Ge Finance Australasia Pty Ltd v Tony B Holdings Pty Ltd
[2005] WASC 247
GE FINANCE AUSTRALASIA PTY LTD -v- TONY B HOLDINGS PTY LTD & ANOR [2005] WASC 247
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASC 247 | |
| Case No: | CIV:1183/2005 | 13 OCTOBER 2005 | |
| Coram: | MASTER NEWNES | 15/11/05 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | Summary judgment for plaintiff | ||
| B | |||
| PDF Version |
| Parties: | GE FINANCE AUSTRALASIA PTY LTD (ABN 88 000 015 485) TONY B HOLDINGS PTY LTD (ABN 16 008 754 701) ANTHONY BARLOW |
Catchwords: | Practice and procedure Application for summary judgment Guarantee Whether creditor lost or impaired securities held for debt Whether guarantors discharged Effect of terms of guarantee Whether unconscionable conduct by creditor Section 12CC Australian Securities and Investments Commission Act 2001 (Cth) Meaning of "unconscionable" conduct Turns on own facts |
Legislation: | Australian Securities and Investments Commission Act 2001 (Cth), s 12CC, s 12CC(1), s 12CC(1)(a), s 12CC(2) Corporations Act 2001 (Cth) Trade Practices Act 1974 (Cth), s 51AA, s 51AC, s 51AC(3) |
Case References: | ACCC v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365 Apple Computer Australia Pty Ltd v George Mekrizis and Ors [2003] NSWSC 126 Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332 Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2000] FCA 1376 Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926 Boral Formwork & Scaffolding Pty Ltd v Action Makers Ltd [2003] NSWSC 713 Bridge v Campbell Discount Co Ltd [1962] AC 600 Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654 China and South Seas Bank Ltd v Tan [1989] 3 All ER 839 Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18 Credit Lyonnais (Aust) Ltd v Darling (1991) 5 ACSR 703 Durkin v Pioneer Permanent Building Society Ltd [2003] FCA 419 Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 Glengariff Holdings Pty Ltd v Tah Land Pty Ltd [2005] FCA 132 Graeme Webb Investments Pty Ltd v St George Partnership Banking Limited (2001) 38 ACSR 282 Hancock v Williams (1942) 42 SR (NSW) 252 Hurley v McDonalds Australia Ltd [2000] ATPR 41,741 James v Surf Road Nominees Pty Ltd & Ors [2004] NSWCA 475 Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd & Ors [2003] WASCA 11 Overlook v Foxtel [2002] NSWSC 17 Scaffidi Nominees Pty Ltd v Scaffidi & Anor, unreported; FCt SCt of WA; Library No 960588; 11 October 1996 Williams v Frayne (1937) 58 CLR 710 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
TONY B HOLDINGS PTY LTD (ABN 16 008 754 701)
First Defendant
ANTHONY BARLOW
Second Defendant
Catchwords:
Practice and procedure - Application for summary judgment - Guarantee - Whether creditor lost or impaired securities held for debt - Whether guarantors discharged - Effect of terms of guarantee - Whether unconscionable conduct by creditor - Section 12CC Australian Securities and Investments Commission Act 2001 (Cth) - Meaning of "unconscionable" conduct - Turns on own facts
(Page 2)
Legislation:
Australian Securities and Investments Commission Act 2001 (Cth), s 12CC, s 12CC(1), s 12CC(1)(a), s 12CC(2)
Corporations Act 2001 (Cth)
Trade Practices Act 1974 (Cth), s 51AA, s 51AC, s 51AC(3)
Result:
Summary judgment for plaintiff
Category: B
Representation:
Counsel:
Plaintiff : Mr M J Hawkins
First Defendant : Mr M F Rynne
Second Defendant : Mr M F Rynne
Solicitors:
Plaintiff : Clark Whyte
First Defendant : Tottle Partners
Second Defendant : Tottle Partners
Case(s) referred to in judgment(s):
ACCC v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365
Apple Computer Australia Pty Ltd v Mekrizis [2003] NSWSC 126
Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850
Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2000] FCA 1376
Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926
Boral Formwork & Scaffolding Pty Ltd v Action Makers Ltd [2003] NSWSC 713
(Page 3)
Bridge v Campbell Discount Co Ltd [1962] AC 600
Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654
China and South Seas Bank Ltd v Tan Soon Gin [1989] 3 All ER 839
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Credit Lyonnais (Australia) Ltd v Darling (1991) 5 ACSR 703
Durkin v Pioneer Permanent Building Society Ltd [2003] FCA 419
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306
Glenariff Holdings Pty Ltd v Tah Land Pty Ltd [2005] FCA 132
Graeme Webb Investments Pty Ltd v St George Partnership Banking Limited (2001) 38 ACSR 282
Hancock v Williams (1942) 42 SR (NSW) 252
Hurley v McDonald's Australia Ltd (2000) ATPR 41-741
James v Surf Road Nominees Pty Ltd [2004] NSWCA 475
Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11
Overlook v Foxtel [2002] NSWSC 17
Scaffidi Nominees Pty Ltd v Scaffidi & Anor, unreported; FCt SCt of WA; Library No 960588; 11 October 1996
Williams v Frayne (1937) 58 CLR 710
Case(s) also cited:
Nil
(Page 4)
1 MASTER NEWNES: This is an application by the plaintiff for summary judgment. The plaintiff's claim arises out of guarantees entered into by the defendants in respect of a chattel lease agreement and two hire purchase agreements made between the plaintiff and Tony Barlow Australia Limited ("TBAL").
