Investec v Butterss
[2016] VSC 80
•7 March 2016
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE | Not Restricted |
COMMERCIAL COURT
S CI 2014 5267
| INVESTEC AUSTRALIA FINANCE PTY LTD (ACN 161 468 131) (formerly Investec Australia Loans Management Pty Ltd) | Plaintiff |
| v | |
| RODERICK DAMIEN JOSEPH BUTTERSS and ROBERT JOHN SAVAGE | Defendants |
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JUDGE: | DIGBY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 March 2016 |
DATE OF JUDGMENT: | 7 March 2016 |
CASE MAY BE CITED AS: | Investec v Butterss & Anor |
MEDIUM NEUTRAL CITATION: | [2016] VSC 80 |
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BANKING – Facility Agreement between Investec Bank (Australia) Ltd and Beyond Sportswear International Ltd – Plaintiff seeks recovery against first defendant pursuant to Guarantee – Whether Guarantee binding following novation of the Facility Agreement from Beyond Sportswear International Ltd to BSI 2 Ltd – Whether Guarantee binding following assignment of the Facility Agreement, Novated Facility Agreement and Guarantee from Investec Bank (Australia) Ltd to plaintiff.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A Folie | Henry Davis York |
| For the First Defendant | No appearance | |
| For the Second Defendant | No appearance |
HIS HONOUR:
Introduction
Investec Australia Finance Pty Limited (plaintiff) seeks recovery from Roderick Butterss (first defendant), pursuant to a guarantee and indemnity in the amount of $1,350,000 plus interest, costs and expenses, by way of Writ and Statement of Claim filed 30 September 2014.
By consent orders of Justice Judd made 6 November 2015, the proceeding was discontinued as between the plaintiff and the second defendant with a right of reinstatement and no order as to costs.
The first defendant did not defend these proceedings at trial.
On 2 March 2016, counsel for the plaintiff informed the Court that the plaintiff had been advised that the first defendant had signed an authority to name an appointed trustee pursuant to s 188 of the Bankruptcy Act 1966 (Cth).[1] Solicitors for the plaintiff wrote to the appointed trustee, Daniel Peter Juratowitch of Cor Cordis, on 26 February 2016, advising him of the proceeding and the plaintiff’s intention to proceed with the trial in this matter.[2] A response was requested by 29 February 2016, however no response was received and there have been no further communications between the plaintiff and Mr Juratowitch.[3]
[1]T1.21-27.
[2]T1.25-2.03.
[3]T2.03-07.
Section 189AA of the Bankruptcy Act 1966 (Cth) provides the Court with a discretion to order a stay of a civil proceeding at any time where a person has nominated a trustee under s 188.[4] No such stay has been sought and there are no materials before the Court which justify a stay of these proceedings or this trial.
[4]T2.21-26.
At the outset of opening submissions counsel for the plaintiff sought leave to change the plaintiff’s name to reflect such change. Leave was granted to substitute “Investec Australia Finance Pty Ltd” for “Investec Australia Loans Management Pty Ltd”.
Chronology
On 24 February 2011, Investec Bank (Australia) Limited (ACN 071 292 594) (IBAL) and Beyond Sportswear International Limited (ACN 108 042 593) (BSI) entered into an agreement, pursuant to which IBAL provided financial accommodation to BSI by way of two facilities up to the amount of $6 million (Facility Agreement). The first defendant was a shareholder of BSI and he signed the Facility Agreement in his capacity as guarantor.[5]
[5]Exhibit “A”, Tab 6.
The Facility Agreement was varied on 28 February 2011, 7 March 2011, and 26 April 2012.
On 1 March 2011, the first defendant executed a deed of guarantee and indemnity in favour of IBAL (Guarantee),[6] pursuant to which he guaranteed BSI’s liabilities and obligations under the Facility Agreement, and indemnified IBAL for any loss arising in connection with the Facility Agreement.
[6]CB271-302
Clause 2.1 establishes the Guarantee:
The Guarantor irrevocably and unconditionally guarantees to Investec the due and punctual payment of the Debt to Investec and punctual performance of all the obligations undertakings and provisions in or implied by the Transaction Documents other than those imposed on Investec.
Clause 2.4 of the Guarantee sets out the limitations of the Guarantee:
Despite anything else in this document other than clause 2.4(b), the maximum amount which the Guarantor is required to pay under this Guarantee at any time is:
(i) $1,350,000; plus
(ii)interest, fees, costs and expenses that the amount set out in (i) bears to the Debt,
In December 2012 IBAL, at the request of the directors of BSI, agreed to novate the Facility Agreement from BSI to BSI 2 Limited (ACN 108 042 593) (BSI 2). The novation was effected by entry into a variation deed on about 14 December 2012 (Variation Deed),[7] which annexed an amended and restated facility agreement between IBAL and BSI 2 (Novated Facility Agreement).[8] The first defendant signed the Variation Deed.[9]
[7]CB363-405.
