Horsburgh v Emerald Rock Pty Ltd - [2016] QCA 47

[2016] QCA 47

COURT OF APPEAL

FRASER JA
PHILIPPIDES JA
BOND J

Appeal No 8714 of 2015
DC No 1203 of 2012

GREGORY ALAN HORSBURGH Appellant

EMERALD ROCK PTY LTD Respondent

BRISBANE

THURSDAY, 3 MARCH 2016

JUDGMENT

FRASER JA: The appellant appeals a District Court judgment against it of an amount exceeding $300,000 in favour of the respondent.

There is no factual dispute in the appeal. The respondent granted a lease for a term of 10 years, commencing on 2 January 2003, with two six year options. The lessee covenanted to pay rent and other charges to the respondent. The appellant and a co-surety executed a “Guarantee & Indemnity” jointly and severally guaranteeing the performance and observance of all of the terms of the lease by the lessee. By November 2010 the lessee was in arrears under the lease in the sum of $342,930. By a “Deed of Surrender of Lease” dated 24 January 2011, the respondent and the lessee agreed to a surrender of the lease on terms and conditions, including an acknowledgment by the lessee that it was indebted to the respondent in the stated sum with respect to rental and other monies outstanding and owing to the respondent pursuant to the lease for which the respondent was then entitled to issue proceedings and enter judgment for that amount as a liquidated debt. The lessee did not pay that sum to the respondent. In March 2012 the respondent commenced proceedings to recover that sum, together with legal costs and interest, from the appellant and his co-surety. In June 2012 the respondent and the co-surety entered into a deed of settlement under which the co-surety agreed to pay to the respondent $125,000 in full and final settlement of the dispute between them.

At the trial the appellant advanced three contentions in support of his proposition that he was not liable under the Guarantee & Indemnity. The first proposition was that the Deed of Surrender released the lessee from its payment obligations under the lease, and replaced them with an obligation to pay a debt in the stated sum, that being a new debt which was not caught by the Guarantee & Indemnity. The second proposition was that the Guarantee & Indemnity was discharged by the Deed of Surrender because it varied the lessee’s obligations under the lease to the prejudice of the appellant without his consent. The third proposition was that the Guarantee & Indemnity was discharged by the Deed of Settlement because it operated to release the co-surety. The trial judge rejected each contention.

The appellant repeats each contention in this appeal.

As to the first contention, that the Deed of Surrender released the lessee from its payment obligations under the lease and replaced them with an obligation to pay a new debt not caught by the guarantee, for present purposes it may be assumed that so much is correct. But, if so, it is not an answer to the claim under the guarantee. On the agreed…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] QCA 47
Decision Date: 3 March 2016

CaseChat Overview and Summary

In the case of Horsburgh v Emerald Rock Pty Ltd, the appellant, Horsburgh, appeals against a District Court judgment that found him liable to pay the respondent, Emerald Rock Pty Ltd, an amount exceeding $300,000. The underlying dispute concerns a lease agreement that was granted by the respondent to a lessee, who subsequently defaulted on his payment obligations. Horsburgh, along with a co-surety, had executed a Guarantee & Indemnity that jointly and severally guaranteed the lessee's performance under the lease. When the lessee fell into arrears, the respondent entered into a Deed of Surrender of Lease with the lessee, acknowledging the debt owed. The respondent then proceeded to sue Horsburgh under the Guarantee & Indemnity for the outstanding amount, which he sought to contest on several grounds.

The legal issues in this appeal revolve around Horsburgh's contentions that he was not liable under the Guarantee & Indemnity. Horsburgh argued that the Deed of Surrender released the lessee from the lease payment obligations and replaced them with a new debt, which was not covered by the guarantee. He also contended that the guarantee was discharged by the Deed of Surrender as it varied the lessee's obligations without his consent and by the Deed of Settlement as it released his co-surety. The Court of Appeal needed to determine whether these contentions were valid and whether they could discharge Horsburgh from his liability under the guarantee.

The Court of Appeal held that all of Horsburgh's contentions were without merit. The Court found that the Deed of Surrender could not discharge Horsburgh from his accrued liability under the guarantee as it was not a party to that deed. The Court further held that the clauses in the Guarantee & Indemnity precluded Horsburgh from relying on rules applicable to guarantees that would discharge him from liability. The Court also found that the Deed of Settlement did not release Horsburgh from liability as it was intended as a covenant not to sue and not a release of liability. The Court of Appeal, therefore, dismissed the appeal and upheld the District Court judgment.

The final orders of the Court of Appeal were that the appeal is dismissed with costs, effectively affirming the District Court judgment against Horsburgh. The Court's decision underscores the enforceability of guarantee agreements and the importance of clear contractual language in defining the rights and obligations of the parties involved.

Orders