2 The second defendant was at all relevant times a director of TBAL and the sole director of the first defendant.
3 On 24 September 1999, the plaintiff and TBAL entered into a lease agreement by which the plaintiff agreed to, and did, acquire and lease to TBAL certain shop fittings and fixtures for a period of 60 months, commencing on 28 September 1999. TBAL agreed to pay to the plaintiff a monthly rental of $3878.88, plus stamp duty and FID of $72.19 per month. At the same time, the defendants entered into a written guarantee by which they guaranteed the due performance by TBAL of its obligations, and the due and punctual payment by TBAL of all moneys due and payable, in connection with the lease agreement.
4 On 27 June 2000, the plaintiff and TBAL entered into a hire purchase agreement by which the plaintiff agreed to, and did, acquire and provide on hire purchase terms to TBAL further shop fittings and fixtures for a period of 60 months, commencing on 27 June 2000. TBAL agreed to pay to the plaintiff monthly hire charges of $4195.49. Once again, the defendants entered into a written guarantee by which they guaranteed the performance by TBAL of its obligations under the agreement.
5 On 17 October 2001, the plaintiff and TBAL entered into a further hire purchase agreement in respect of other shop fittings and fixtures. The hire purchase agreement was for a period of 61 months, commencing on 17 October 2001. Pursuant to the hire purchase agreement, TBAL agreed to pay to the plaintiff a monthly hire charge of $2999.60 for the first 60 months and a final single payment of $30,000. The defendants again guaranteed the performance by TBAL of its obligations under the agreement.
6 On 6 March 2003, an administrator was appointed to TBAL under the Corporations Act 2001 (Cth). As at 15 August 2003, the balance of moneys due to the plaintiff under the lease agreement was $66,620.59, under the first hire purchase agreement was $70,760.99 and under the second hire purchase agreement was $70,969.68. In April 2004 the plaintiff made demand for payment of those amounts by the defendants under the respective guarantees. Payment has not been made by the
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- guarantors and those sums remain due and owing. The plaintiff claims those amounts, plus interest from 15 August 2003.
7 The lease and the hire purchase agreements, and the respective guarantees, each provide that a certificate by a manager of the plaintiff will be sufficient evidence of the matters stated in it unless the contrary is proved. A manager of the plaintiff, Mr Burrows, has put in evidence a certificate as to the above amounts owing under each of the agreements as at 15 August 2003 and the daily amount of interest that accrues on each while it remains unpaid.
8 The defendants deny that they are liable under the guarantees, or at least that they are liable for the amounts claimed, and deny that the plaintiff is entitled to judgment.
9 The principles applicable to an application of this sort are well known. The overall legal burden of persuading the Court that the claim is a good one and that the plaintiff is entitled to judgment rests throughout on the plaintiff. But once the plaintiff discharges the initial onus of satisfying the Court that in respect of its claim it would, upon the evidence adduced by it, be entitled to judgment, there is an evidentiary onus on the defendant to satisfy the Court that there is a triable issue or dispute or there ought to be a trial: Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18 at 23; Scaffidi Nominees Pty Ltd v Scaffidi & Anor, unreported; FCt SCt of WA; Library No 960588; 11 October 1996.
10 It is clear that the power to order summary judgment must be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87. If after argument there remains real uncertainty as to the plaintiff's right to judgment without further investigation of the facts, summary judgment must be refused: Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332 at 335.