[8]CB406-442.
[9]Variation Deed dated 12 December 2012, Clause 7.3 and Schedule 1.
Pursuant to the Variation Deed and the terms of the Guarantee, the Guarantee operated to secure the liabilities and obligations of BSI 2 to IBAL under the Novated Facility Agreement.
Throughout 2013, BSI 2 fell into arrears under the Novated Facility Agreement and was in default of the agreement.
On 21 November 2013, IBAL sent letters of demand to the first defendant pursuant to the Guarantee.[10]
[10]CB446-448.
The first defendant has not met the demands, and has not made any payments in reduction of the amounts owed by him pursuant to the Guarantee.
On or about 10 July 2014, as part of a corporate restructure, IBAL assigned to the plaintiff all of its rights and interests under certain facilities, including the Facility Agreement, the Novated Facility Agreement and the Guarantee (Assignment Agreement).[11] By reason of the assignment, the plaintiff is the creditor in whose favour the Guarantee operates.
[11]CB7-206.
As at 1 March 2016 $1,350,000, plus interest of $123,897.83, is claimed as due and payable by the first defendant to the plaintiff pursuant to the Guarantee, the Novated Facility Agreement and the Assignment Agreement.[12]
[12]See Exhibit “C”, [6].
Amended Defence of the first defendant
An Amended Defence was filed by the first defendant on 16 February 2015. In relation to most of the plaintiff’s allegations the first defendant’s Amended Defence pleads non-admissions to the plaintiff’s Statement of Claim of 30 September 2014, thereby putting the plaintiff to the burden of proving its claim at trial. More particularly, however the first defendant:
(a) admits that he signed the Butterss Guarantee and refers to its full terms and effect;
(b) denies that the Novated Facility Agreement was secured by the Butterss Guarantee;
(c) says that to the extent the Butterss Guarantee secured obligations owed to IBAL, it was limited to securing the obligations of BSI to IBAL (including in circumstances where, at the time of the signing of the Butterss Guarantee, BSI 2 had not yet been incorporated);
(d) says that to the extent the Variation Deed novated the Facility Agreement to BSI 2, the effect of the novation was to:
(i) extinguish the indebtedness of BSI to IBAL (Clause 4.3 of the Variation Deed); and
(ii) discharge the Butterss Guarantee (the novation of the only obligations secured by the Butterss Guarantee, being those of BSI to IBAL, operated to discharge and release all obligations of the first defendant otherwise arising under the Butterss Guarantee);
(e) says he provided no guarantee to IBAL in respect of the obligations of BSI 2 to IBAL (from December 2012 or otherwise), including because:
(i) the first defendant did not sign a document in an equivalent form to the Butterss Guarantee expressed to secure the obligations of BSI 2 to IBAL;
(ii) the Variation Deed did not constitute a guarantee by the first defendant of obligations owed by BSI 2 to IBAL (including in circumstances where the terms of a purported guarantee are to be construed strictly and in favour of the purported surety);
(iii) the Variation Deed did not have the effect that the Guarantees continue in full force and effect to secure the obligations of BSI 2 under the Novated Facility Agreement (Clause 7.3(a) of the Variation Deed);
(iv)the first defendant did not obtain independent legal or financial advice regarding the provision to IBAL of a guarantee of the obligations of BSI 2 to IBAL (whether via his signing of the Variation Deed or otherwise);
(f) does not admit service upon him or upon the second defendant of any notice dated 21 November 2013; and
(g) admits that he has not complied with any demand by IBAL, including by reason of the matters set out above at (e), he denies that he had or has any liability to IBAL under the Guarantee such as would require him to comply with a demand by IBAL.
Accordingly, the contents of the Amended Defence dated 16 February 2015, subject to the plaintiff establishing the elements of its claim against the first defendant, leave the substantive issue for the Court to determine as being whether the Guarantee secures the Novated Facility Agreement and the debt sought to be recovered.
The plaintiff’s evidence
Ms Helene Marie-lyse Charmaine Eliatamby (Eliatamby) was the only witness called by the plaintiff. Eliatamby has been employed by IBAL as in house counsel since about December 2000. Eliatamby is also in house counsel to the plaintiff and is employed by Investec Australia Ltd, the parent company of the plaintiff.
