Ghossayn v Bleyer

[2010] NSWCA 123

New South Wales

Court of Appeal

CITATION:	Ghossayn v Bleyer [2010] NSWCA 123
HEARING DATE(S):	24 May 2010
JUDGMENT OF:	Tobias JA at [1], [22], [24]; Basten JA at [23]; Macfarlan JA at [2]
EX TEMPORE JUDGMENT DATE:	24 May 2010
DECISION:	(1) Appeal allowed; (2) Set aside the orders made by his Honour Judge Rolfe on 11 and 21 May 2009 and in lieu thereof order that the respondent pay the appellant the sum of $572,313.40 inclusive of interest up to and including 24 May 2010; (3) The respondent pay the appellant’s costs of the proceedings in the District Court including the respondent’s cross-claim and the respondent pay the appellant’s costs of the appeal but with respect to the latter have a certificate under the Suitors’ Fund Act 1951 if otherwise qualified.
CATCHWORDS:	CONTRACT - construction of guarantee - whether advances by one of the appellant's "related entities" rather than by the appellant himself gave rise to guaranteed debt - whether guaranteed debt reduced by expenses paid to US attorney and merchant bankers
LEGISLATION CITED:	Fair Trading Act 1987
CATEGORY:	Principal judgment
PARTIES:	George Ghossayn (Appellant) Roland Bleyer (Respondent)
FILE NUMBER(S):	CA 2009/298368
COUNSEL:	Dr A S Bell SC (Appellant) D A McLure/A G Stenhouse (Respondent)
SOLICITORS:	Blackstone Waterhouse (Appellant) Lincoln Smith & Company (Respondent)
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	2801/2007
LOWER COURT JUDICIAL OFFICER:	Rolfe DCJ
LOWER COURT DATE OF DECISION:	11 and 21 May 2009
LOWER COURT MEDIUM NEUTRAL CITATION:	George Ghossayn v Roland Bleyer [2009] NSWDC 86

CA 2009/298368

TOBIAS JA
BASTEN JA
MACFARLAN JA

MONDAY 24 MAY 2010

GHOSSAYN v BLEYER

Judgment

1 TOBIAS JA: I shall ask Macfarlan JA to give the first judgment.

2 MACFARLAN JA: The appellant brought proceedings against the respondent in the District Court claiming judgment in the amount of $314,483.86 and various ancillary and alternative orders. The proceedings were heard by Rolfe DCJ who rejected the bulk of the appellant’s claims and directed the entry of judgment in his favour only to the extent of $20,000 plus interest. In his Amended Notice of Appeal the appellant contended that judgment should instead be entered in his favour in the sum of $300,000.

3 At relevant times the appellant was a director of Kari and Ghossayn Pty Ltd which was a large earth moving company. He was also director of Magicglow Pty Ltd (“Magicglow”) of which the respondent also came to be a director.

4 The primary judge found that on 29 January 2001 both the appellant and respondent were present at a meeting of directors of Magicglow. The minutes of that meeting recorded that the following occurred:

“The Chairman [the appellant] advised that an entity associated with him would provide $600,000 to the company. Some discussion took place as to whether the funding would be in the form of equity or debt. IT WAS RESOLVED that the funding would be in the form of debt and the special conditions in relation to the provision of this debt would be as follows:

Interest free
On demand
Unsecured

IT WAS FURTHER RESOLVED that once the Chairman procured these funds by way of interest free on demand, unsecured debt to the company, Richard A. Bobb would be instructed to receive the said funds into their trust account”.

5 The primary judge made a finding that at about this time the following discussions occurred between the appellant and the respondent referrable to what was decided at this Board meeting:

“19 I am satisfied that, at or about the time of the meeting [of directors of Magicglow on 29 January 2001] or shortly thereafter, Mr Ghossayn and Mr Bleyer had a discussion in which Mr Bleyer told Mr Ghossayn that he could ‘raise an insurance bond or bank guarantee worth USD$50 million to bring to Australia’ to assist with the developments. Mr Bleyer told Mr Ghossayn that he had an attorney in the United States, Robert Masud, who had a lot of contacts with banks. Mr Bleyer told Mr Ghossayn that to raise the insurance bond they would need about USD$300,000. I am satisfied that Mr Bleyer told Mr Ghossayn that he would personally guarantee that Mr Ghossayn would get his money back if the insurance bond could not be obtained. Mr Ghossayn asked Mr Bobb, who was present at the discussion, to prepare the necessary paperwork. Solicitors were not involved”.