11 In opposition to this application, the defendants rely on two affidavits sworn by the second defendant ("Mr Barlow"). Mr Barlow says that the business of TBAL was managed by Boutique Pty Ltd ("Boutique"). TBAL owned the assets of the business and was responsible for all of its liabilities. The business was conducted at various locations, including retail stores at Whitford City and Carousel Shopping Centres in Perth, and at Wintergarden in Brisbane. The goods which were the subject of the lease and hire purchase agreements were located at those stores.
(Page 6)
12 On 22 May 2002, administrators were appointed to Boutique. Mr Barlow says that in mid-2002 the board of TBAL decided to sell some of its retail outlets, including the businesses carried on at its Whitford, Carousel and Wintergarden stores. On 5 July 2002, the administrators of Boutique, on behalf of TBAL, sold the Whitford City and Carousel businesses to Flashline Pty Ltd ("Flashline"). In February 2003 the Wintergarden business was sold to Allendale Pty Ltd ("Allendale"). Each of the businesses operated from leased premises.
13 The contract of sale for the Whitford City and Carousel businesses, provided, among other things, that Flashline would take an assignment of TBAL's interest in the lease agreement of 24 September 1999 and the hire purchase agreement of 17 October 2001. It was a term of the contract of sale for the Wintergarden business that Allendale would take an assignment of TBAL's interest in the hire purchase agreement of 27 June 2000.
14 Mr Barlow says that, on behalf of TBAL, he requested Mr McGhee of Westminster National Finance to contact the plaintiff and arrange for the assignment of the lease and the hire purchase agreements to Flashline and Allendale respectively, as required by the contracts of sale. He says Mr McGhee has informed him that he (Mr McGhee) wrote to the plaintiff asking if it would agree to the assignments but received no reply and the plaintiff's employees would not respond to his oral enquiries. Nevertheless, according to Mr Barlow, Mr McGhee has informed him that the plaintiff prepared the relevant assignment documents and forwarded them to the respective assignees. He says that Mr McGhee has informed him that the assignment documents were "not executed by the parties because the plaintiff did not follow up the recovery of the signed documents." I should interpose that it is not at all clear what is meant by that last statement.
15 Mr Barlow says he was aware from his involvement in TBAL that the sales of the businesses by TBAL to Flashline and Allendale were completed. Mr Barlow says that after the sales were completed he heard no more about the assignment of the lease and hire purchase agreements and believed that whatever was necessary to complete the assignments had been done.
16 I should mention in passing that in the course of argument counsel for the defendants acknowledged there was nothing to suggest that it was intended the assignment of the agreements to Allendale and Flashline would release the defendants from their guarantees to the plaintiff.
(Page 7)
17 According to Mr Barlow, Flashline took possession of the Whitford City and Carousel stores, and the fixtures and fittings in them, in about mid-2002. Allendale took possession of the Wintergarden premises, including the fixtures and fittings in it, in about June 2003 and paid the instalments due under the lease from June 2003 to January 2004. Mr Barlow says the payments were made by Allendale by direct transfer to the plaintiff's bank account and he exhibits a letter which he says was sent by the plaintiff to Allendale containing a direct debit form to be used by Allendale. The letter, however, is not (at least in terms) addressed to Allendale, but to a Derek Barlow, whose role is not identified, and it is dated 24 July 2002, well prior to February 2003 when Mr Barlow says the sale to Allendale took place.
18 According to Mr Barlow, it was not until late 2003 or early 2004 that he became aware the plaintiff was seeking to enforce the guarantees against him and the first defendant. He says he then discovered that the assignments of the lease and hire purchase agreements to Flashline and Allendale had not been completed.
19 Mr Barlow says he has been unable to obtain from Mr McGhee copies of some documents that he (Mr Barlow) requires so that he "can fully understand what has happened". Mr Barlow says Mr McGhee has refused to hand over the documents in the absence of a court order. Counsel for the defendants acknowledged that, despite the fact this application for judgment was made in June 2005, no application had been made by the defendants for non-party discovery nor had any other steps been taken to obtain an order that the documents be provided to the defendants. Mr Barlow also does not identify the nature of the documents he has sought or why they are required to enable the defendants to "understand what has happened".
20 Mr Barlow says that had he known the assignments had not been finalised he would have followed up their completion personally and made sure the goods concerned "were secured".