Eliatamby gave evidence that:
(a) on 24 February 2011, IBAL provided financial accommodation to BSI by way of an amortising senior debt term facility and an acquisition facility in the amount of $6,000,000;
(b) the facilities were secured by a guarantee and indemnity provided by the first defendant dated 1 March 2011, which was limited to $1,350,000 plus specified interest, fees, costs and expenses;
(c) the Facility Agreement was varied on 28 February 2011, 7 March 2011 and 26 April 2012;
(d) throughout 2012, BSI did not meet its obligations under the Facility Agreement;
(e) at the request of the directors of BSI, IBAL agreed for the Facility Agreement to be novated from BSI to BSI 2;
(f) on 14 December 2012, IBAL, BSI, BSI 2, the first defendant and others executed a variation deed to effect the novation, and which incorporated the Novated Facility Agreement;
(g) throughout 2013, BSI 2 fell into arrears under the Novated Facility Agreement;
(h) on 21 November 2013, IBAL issued a demand to the first defendant, which has not been met;
(i) on 10 July 2014, IBAL assigned all its rights, title and interests under, among other facilities, the Facility Agreement, the Novated Facility Agreement and the Guarantee of the first defendant to the plaintiff;
(j) she was involved in the assignment by IBAL to the plaintiff and the conditions of that assignment were complied with and completed;[13] and
(k) since the commencement of the proceeding, no payments have been made or credits accrued in reduction of the amounts owed to the plaintiff by BSI 2 or the first defendant.[14]
[13]T35.12-26.
[14]Exhibit “D”; Outline of Evidence of Helene Marie-lyse Charmaine Eliatamby filed 5 February 2016.
Through Eliatamby the plaintiff tendered a ‘Certificate and Statement pursuant to Clause 14.7 of the Deed of Guarantee’ (Certificate).[15] Eliatamby gave evidence that the Certificate accurately reflected the first defendant’s indebtedness to the plaintiff and no amounts had been paid to the plaintiff which reduced the indebtedness of the first defendant.[16]
[15]Exhibit “C”; T33.26-31.
[16]T34.17-19.
The Certificate of 1 March 2016 establishes that:
(a) on 21 November 2013, the amount due and payable by BSI 2 to IBAL was $3,194,645.71 pursuant to the Novated Facility Agreement;
(b) on 21 November 2013, pursuant to the Guarantee, a demand for payment in the amount of $1,350,000 was issued to the first defendant by IBAL by being sent to him by post;
(c) on 1 March 2016, the amount due and payable by BSI 2 to the plaintiff was $3,775,249.49 pursuant to the Novated Facility Agreement and Assignment Agreement;
(d) on 1 March 2016, the amounts due and payable by the first defendant to the plaintiff pursuant to the Guarantee, Novated Facility Agreement and Assignment Agreement were $1,350,000, plus interest of $123,897.83.
The plaintiff also relies upon ASIC search results to inform the Court of the first defendant’s interests in BSI and BSI 2.[17] The ASIC search results show:
[17]Exhibit “B”.
(a) the BSI 2011 Annual Report under ‘Substantial Shareholders as at 16 September 2011’ has at number one ‘Rod Butterss’ with 49.04% of the shareholdings;
(b) the BSI 2011 Annual Report under ‘Twenty Largest Holders of Quoted Equity Securities’ has at number three ‘Lighthouse Property Group Pty Ltd <Rod Butterss Family A/C>’ with 18.83% of issued capital and ‘Butterss Management Services Pty Ltd <Camash Super Fund A/C> with 2.13% of the issued capital;
(c) the Historical Company Extract for Lighthouse Property Group shows that the first defendant was the sole shareholder, director and company secretary;
(d) the Historical Company Extract for Butterss Management Services shows that the first defendant was a shareholder, director and company secretary;
(e) the Historical Company Extract for BSI 2 and the Application for Registration as an Australian Company for BSI 2 suggests that BSI held all the shares in BSI 2.
The Facility Agreement
The Facility Agreement comprises a letter to BSI dated 24 February 2011 containing the specific terms and conditions of the Facility Agreement, which also incorporates the ‘General Terms and Conditions, December 2008 Version’ by Clause 24 of the Facility Agreement. The letter sets out the specific terms and conditions of the Facility Agreement and states at ‘Clause 17 – Security’ that IBAL must hold the several guarantee of “Roderick Damien Joseph Butterss limited to an amount of $1,350,000”.
