl 7) in the loan agreements. I do not accept that it did, as there was no wording that indicated that the Deed and the guarantee clauses could not subsist together. Of course, if the Deed was not executed (as Mr Alexander-Erber submitted), it could not displace the guarantee clauses. Authorities to the effect that later agreements would ordinarily replace earlier ones are not apposite where there was no inconsistency between the agreements and the Deed (although the Deed alone allowed for the recovery of interest), and where the Deed was not a later document but was signed on the same day as the second loan agreement.

55. Mr Alexander-Erber signed the loan agreements with the guarantee clauses in them nominating him as the person giving the guarantee. Although he was signing as a representative of a named party, his signature manifested assent to the terms, one of which refers to him. [24] There was no separate place designated for the guarantor to sign. [25] As mentioned, the terms of the guarantee clause in each loan agreement were not inconsistent with the Deed of Guarantee,[26] although they were more limited, and as the Deed and the second loan agreement were signed on the same day, apparently on the same occasion, the Deed was not a later amendment of the cl 7 guarantees in the loan agreements. In my view, the Deed did not displace any obligations imposed upon Mr Alexander-Erber by the loan agreements.

    24. See Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168 at [57]-[61].

    25. Cf Druin Pty Ltd atf the Druin No 3 Trust trading as Harvey Norman Commercial Division v Corbin [2014] NSWSC 510 at [14], [38]-[44].

    26. Cf Hillam v Iacullo [2015] NSWCA 196 at [51]-[52].

56. The guarantees in the loan agreements extend only to "[a]ll principal moneys" and can mean only that Mr Alexander-Erber guaranteed repayment of the principal. No other possible meaning was suggested. Accordingly, Mr Alexander-Erber's liability under the guarantee cl 7 of the loan agreements extended only to that principal sum of $200,000. No interest was payable by him under cl 7, although statutory interest for non-payment of the principal sum would be payable. On my findings, Mr Alexander-Erber would bear that lesser liability if he were not liable for the debts of ABEI under the Deed.

G. DEMANDS

57. Mr Alexander-Erber asserted that his obligations under the Deed of Guarantee were conditional on a demand being made in accordance with the Deed.

58. The Deed provided that Mr Alexander-Erber guaranteed the “due and punctual performance by the Debtor of every obligation to be performed by the Debtor under the Loan agreements”, [27] and thus provided that Mr Alexander-Erber guaranteed payments by ABEI. Since the loan was not repaid by ABEI on 12 February 2018, as required under the first loan agreement, ABEI was in default under both loans. [28] Clause 3.1 of the Deed required payment by Mr Alexander-Erber, as guarantor, 30 days after any demand where there has been a default. Mr Gadd asserted that a demand was made on 2 May 2018. On this day, Mr Gadd, by email, sought payment of the outstanding principal and indicated that he would be “[t]aking this to my lawyers next week”. [29] The money was not repaid.

    27. Cl 2.1.2.

    28. See Exhibit D, cls 2.4 and meaning of “Default” in cl 1.2; Affidavit of Mark Gadd, 27/3/19, Annexures A and E, cl 4.

    29. Exhibit A, p 4/82.

59. Similar emails were sent on 8 May 2018 [30] and perhaps most clearly on 27 May 2018, when Mr Gadd said:

“Considering that this is now the seventh of [sic] eighth time, since you promised to make the payment by 5pm on the 30th of April, that you have said the repayment will be made and then it has not happened, can you commit to making the $200,000 repayment for the principal of the loan pm a specific day early this week (no later than Wednesday) and please stick to it this time?

I’ve been really open and upfront with you that I now have no choice other than to take legal action if the principal of the loan is not repaid in full by 5pm Wednesday 30 May 2018. Of course legal action is the last resort though due to the quantum of the loan and my urgent need for the money, I have to take this action now, unless you repay the principal of the loan (AUD $200,000) in full by 5pm Wednesday 30 May 2018.” [31]

30. Exhibit A, p 11/89.

31. Exhibit A, p 34/112.

60. Mr Alexander-Erber did not dispute that a demand had been made. But he asserted that the demand was only on him as the guarantor and not on ABEI, the debtor. Mr Alexander-Erber submitted that cl 2.2.2 required a demand to be served on the debtor. The clause does seem to impose this requirement; however, no such requirement is imposed by cl 3.1, which only requires 30 days’ notice after a “Default”.