21 According to Mr Barlow, after the lease of the Wintergarden premises to Allendale ended Allendale vacated the premises and left the goods on the premises. Mr Barlow says he does not know where the goods now are. Mr Barlow says that Flashline vacated the Carousel premises in about July 2003, leaving the goods in place. The premises are now occupied by another menswear retailer and when Mr Barlow last saw the goods, in about January 2004, they were still in place and were being used by the retailer. Mr Barlow says that the Whitford City premises
(Page 8)
- were vacated by Flashline in about mid-2003. To his knowledge, the goods in the premises were removed by persons associated with Flashline and Mr Barlow says he knows the items are currently being used in a business operating from the former TBAL premises. That is, it seems (although it is not entirely clear) that the fixtures and fittings have been returned to the premises but are being used in a different business.
22 Mr Barlow says that Flashline and Allendale respectively took possession of the goods, with the plaintiff's knowledge, at a time when the plaintiff knew there had not been any proper assignment of the lease or the hire purchase agreements. Mr Barlow says the defendants, on the other hand, were not aware that the assignments had not been completed and were therefore not in a position to take any necessary action to protect their position as guarantors.
23 The defendants say it was an implied term of the guarantees that the plaintiff would not abandon the goods, alternatively, in equity the plaintiff had an obligation to maintain its security in the agreements and the goods which were the subject of the agreements. Counsel for the defendants submitted that in the event the security was not so maintained, in contract the defendants were discharged completely and in equity the defendants were discharged to the extent that the value of the security had been impaired.
24 In this case, it was submitted that by failing to document the assignments and to maintain control of the goods, the plaintiff had failed to maintain its security. Having permitted the goods to pass into the hands of Flashline and Allendale without first having in place enforceable assignments of TBAL's obligations under the agreements, the plaintiff allowed the goods to be dissipated and ultimately lost. The plaintiff had thereby impaired or lost its security, to the detriment of the defendants as guarantors.
25 Accordingly, it was submitted, the defendants are discharged from liability under the guarantees, alternatively discharged to the extent that the value of the security had been lost, an amount which is currently not capable of estimation.
26 The defendants also say they have not had a full accounting from the plaintiff and therefore do not know how much was paid to it by Flashline and Allendale under the lease and hire purchase agreements. Mr Barlow says "I have reason to believe that the plaintiff did not properly account for the payments tendered by Allendale or Flashline". Mr Barlow does
(Page 9)
- not, however, elaborate upon that statement and, in particular, does not say what reason he has to form that belief.
27 Counsel for the plaintiff submitted that the alleged implied term was inconsistent with the express terms of each of the agreements. He argued that there was, in any event, no basis for the term to be implied, a creditor having no general obligation to act in the best interests of guarantors and there being nothing in the facts of this case to distinguish it from the general run of cases, referring to Graeme Webb Investments Pty Ltd v St George Partnership Banking Limited (2001) 38 ACSR 282 at 304. He submitted that any equitable rights the defendants may have are subject to the terms of the guarantees and the terms of the guarantees plainly preserved the guarantor's liability even where any security has been impaired or lost by the plaintiff. I should mention that the plaintiff did not argue that the agreements, or the goods the subject of them, were not a "security" for relevant purposes.
28 It is necessary in the first place to turn to the terms of the relevant agreements. By the lease agreement, the defendants:
"unconditionally and irrevocably guarantee to [the plaintiff]:
(i) the due and punctual payment by the Lessee of all money which now or in the future is or may become owing by the Lessee actually or contingently (the Guaranteed Money); and
(ii) the due performance of the Lessee's obligations under or in connection with this Lease.
(b) Each Guarantor will pay to [the plaintiff] on demand from time to time an amount equal to the Guaranteed Money then due and payable in the same manner and currency which the relevant Lessee is required to pay the Guaranteed Money …"
29 Clause 4 of the guarantee provided, so far as relevant, that the guarantee is a continuing guarantee, and a principal and independent obligation of each guarantor. It further provided that:
"The liability and obligations of each Guarantor are absolute and unconditional. They will not be affected or discharged by anything which might have affected or discharged them but for this provision, including:
(Page 10)
- …
(b) [the plaintiff] entering any transaction or arrangement with any person;
…
(d) any variation or assignment of this Lease;
(e) [the plaintiff] not enforcing any of [the plaintiff's] rights against any person;
…
(g) [the plaintiff] failing to take any security even if it was mentioned to the [defendants];
…
In this clause 'any person' includes the Lessee or any Guarantor."
