| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : HILLS INDUSTIRES LIMITED -v- MORAN & ANOR [2004] WADC 246 CORAM : REGISTRAR CHRISTO HEARD : 17 NOVEMBER 2004 DELIVERED : 6 DECEMBER 2004 FILE NO/S : CIV 1715 of 2003 BETWEEN : HILLS INDUSTIRES LIMITED (ABN 35 007 573 417) Plaintiff
AND
KERRY EDWARD MORAN
ARISTOTELES ARIS
Defendants
Catchwords: Practice and procedure - Western Australia - Application for summary judgment application to strike out statement of claim - Guarantee and indemnity - Whether demand is a requirement of the pleaded guarantee - turns on its own facts
Legislation: Rules of the Supreme Court of Western Australia 1971, O 14 r 1
Stamp Act 1921, s 27
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Result:
Summary judgment refused
Strike out application dismissed Representation:
Counsel:
Plaintiff : Mr A Atkinson
Defendants : In person
Solicitors:
Plaintiff : Atkinson & Associates
Defendants : Not applicable
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
BLM Holdings Pty Ltd v Bank of New Zealand, unreported; NSWCA; BC 9402336; delivered 25 March 1992
Moschi v Lep Air Services Ltd [1973] AC 331
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1 REGISTRAR CHRISTO: There were two applications before me in this matter. On 31 August 2004, the plaintiff filed an application for summary judgment and for leave to apply for summary judgment. In support, the plaintiff filed an affidavit of Renee McLeod, the plaintiff's Credit Manager. The affidavit was dated 19 August 2004. The plaintiff also filed an affidavit of Mark Atkinson and an outline of submissions, both dated 17 November 2004.
2 The first named defendant filed an application on 8 June 2004 for an order that the plaintiff's action be struck out on the grounds that it discloses no reasonable cause of action and it is an abuse of process of the Court. In support of his application, the first named defendant filed an affidavit which he swore on 11 November 2004, together with a schedule of cases in support of the application and in opposition to the plaintiff's chambers summons. 3 Mr Aris, the second named defendant who appeared in person, did not file an affidavit or other documentation in opposition to the plaintiff's summary judgment application. He stated that he needed time to prepare a defence and also proposed that the matter be adjourned. However, once the summary judgment application is filed, it acts as an extension of time to file an defence, so there is no need for a defence to be prepared by the second named defendant until this application is determined. Furthermore, I am satisfied that the second named defendant had sufficient notice of the application and the listing of the hearing. Therefore, I am not prepared to adjourn the matter.
The plaintiff's application 4 Order 14 r 1 Rules of the Supreme Court of Western Australia 1971 requires an application for summary judgment to be made with 21 days after appearance or at any later time by leave of the court. The plaintiff's application is well out of time. The summary judgment procedure is intended to be used early in the proceedings, before the parties incur a great deal of expense. The plaintiff has explained the reason for the delay, by advising from the bar table, that it was initially thought that the ventilating of arguments on the first named defendant's application may be sufficient to prompt settlement of the matter, without the need to incur further costs. It later became apparent that that was not the case and it would be necessary to apply for summary judgment. This is not a very strong argument and in any case, should have been put in an affidavit form.
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5 However, the defendants have not be able to demonstrate any particular prejudice as a result of the delay. There is no evidence that the defendants, who are unrepresented, have taken any action other than that the first named defendant has filed a defence. Accordingly, I am prepared to grant leave to the plaintiff to make the application.
The plaintiff's application 6 I now turn to the merits of the plaintiff's application. Briefly, the statement of claim against each defendant sets out that Austcomm Security Pty Ltd ("the company") is a company of which each defendant was a director. The company purchased goods from the plaintiff and by cl 2 and cl 3 of a Deed dated 6 May 1999 ("the Deed") the defendants guaranteed payment to the plaintiff if the company did not pay the plaintiff on time. Further, it is claimed that by cl 4 of the Deed, the defendants also indemnified the plaintiff against any loss arising out of the transaction. As the company did not make payment, the plaintiff claims, among other things, the sum of $149,975.71 from the defendants, under the guarantee and indemnity contained in the Deed. 7 In interlocutory proceedings, an issue was raised as to the stamping of the Deed. The issue was also canvassed in the hearing of these two applications. However, I am satisfied that the Deed has been stamped and that s 27 of the Stamp Act 1921 is not relevant to the current issue at hand.