The Facility Agreement was accepted by BSI on 28 February 2011 by the signatures of Sophie Karzis, Secretary/Director and Glen F Casey, Director. The Facility Agreement was also signed by “Rod Buttress” in the section at the end of the Facility Agreement entitled ‘Guarantor’s Acceptance’, dated 28 February 2011. Under the heading ‘Guarantor’s Acceptance’ that document states:
The undersigned Guarantor(s) agree(s) to guarantee the Borrower’s obligations in this Facility Agreement and agree(s) to be bound by its terms and the General Terms and Conditions (which we acknowledge having been provided with by or on behalf of Investec). I/We have read this Facility Agreement and the General Terms and Conditions carefully and understand it establishes a legal contract.
I/We also acknowledge that all the securities and guarantees I/we have given or may give to Investec, including but not limited to those described in this Facility Agreement, stand as security for all money due to Investec on any account including under the Facility described in this Facility Agreement.
Clause 13.11 of the General Terms and Conditions states that:
Investec may assign, novate, or participate its rights and/or obligations under any Transaction Document, any other collateral document or security, or any part of them without having to notify or obtain the consent of any Transaction Party or any other person…
A Drawdown Notice dated 25 February 2011 was provided by BSI to IBAL requiring IBAL to provide $5,000,000 to BSI on 28 February 2011 pursuant to the Facility Agreement. These moneys were advanced to BSI on 28 February 2011.[18]
[18]Exhibit “A”, Tab 15.
Guarantee Deed
A Guarantee Deed dated 1 March 2011[19] was entered into between the lender IBAL, the guarantor Roderick Damien Joseph Butterss and the borrower BSI. This Guarantee Deed was executed by the first defendant.
[19]Exhibit “A”, Tab 8.
Relevant definitions of the Guarantee Deed include:
Debt means all money (and any part of that money) which directly, indirectly, contingently or otherwise at any time is or becomes due by a Transaction Party (whether alone or not) to Investec for any reason and includes any money due:
(a) pursuant to a Transaction Document;
(b) …
Transaction Document means:
(a) the Facility Agreement;
(b) each Security;
(c) any other document under which the Guarantor either alone or with any other person agrees to pay money or provide a security to Investec;
(d) any other document which relates to the payment of the Debt;
(e) any other document which is agreed to be a Transaction Document;
(f) …
The Guarantee Deed relevantly provides:
2.1 Guarantee
The Guarantor irrevocably and unconditionally guarantees to Investec the due and punctual payment of the Debt to Investec and punctual performance of all the obligations undertakings and provisions in or implied by the Transaction Documents other than those imposed on Investec.
2.2 Indemnity
The Guarantor irrevocably and unconditionally indemnifies Investec against all liabilities, loss, damage, costs and expenses suffered or incurred by Investec as a result of:
(a) any person (including any Transaction Party and/or the Guarantor) not being obliged to, being unable to or not being willing to, pay in a due and punctual manner the Debt;
…
2.3 Payment
The Guarantor must pay the Guaranteed Money immediately on demand to Investec.
2.4 Liability Limit
(a)Despite anything else in this document other than clause 2.4(b), the maximum amount which the Guarantor is required to pay under this Guarantee at any time is:
(i)$1,350,000; plus
(ii)interest, fees, costs and expenses that the amount set out in (i) bears to the Debt,
(Liability Limit)…
3 Continuing Guarantee
This Guarantee is continuing and irrevocable and the obligations of the Guarantor are absolute and unconditional in all circumstances. Investec is not obliged to take any action against any person or under any security prior to claiming from the Guarantor.
4.1 Principal obligation
This Guarantee is a principal obligation and will not be treated as ancillary or collateral to any other obligation…
5 Non-Waiver
This Guarantee will not be abrogated, modified, prejudiced, affected or considered as wholly or partially discharged by any act or omission of Investec or any other person or by anything else that might otherwise affect Investec under law or otherwise, including the following:
…
(b)any compounding, compromise, release, abandonment, waiver, variation, relinquishment or renewal of any rights of Investec against any Transaction Party or any other person;
(c)any variation of the Facilities or of any term, covenant or condition contained in or implied by any of the Transaction Documents and the Guarantor will be deemed to have consented to any such variation…
…
(h)any release or discharge of the Debt, the Borrower, the Transaction Documents or any other security or person;
…
(n)anything else.