30 Clause 5 of the lease provided, so far as relevant, that:
"If [the plaintiff] holds any other security or right for the Guaranteed Money (including a Security Interest or any other Guarantee):
(a) [the plaintiff] does not have to enforce it;
(b) [the plaintiff] can change it or release or give up all or part of it;
(c) the value or effectiveness of that security or right can be reduced or lost,
and the Guarantor's obligations under this document will not be affected. This applies even if that security or right was mentioned to a Guarantor. [The plaintiff] need not consider the Guarantor's position. Nor will the Guarantor's obligations be affected if the security or right is lost, or cannot be enforced."
31 The guarantees under the hire purchase agreements are in identical terms. Under the hire purchase agreements, the guarantor "unconditionally and irrevocably guarantees to [the plaintiff] the due and punctual payment of the Secured Moneys" and "On demand from time to
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- time by [the plaintiff] the Guarantor will pay to [the plaintiff] an amount equal to the Secured Moneys then due and payable in the same manner which [the hirer] is required to pay the Secured Moneys under this Agreement". The guarantee provides that it is a continuing guarantee and a principal obligation of the guarantor and is unconditional and is not affected or discharged "by anything which, but for this provision, would do so, including, without limitation:
(i) any alteration or variation of the terms of this Agreement;
…
(v) any neglect or omission by [the plaintiff] to enforce any of [its] rights against [the hirer] or any other person;
(vi) the release or discharge or other dealing by [the plaintiff] with any property comprised in any Security Interest held by [the plaintiff] from or relating to [the hirer] or any other person".
33 It is well established that, subject to the terms of the guarantee, a guarantor is entitled to the benefit of any security held by the creditor and a creditor may not worsen the position of a guarantor by diminishing or losing securities held by the creditor for the guaranteed debt. The relevant principles were stated by Dixon J in Williams v Frayne (1937) 58 CLR 710 (at 738) as follows:
"If the guarantee is given upon a condition, whether express or implied from the circumstances, that a specific security shall be obtained, completed, protected, maintained or preserved, any failure in the performance of the condition operates to discharge the security and the discharge is complete. But otherwise the surety can complain only if the creditor sacrifices or impairs a security, or by his neglect or default allows it to be lost or diminished, and in that case the surety is entitled in equity to be credited with the deficiency in reduction of his liability. The cases are collected in the ninth chapter of Sir Sidney Rowlatt's book, and there is an examination of some of them in the judgment of Hanna J in Northern Banking Co v Newman & Colton (1927) IR 520 at 536 - 539."
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34 Accordingly, unless it is a condition, express or implied, of the guarantee that the creditor will obtain or maintain a security, a breach of the creditor's duty will not discharge the guarantor's liability entirely, but only to the extent of the loss of the benefit of the security. In Buckeridge v Mercantile Credits Ltd (1981) 147 CLR 654 at 675, Brennan J said:
"In a case where the act of a creditor does not discharge a surety, but the creditor has nonetheless sacrificed or impaired a security, or by his neglect or default allowed it to be lost or diminished, the surety is entitled in equity to be credited with the deficiency in reduction of his liability (Williams v Frayne (1973) 58 CLR 710, at p 738, per Dixon J). The surety's entitlement is lost, however, if he bargains away his right to complain of the act which occasions the deficiency (cf Perry v National Provincial Bank of England [1910] 1 Ch 464; Bank of Adelaide v Lorden (1970) 127 CLR 185)."
35 Counsel for the defendants referred to the following passage of the judgment of the New South Wales Court of Appeal in James v Surf Road Nominees Pty Ltd [2004] NSWCA 475:
"If a contract of guarantee provides that a security will be taken and the obligor subsequently releases the security, the guarantor is discharged because the obligation is not, or ceases to be, the obligation guaranteed. See also Smith v Wood at 23. This principle is sometimes described in slightly different terms, namely, if there is a contractual obligation contained in the guarantee that the security will be maintained by the creditor, a failure to perform this obligation will operate to discharge the guarantor completely because the creditor has breached the contractual bargain. The obligation may be expressed or implied. See generally O'Donovan and Phillip: and cases cited at p 434.
This principle is subject to the qualification that if the security has been released by the obligee in a manner that involved no breach of the contract of guarantee and there is no change in the nature of the obligation guaranteed, then the guarantor is not discharged: Taylor v Bank of NSW (1886) 11 App Case 596; Hancock v Williams & Anor at 255.