6 Following these discussions the appellant took steps to raise A$600,000 and had two separate amounts of A$480,000 and A$120,000 deposited into a bank account of Mr Bobb, Magicglow’s accountant.

7 On 14 February 2001 the respondent provided a guarantee (“the guarantee”) to the appellant in the following terms:

“Dear Mr Ghossayn

You have requested that I provide you with my personal written guarantee with regard to an amount of no less than $A575,000 of $A600,000 advanced by you (or one of your related entities) to Magicglow Pty Ltd A.C.N. 091 766 059 (hereinafter referred to as “Magicglow”).

1. I hereby irrevocably, unreservedly and unconditionally personally guarantee to you (or your related entity) that an amount of $A575,000 will be repaid to you (or your related entity) in the event that the said funds are not used for the purposes of acquiring an insurance company bond.

2. Any insurance company bond which will be acquired by Magicglow will be acquired from only an insurance company with a rating of no less than AA, such rating to have been provided by Standards and Poor (a well known rating agency based in the United States of America).

3. In the meantime, funds will be retained in the trust account of Mr Robert Masud (attorney at law) and will not be released by the said Mr Robert Masud without my prior written instructions to him. The only purpose for which a release will be issued to Mr Masud is, as stated above, for the purchase of an insurance bond from an insurer with a rating of no less than AA.

In the event that you have satisfied yourself in relation to my representations, as set out herein, I would appreciate if you would issue written instructions to Mr Bobb so that he may disburse the sum of $A600,000 as follows:

Robert Masud trust account *(MagicGlow Trust Account) 575,000 Richard A. Bobb *(Accountant Fees & Expenses) 25,000
Roland Bleyer *(Expenses for Intermediary) 15,000
[Total] $ A615,000”.

[the text in parentheses that is asterisked was handwritten].

8 On 23 February 2001 Mr Bobb transferred the sum of A$575,000 from the funds in his account into an account in the name of Mr Masud who was the respondent’s attorney in the United States. The two other amounts referred to in the guarantee were presumably disbursed as contemplated in the guarantee but there is no issue on the appeal which relates to them. No insurance bond was ever procured and the appellant was only reimbursed A$280,516.14 of the amount provided to Mr Bobb acting on behalf of Magicglow.

9 The appellant claimed that the respondent was bound under the guarantee of 14 February 2001 to reimburse to him the balance (up to the amount of A$575,000). He also claimed an entitlement to the same amount under a letter agreement of 16 August 2001 and a deed of 14 November 2001. Alternatively he made claims based upon the principles of unjust enrichment and promissory estoppel and under the Fair Trading Act 1987. He was successful only to the extent that he obtained a limited judgment on a separate claim in respect of a loan made on 5 November 2001.

10 There are two principal issues in relation to the guarantee of 14 February 2001. If the appellant is successful on these issues his alternative arguments in relation to this guarantee and his alternative claims do not arise.

11 The first principal issue is whether the payments of A$480,000 and A$120,000 deposited into the bank account of Mr Bobb represented the amount of “$A600,000 advanced by you (or one of your related entities) to Magicglow” referred to in the guarantee of 14 February 2001.

12 The primary judge held that the payment of A$480,000 fell within this description as it came from the appellant’s personal bank account. On his Amended Notice of Contention the respondent challenged this finding. He contended that “[i]t is open to conclude that [the appellant] held the money in that account as the nominee or trustee of one of his companies” (Written Submissions [8]). However even if the funds in the appellant’s account had been so held that would not mean that the payment did not meet the relevant description. The payment would still have been of funds “advanced” by the appellant. In an action at law for recovery of the funds the appellant would have been the proper plaintiff, notwithstanding that he might have been acting for an undisclosed principal or as a trustee when he advanced the funds. That fact is sufficient to attract the description and the guarantee.

13 In any event the guarantee expressly extended to funds advanced by one of the appellant’s “related entities”. The respondent’s submission quoted in [12] above implicitly accepted that even if the funds were not advanced by the appellant they were at least advanced by an entity related to him. This satisfied the description in the guarantee. It did not follow that the related entity was required to be a plaintiff in the proceedings, because the guarantee was given to the appellant personally and operated according to its terms even if the funds were advanced not by the appellant but by a related entity.