The guarantee 8 Clauses 2, 3 and 6 of the Deed provide as follows: "2. GUARANTEE The Guarantor unconditionally and irrevocably guarantees payment to Hills of the Guaranteed Liability. 3. DEMAND If the Customer does not pay the Guaranteed Liability to Hills on time and in accordance with the conditions of sale herein then the Guarantor agrees to pay the Guaranteed Liability on demand whether or not demand has been made on the Customer. A demand may be made at any time and from time to time. …
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… 6. CONTINUNING SECURITY The guarantee and indemnity provided for herein is a continuing security and extends to all the Guaranteed Liability and other money payable under this instrument. The Guarantor waives any right it has of first requiring Hills to proceed against or enforce any other right, power, remedy, security or claim payment from the Customer or any other person before claiming from the Guarantor under this instrument." 9 The plaintiff argued that cl 2 of the Deed created an obligation which was expressly unconditional. It was also argued that cl 3 is, in effect, a redundant clause and that it does not modify the unconditional guarantee in cl 2, despite the fact that it provides that the guarantor must pay "on demand". The plaintiff argued that the second sentence of cl 6 also supports the view that the plaintiff is not obliged to enforce any other right against another party before claiming under the guarantee. 10 The plaintiff also submits that cl 7.2 of the Deed supports the plaintiff's case. That clause provides that the liability of the guarantor is not to be affected by any acquiesce, delay, acts, omissions or mistakes on the part of the plaintiff. 11 Simply, the defendants' contention is that under cl 3 and cl 9.3 of the Deed, a written notice of demand must be issued prior to the action being commenced. In effect, it was argued that there was a condition precedent to the operation of the guarantee. 12 I take the view that the defendants have mis-interpreted the provisions of cl 9.3 of the Deed. Clause 9.3 provides as follows: "Any notice or demand upon the Guarantor for the purposes of this instrument shall be made in writing and signed by the authorised officer of Hills or by duly constituted attorney of Hills or by the solicitors for the time being of Hills and may be served by leaving the same for the Guarantor at the address of the Guarantor disclosed in item 2 to the schedule herein or at such other address as may from time to time be known by Hills as being the address of the Guarantor or by position the same to the Guarantor by prepaid post addressed to the Guarantor at such address and if sent through the post such notice or demand shall be deemed served on the business day following the date
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of posing whether actually received or not or sent by facsimile in which case service shall be deemed to be effected on receipt by the sender from its machine of notification that all pages were transmitted to the number of recipients." 13 I take the view that the defendants have mis-interpreted the provisions of cl 9.3. That clause merely sets out how a demand is to be made, for example, that it is to be in writing, who is to sign it and how it is to be served. It does not require the plaintiff to issue a demand, but merely sets out the method by which a demand must be made. Therefore, it does not support the defendants contentions. 14 Although it does not require the plaintiff to make a demand on the company, the words "the guarantor agrees to pay the guaranteed liability on demand …" in cl 3 clearly require the plaintiff to make demand on the guarantor. Although paragraph 9 of the statement of claim implies that a demand was made on the guarantor, neither the statement of claim nor any evidence filed in support of the plaintiff's summary judgment application set out the circumstances in which such demand may have been made. The plaintiff's counsel stated that for the purposes of the hearing it was not contended that a demand had been made. Exhibit (b) to the affidavit of Mr K E Moran, dated 26 May 2004, is a letter from the plaintiff's then solicitors asserting that the writ was a valid demand for payment. For the avoidance of doubt, the demand was restated in that letter. 15 I accept that there may be a conflict between cl 2 of the Deed, which provides that the guarantee is unconditional and cl 3, which provides that demand must be made on the guarantor. Moreover, the provisions of cl 6 and cl 7.2 may well conflict with the requirement for demand as set out in cl 3. However, it is not for the plaintiff to decide that cl 3 is redundant and that in effect cl 2, or any other provisions prevail over it. This kind of conflict can only be decided by a court after detailed consideration of the issues of fact and legal argument. The issues of whether a demand is a condition precedent to proceeding against the guarantors or whether the writ or subsequent demand by letter, are valid demands, must be determined in similar fashion. Therefore, this ground raised by the plaintiff must fail.
Indemnity 16 Clause 4 of the Deed provides: "As a separate undertaking, the Guarantor indemnifies Hills against all liability or loss arising from and any costs, charges or
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expenses incurred in connection with the Guaranteed Liability not being recoverable from the Guarantor or from the Customer due to any circumstance whatsoever." 17 The plaintiff contended that this clause provides that the indemnity is a separate obligation of the defendants and that the Deed does not require a demand to be made of them. In support of this ground, the plaintiff adopted the above arguments in respect of the guarantee. In addition, the plaintiff pointed to the opening words of cl 7, which refer to "the liability of the guarantor as a guarantor, principal debtor or indemnifier…" These words were said to support the argument that under the indemnity, the defendants were principal debtors and as such, no demand was necessary. 18 Under cl 4, the guarantor agrees to indemnify the plaintiff against liability or loss "not being recoverably from the guarantor or from the customer…". 19 In connection with the customer, the words "not being recoverable" imply to me that some attempt to recover from the customer must have been made, before the indemnity can be involved Although, the liability may not be recoverable for some other reason such as the customer being in liquidation for example. No evidence has been presented to show if any attempts have been made by the plaintiff to recover from the customers (the company) or if the liability is not recoverable for some other reason. 20 If the debt is not recoverable from the guarantor due to the plaintiff having failed to make a valid demand before issuing a writ, I can not accept that the words of cl 7.2 would cure that defect, based on the argument before me. In my view, the opening words of cl 7 that is, "guarantor, principal debtor or indemnifier…" do not unequivocally put the guarantor within the definition of "Customer" contained in the Deed. This proposition needs to be tested by appropriate argument and a chambers hearing is not the forum for that argument. 21 Accordingly, the plaintiff's application for summary judgment must fail in its entirety.
The application by the first named defendant to strike out the statement of claim 22 The basis of the first named defendant's application is that the statement of claim discloses no reasonable cause of action and is an abuse of process of the court. As outlined above, in the examination of the
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plaintiff's application, the main thrust of the first named defendant's argument is that to bring the guarantee into effect, the plaintiff had to satisfy a condition precedent. That is, to make a written demand of the guarantors. It is the first named defendant's case that such a demand was not made and that therefore, there is no reasonable cause of action. 23 I have already canvassed above, the questions of whether the Deed requires a demand and whether in fact a valid demand has been made. The issues to be dealt with in both applications are intertwined. In the first named defendant's application, I come to the same conclusion as I did above, in that the interpretation of the relevant clauses of the Deed needs to be fully examined at a trial with appropriate evidence and legal argument. 24 For this reason, the first named defendant's application must also fail.
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