Even where there is no contractual obligation to maintain the security, the creditor remains under an equitable obligation to
(Page 13)
- maintain the securities and a failure to do so will result in a discharge of the guarantor to the extent to which the value of the securities has been impaired: Smith v Wood at 30; Hancock v Williams & Anor at 256; O'Donovan and Phillips at 443 ff."
36 It is also clear that where, under the terms of the guarantee, the principal may release securities, or where the guarantor has agreed that his or her liability will not be affected by anything that would otherwise have affected or discharged it, that will normally be effective to preserve the guarantor's liability notwithstanding acts or omissions of the principal that have caused the securities held for the guaranteed debt to be lost or diminished: Hancock v Williams (1942) 42 SR (NSW) 252 at 256, 259; Buckeridge v Mercantile Credits Ltd (supra) per Aickin J at 667 - 671 (with whom Gibbs CJ and Wilson J agreed).
37 In Hancock v Williams, the relevant clause of the guarantee provided that the liability of the guarantors would not be affected or discharged by, among other things, any act or default of the mortgagee whereby the liability of the guarantors might otherwise have been affected or discharged. The clause was held effective to preserve the liability of the guarantor where there had been mismanagement of the mortgaged property by the principal after the principal had entered into possession under the terms of the mortgage.
38 In Credit Lyonnais (Australia) Ltd v Darling (1991) 5 ACSR 703, a similarly worded clause was held to preserve the liability of the guarantor where the creditor had failed to register a mortgage debenture.
39 In my view, the provisions of the respective guarantees clearly exclude any implied term of the sort contended for by the defendants in this action. The provisions of each guarantee also, in my view, exclude any equitable right of the nature claimed. Even assuming it could be said that the plaintiff has failed to preserve its security under the agreements, in my view the terms of the guarantees are effective to preserve the defendants' liability as guarantors. That, it seems to me, is a complete answer to the defendants' contention based on an implied term or an entitlement in equity.
40 In addition, as the Privy Council pointed out in China and South Seas Bank Ltd v Tan Soon Gin [1989] 3 All ER 839, the guarantor's right to relief will only arise where the security was surrendered, lost or impaired by reason of what was done by the creditor.
(Page 14)
41 As I have said, the defendants' complaint was that the plaintiff had impaired or lost its security by allowing Flashline and Allendale to take possession of the subject goods without valid assignments to them of the relevant agreements having been effected.
42 It was not suggested, however, that the plaintiff played any part in the transfer of possession of the goods to Flashline and Allendale. On the evidence, at no relevant time was the plaintiff in possession of the goods. The goods remained at all times in the possession of TBAL until, upon the completion of the sales of the various businesses, TBAL gave possession of them to Flashline and Allendale respectively. There is nothing before me to suggest that at the time TBAL gave possession of the goods to Flashline and Allendale, the plaintiff knew that that had occurred, much less that it concurred in it. Indeed, there is no evidence of when (if at all prior to these proceedings) the plaintiff became aware that TBAL was no longer in possession of the goods.
43 There is also no evidence of any representation by the plaintiff that there had been valid assignments of TBAL's interest in the agreements to Flashline and Allendale. On Mr Barlow's evidence, he simply assumed the assignments had been effected because it was a term of each of the contracts of sale of the businesses to Flashline and Allendale that the lease and hire purchase agreements would be assigned to them, and the sales of the businesses had since been completed.
44 Moreover, not only was that simply an assumption on Mr Barlow's part, it was also an assumption that the terms of the sale contracts did not justify. Only a copy of the contract of sale between TBAL and Flashline is in evidence, but it seems from Mr Barlow's evidence that it is in substantially the same terms as the contract with Allendale. I note that one of the signatories to the contract on behalf of TBAL is Mr Barlow, in his capacity as a director of TBAL. The contract provides, in effect, that if, despite all reasonable endeavours by Flashline and TBAL, assignments of the lease agreement and hire purchase agreement have not been obtained by the completion date of the contract, the contract remains in full force and effect and neither party has any claim against the other. The completion of the contracts of sale was not therefore an indication that the assignments had been effected.
45 In addition, in the normal course, TBAL, as assignor of its interests under the respective agreements, would have executed any assignment documents. At all relevant times Mr Barlow was a director of TBAL and it appears from his affidavit that he was directly involved in the
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- transactions between TBAL and Flashline and Allendale. It would, therefore, have been a simple matter for Mr Barlow, on his own behalf and on behalf of the first defendant of which he was the sole director, to ascertain whether the relevant assignments had been duly effected and to take steps to ensure that possession of the goods was not transferred until the assignments were in order. It seems, however, that, having asked Mr McGhee to arrange the assignments, Mr Barlow took no further interest in the matter.