61. As both cls 2.2.2 and 3.1 use terminology “the Lender may”, a literal construction would leave it open to Mr Gadd to proceed under either clause; that is, he could proceed under cl 2.2.2 once demand had been made on the debtor, or under cl 3.1 once there had been default. As there was no evidence that a lawyer was involved in the drafting of the guarantee, but it was negotiated between two commercial persons, I think internal inconsistency between clauses is a less weighty guide to construction than it might otherwise have been. [32] As an example, ABEI and Mr Alexander-Erber are titled “Guarantors” on page 1 of 8 of the Deed, but only Mr Alexander-Erber is referred to as “Guarantor” on p 7 of 8.

    32. See also page 6 of 8 of the Deed evidenced in Exhibit D (the unsigned version), and see endnote 22 above. Clause 11.1 on p 6 appears to relieve Mr Gadd of making a demand on ABEI.

62. I note that in general a guarantor is not entitled to a notice of default or demand before a creditor institutes proceedings to enforce a guarantee in the absence of express stipulation. [33] Thus, as Mr Alexander-Erber accepted, no demand was required under cl 7 of the loan agreements.

    33. Commercial Bank of Australia Ltd v Colonial Finance, Mortgage, Investment & Guarantee Corporation Ltd (1906) 4 CLR 57 at 61.

63. However, even accepting that Mr Gadd could not make a demand on Mr Alexander-Erber until a demand had first been made on the debtor 30 days earlier, that requirement is satisfied here. As indicated, Mr Alexander-Erber accepted that the earlier quoted emails and texts were demands. He contended that they were sent solely to him. I do not think this is correct. The Deed contemplated service by email as permissible [34] and the only way service by email could be effected on ABEI, on the evidence before me, was to email the sole director and shareholder. That Mr Alexander-Erber’s email was not connected to a website owned by ABEI, if one even existed, is not to the point. In my view, demands on Mr Alexander-Erber were, in the circumstances of these loans, demands on ABEI also. The Deed required notice to be in writing, but Mr Alexander-Erber accepted that texts and emails would satisfy this requirement. In my view, texts or emails to Mr Alexander-Erber were sufficient to serve notices on the company. No clause indicated otherwise.

    34. Cl 6.2.5.

64. Further, since the statements of claim (the original and the amended iteration) constitute demands for monies owing, it follows that at the time of judgment, 30 days having long since elapsed since the statements of claim were served, Mr Alexander-Erber was liable for all monies owing by ABEI, and judgment must be given reflecting a party’s entitlement at that date of judgment, namely today.

65. Mr Alexander-Erber finally asserted that Mr Gadd had conceded that no demand was made on the company and so should not be allowed to assert otherwise. In opening, Mr Gadd, by his solicitor, submitted “[D]id we demand directly with the letter to the first defendant? No, I say not”. [35]

    35. 9/10/19, T8/16.

66. I do not understand this to be a concession wider than its terms; namely that there was not a letter addressed to the first defendant that constituted a demand. But as I have found, text and email demands to ABEI’s sole director and shareholder and the service of an originating process and amended statement of claim in these proceedings are sufficient to satisfy any requirement for a demand to be made on the company.

67. Accordingly, Mr Alexander-Erber is liable under the Deed and the guarantee clauses. Judgment against him should be in the same amount as against ABEI.

H. COSTS

68. In view of the judgment in favour of the plaintiff and a Calderbank offer made on 5 December 2018, the defendants did not oppose an order that the plaintiff be entitled to indemnity costs from the date of the Calderbank offer.

I. ORDERS

69. Accordingly, the orders of the Court are:

1. Judgment for the plaintiff against the defendants in the sum of $244,249.75.

2. Defendants to pay the plaintiff’s costs of the proceedings with those costs incurred from 5 December 2018 to be payable on the indemnity basis.

**********

Endnotes

Decision last updated: 07 February 2020