14 The primary judge held that the payment of A$120,000 did not fall within the terms of the guarantee because it came from the bank account of Kari and Ghossayn Pty Limited. Because that company owed the appellant an amount well in excess of A$600,000, there is good reason to think that the payment by that company was a payment at the appellant’s direction in partial repayment of the debt owing to him by that company. It is sufficient however to rest my decision upon the fact that that company was undoubtedly related to the appellant. Thus even if the payment is regarded as having been an advance by the company rather than the appellant, it fell within the terms of the guarantee and the appellant was the only necessary plaintiff in an action to enforce the guarantee.

15 The second principal issue concerns the effect of the payment by Mr Masud of certain amounts out of the amount of A$575,000 received by him. First, two payments totalling USD$100,000 were made by Mr Masud to Downing & Company Incorporated, a firm of merchant bankers. These were said to relate to that firm’s professional fees in attempting to procure the insurance bond for Magicglow. Secondly, payments totalling USD$50,000 were made by Mr Masud to himself. These were also said to be professional fees for attempting to procure the insurance bond.

16 The primary judge held that the respondent was entitled to have these amounts deducted from the amount of A$575,000 that the respondent guaranteed would be repaid to the appellant because they were properly disbursed by Mr Masud from the amount he received. His Honour said that “[i]t does not matter whether the insurance bond was procured, so long as the Court is satisfied, which it is, that the funds were used for the purpose of acquiring it” (Judgment [45]).

17 I do not agree with this proposition. Whilst the paragraph of the guarantee numbered one is capable of this interpretation, the paragraph numbered three in my view makes it clear that it is only funds that are to be used for the actual purchase of an insurance bond that are permitted to be paid out of Mr Masud’s account. Expenditure for the purpose of merely attempting to obtain such a bond is not authorised. The language in the second sentence of the paragraph numbered three is quite unambiguous as to this and its use of the words “as stated above” indicate that the same meaning is to be given to the otherwise possibly ambiguous terms of the paragraph numbered one.

18 The respondent submitted that the guarantee could not have been intended to bear this meaning because “[t]here was no evidence that Mr Masud or any other professional was to be engaged on a contingency basis” (Written Submissions [17]) and that the only money available to pay fees and disbursements which could be expected to be incurred was the $A575,000 transferred to Mr Masud’s account. However, this consideration would not cause the Court to depart from what I consider to be clear contractual terms. In any event the respondent’s submission fails to take into account the separate amounts referred to in the guarantee as to be paid for Mr Bobb’s accountancy fees and expenses (A$25,000) and to the respondent for “expenses for intermediary” (A$15,000). These amounts were capable of being understood by an objective observer of the contractual terms as intended to encompass any expenses that might be incurred in the United States or elsewhere. The reference to them in the guarantee negates any argument that authority to withdraw, from Mr Masud’s account, funds to pay expenses of attempting to obtain the insurance bond should be implied.

19 The resolution of these two principal issues in favour of the appellant entitles the appellant to the relief he seeks, as it results in the guarantee being held to cover the full amount (other than the specified amounts for the fees and expenses of Mr Bobb and the respondent) that the appellant contends was advanced and it precludes the respondent claiming that amounts for other expenses were properly deducted from the amount advanced.

20 As the Court has reached a firm view that these two issues should be resolved in favour of the appellant, as there is no issue of general principle involved and as the confining of the court’s reasoning to these two issues will enable the appeal to be disposed of today, it is inappropriate to proceed to deal with the alternative arguments and claims of the appellant.

21 I propose the following orders:

(1) That the appeal be allowed;
(2) Set aside the orders made at first instance;
(3) Judgment for the appellant in the sum of $314,483.86 together with interest under s 100 of the Civil Procedure Act 2005 to today’s date in an amount to be specified;
(4) Order the respondent to pay the appellant’s costs in this Court and in the District Court; and
(5) Grant the respondent a certificate under the Suitors’ Fund Act 1951 if qualified.

22 TOBIAS JA: I agree with the orders proposed by Macfarlan JA for the reasons he has given.

: I also agree.

[DISCUSSION THEN ENSUED ABOUT THE FORM OF THE ORDERS TO BE MADE]

: The orders of the Court therefore are as follows:

(1) Appeal allowed;
(2) Set aside the orders made by his Honour Judge Rolfe on 11 and 21 May 2009 and in lieu thereof order that the respondent pay the appellant the sum of $572,313.40 inclusive of interest up to and including 24 May 2010;
(3) The respondent pay the appellant’s costs of the proceedings in the District Court including the respondent’s cross-claim and the respondent pay the appellant’s costs of the appeal but with respect to the latter to have a certificate under the Suitors’ Fund Act 1951, if otherwise qualified.

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