46 I should also mention that it is not clear what Mr Barlow means when he says that, had he been aware the assignment documents had not been executed, he would have made sure the goods concerned "were secured" or how it is said that whatever steps he would have taken would have better secured the guarantors' position.
47 As to Mr Barlow's complaint that he has been unable to obtain from Mr McGhee copies of some documents that he (Mr Barlow) requires to enable him to "understand what has happened", it is notable that Mr Barlow does not identify the documents, or the nature of the documents, he needs from Mr McGhee, or why he needs them, to understand what has happened. Moreover, no explanation was offered for the failure to take any steps prior to the hearing of this application to obtain any necessary court order to require Mr McGhee to produce the necessary documents.
48 In my view, on the material before me there is no triable issue that by reason of the circumstances of the transfer of the goods to Flashline and Allendale, the defendants are discharged from liability under the guarantees or that their liability is reduced.
49 The defendants further submitted that by failing to perfect their security by a proper assignment of TBAL's interest in the agreements, or by not informing the defendants of its failure to do so, the plaintiff had acted unconscionably within the meaning of s 12CC of the Australian Securities and Investments Commission Act 2001 (Cth) (the "ASIC Act").
50 Section 12CC(1)(a) provides that a person must not, in trade or commerce, in connection with the supply or possible supply of financial services to another person, engage in conduct that is, in all the circumstances, unconscionable. Section 12CC(2) sets out a number of matters to which the Court may have regard for the purpose of determining whether a person has contravened s 12CC(1). Those matters include, by s 12CC(2)(i), the extent to which the supplier unreasonably
(Page 16)
- failed to disclose to the service recipient any intended conduct of the supplier that might affect the interests of the service recipient and any risks to the service recipient arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the service recipient).
51 In his written outline of submissions, counsel for the defendants submitted that "the concept of unconscionability bears no special meaning. It is simply an organising idea informing specific equitable rules and doctrines which do not in terms refer to, or require an explicit finding of unconscionable conduct … However even equitable concepts may themselves be too limiting." Counsel referred to the judgment of French J in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2000] FCA 1376.
52 Counsel submitted that the relevant supply of financial services was first, "the agreements" and secondly, in connection with the intended assignments to Flashline and Allendale. The defendants' case was put, with great brevity, in the written submissions as being "that by failing to either perfect their securities or inform the defendants of the failure to perfect those securities, the plaintiff's conduct has been unconscionable."
53 In the course of argument the defendants' counsel submitted that the plaintiff's conduct was unconscionable in that the plaintiff had allowed the goods, the subject of the lease and hire purchase agreements, to pass into the hands of Flashline and Allendale in circumstances where, contrary to the defendants' belief, valid assignments had not been effected, with the result that the goods had subsequently been lost and the defendants' liability as guarantors thereby increased.
54 Counsel for the plaintiff simply submitted that there was no foundation for a claim based on s 12CC and, moreover, even if there had been unconscionable conduct, the defendants had made no attempt to show what loss or damage they had sustained.
55 There does not appear to have been any substantial judicial consideration of the meaning of "unconscionable" in the context of s 12CC of the ASIC Act. The meaning of "unconscionable" under s 51AC of the Trade Practices Act 1974 (Cth), has, however, been the subject of considerable judicial consideration. Section 51AC, save that it applies to the supply of services rather than financial services, is for all relevant purposes in the same terms as s 12CC of the ASIC Act.
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56 In Hurley v McDonald's Australia Ltd (2000) ATPR 41-741 at 4,585, the Full Court of the Federal Court, having said that it should not be taken necessarily to be in agreement with the view of Dowsett J, at first instance, that in s 51AB "unconscionable" encompasses traditional equitable concepts, went on to say:
"For conduct to be regarded as unconscionable, serious misconduct or something clearly unfair or unreasonable, must be demonstrated … Whatever unconscionable means in s 51AB and s 51AC, the term carries the meaning given by the Shorter Oxford Dictionary, namely, actions showing no regard for conscience, or that are irreconcilable with what is right or reasonable … The various synonyms used in relation to the term 'unconscionable' import a pejorative moral judgment …"
57 That passage has been cited with approval in a number of cases, including Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 per Lindgren J at [300]; Overlook v Foxtel [2002] NSWSC 17 per Barrett J at [95]; Durkin v Pioneer Permanent Building Society Ltd [2003] FCA 419 at [42]; Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11 at [139]; Apple Computer Australia Pty Ltd v Mekrizis [2003] NSWSC 126 per Bergin J at [251]; Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850 per Selway J at [184]; Boral Formwork & Scaffolding Pty Ltd v Action Makers Ltd [2003] NSWSC 713 and Glenariff Holdings Pty Ltd v Tah Land Pty Ltd [2005] FCA 132 at [7] - [8].
58 In ACCC v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365, Sundberg considered that, whatever might be its precise ambit in s 51AA, "unconscionable" in s 51AC is not limited to the cases of equitable or unwritten law unconscionability which are the subject of s 51AA. His Honour considered that that follows from the (non-exhaustive) list of factors to which s 51AC(3) permits the Court to have regard, some of the listed factors describing conduct that goes beyond what would constitute unconscionability in equity. Sundberg J concluded that whether conduct is unconscionable for the purposes of s 51AC is at large. See also Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926 at [98]; Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (supra).
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59 In Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (supra), after referring to the above cited passage from Hurley v McDonald's Australia Ltd, Selway J said in relation to s 51AC:
"In order to find that conduct is 'unconscionable' it is necessary to do more than merely show that the behaviour is misleading or deceptive, or otherwise in breach of some other provision of the TPA. What is necessary is to show that the conduct is so unacceptable that it can properly be described as 'unconscionable'. Normally it might be expected that behaviour would only be 'unconscionable' if some moral fault or responsibility is involved. Normally it might be expected that this would involve either a deliberate act, or at least a reckless act. Mere unreasonableness or unfairness may not be sufficient, at least in the absence of some moral fault. This is why it was critical to the conclusion he reached in Simply No-Knead that Sunberg J was able to find an 'overwhelming case of unreasonable, unfair, bullying and thuggish behaviour'. Of course, those words are not a definition of 'unconscionable'. But having made that finding it is quite apparent that the behaviour could properly be characterised as 'unconscionable'."
60 Selway J pointed out that s 51AC of the TPA is not to be "treated as a 'catch all' provision applicable to each and every inappropriate business practice adopted by a trading corporation in relation to the supply of goods. The relevant conduct must be conduct which can be characterised as 'unconscionable'." And as Viscount Simonds warned in Bridge v Campbell Discount Co Ltd [1962] AC 600 at 626, " 'Unconscionable' must not be taken to be a panacea for adjusting any contract between competent persons when it shows a rough edge to one side or the other".
61 In my view, the conclusions reached in the cases to which I have referred are equally applicable to s 12CC of the ASIC Act. In the present case it is, as in those cases, unnecessary to endeavour to define the precise metes and bounds of the section. However, "unconscionable conduct" under s 12CC does not refer simply to any inappropriate business practice but must be conduct which can be characterised as "unconscionable"as that concept was described in Hurley v McDonald's Australia Ltd (supra).
62 I have already set out the relevant circumstances of the transactions in question. In my view, there is nothing in the evidence to suggest that any conduct of the plaintiff in connection with the assignment of the lease
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- and hire purchase agreements is capable of constituting unconscionable conduct. On the evidence, TBAL simply gave up possession of the goods when the sales of the businesses were completed. Neither TBAL nor Mr Barlow took the trouble to ensure that valid assignments to Flashline and Allendale had been effected before TBAL did so. There is no evidence that the plaintiff knew TBAL was giving up possession of the goods or that it represented that valid assignments had been effected. Upon settlement of the sale of the businesses, Mr Barlow simply assumed, without good grounds, that valid assignments had been effected.
63 I do not consider there is any triable issue under s 12CC of the ASIC Act.
64 The final matter is the defendants' complaint that the plaintiff has not properly accounted for all money paid to it by Flashline and Allendale.
65 In my view, no basis has been shown for the assertion by the defendants that there is some uncertainty as to the extent of their monetary liability to the plaintiff under the guarantees. As I have said, it is not apparent what grounds Mr Barlow has to hold the belief that the plaintiff has not properly accounted for any payments made to it by Flashline and Allendale. If there was a proper basis for that belief it would have been a simple matter to state it.
66 In my view, nothing has been put before me that is capable of displacing the contents of Mr Burrows' certificates as to the amount of the defendants' indebtedness to the plaintiff.
67 In my view, the defendants have no arguable defence to the claim. Accordingly, I consider there should be judgment for the plaintiff for the amounts claimed.
68 I will hear the parties on the form of the appropriate orders and on costs.
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