14.1 Costs and expenses
The Guarantor must pay Investec on demand for all costs, charges and expenses of Investec and any employee, officer, agent or contractor of Investec in relation to:
(a) …
(ii)any Transaction Document or any agreement or document entered into or signed under this document or a Transaction Document;
…
(c)any exercise, non exercise, enforcement or waiver or attempted exercise or enforcement of rights (including those arising from any Event of Default or Potential Event of Default) under or in connection with this document or any agreement, document or transaction described in clause 14.1(a)(ii);
…
Including in each case:
…
(f)legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is higher;
…
14.7 Investec’s certificate
A certificate signed by or on behalf of Investec as to a matter or as to an amount payable to Investec in connection with this Guarantee is, in the absence of manifest error, conclusive and binding on the Guarantor as to the amount stated in it or any matter of a factual nature.
…
14.10 Assignment
Investec may assign, participate or otherwise deal with its rights and/or obligations under this Guarantee and/or the Transaction Documents without having to notify or obtain the consent of the Guarantor or any other person. The Guarantor must execute any documents which in Investec’s opinion are reasonably necessary for those purposes. The Guarantor must not assign, transfer or deal with its rights or obligations under this Guarantee or under the Transaction Documents without Investec’s prior written consent.
Variation Deed and Novated Facility Agreement
A Variation Deed dated 14 December 2012[20] was entered into between the following parties:
[20]Exhibit “A”, Tab 11.
(a) IBAL as the financier;
(b) BSI as the existing borrower;
(c) BSI 2 as the new borrower; and
(d) each entity specified in Schedule 1 – each a Guarantor.
The Variation Deed under the heading ‘Background’ states that “at the request of the Borrowers and Obligors, this document novates the Facility Agreement from the Existing Borrower to the New Borrower and varies and restates the Facility Agreement”.
‘Facility Agreement’ is defined as “the agreement titled ‘Facility Letter – Corporate Facility Agreement’ dated 24 February 2011 as varied on 28 February 2011, 7 March 2011, and 26 April 2012 between the Financier, the Existing Borrower, the New Borrower and Guarantors”. ‘Obligor’ is defined as “each Borrower and each Guarantor”.
Clause 4.1 of the Variation Deed provides for the novation of the Facility Agreement from the Existing Borrower to the New Borrower. Clause 4.2 provides for the New Borrower to be bound by the Facility Agreement.
The Variation Deed further provides:
5. Variation
On and from the Effective Date and after the Novation takes effect:
…
(b) each party (other than the Existing Borrower) agrees to be bound by the Varied Facility Agreement.
…
7.2 Consent
Each Obligor consents to the Variation, the Novation and execution of the ISDA Master Agreement.
7.3 Acknowledgment and agreement
Each Obligor (other than the Existing Borrower) acknowledges and agrees:
(a)to and requests the Novation and that each Guarantee and each Security provided by it continues in full force and effect to guarantee and secure all of its liabilities and obligations under the Transaction Documents… and any reference in any such Guarantee or Security to the original Facility Agreement is amended to refer to the Varied Facility Agreement;
(b)that its respective liabilities and obligations under each Transaction Document to which it is a party are not released, reduced or diminished as a result of the Variation;
…
7.4 Transaction Document
This document is a ‘Transaction Document’ for the purposes of the Varied Facility Agreement and each other Transaction Document.
‘Schedule 1 – Guarantors’ of the Variation Deed includes Roderick Damien Joseph Butterss and the Variation Deed is signed by the first defendant.
The Variation Deed annexes the Novated Facility Agreement. At Clause 18 the Novated Facility Agreement repeats Clause 17 of the Facility Agreement requiring IBAL to hold the several guarantee of Roderick Damien Joseph Butterss limited to an amount of $1,350,000.
The Novated Facility Agreement also incorporates by Clause 27 the ‘General Terms and Conditions, February 2012 Version’. Clause 12.13 of the General Terms and Conditions, February 2012 Version is in the same terms as Clause 13.11 of the December 2008 Version of the General Terms and Conditions extracted above at [28].
Assignment Agreement
An Assignment Agreement dated 10 July 2014[21] was entered into between IBAL as transferor and the plaintiff as transferee, with Investec Holdings Australia Ltd also a party to the Assignment Agreement.
[21]Exhibit “A”, Tab 3.
Under the Assignment Agreement, IBAL assigned and transferred to the plaintiff the Facility Agreement, the Variation Deed, and the Guarantee Deed of Roderick Damien Joseph Butterss, for consideration.
By letter dated 10 July 2014, IBAL informed the first defendant that it had transferred the loan between BSI 2 and IBAL and the related securities to the plaintiff.
Plaintiff’s submissions
The plaintiff makes the following submissions in relation to the defences raised by the Amended Defence of the first defendant dated 16 February 2015.
The terms of the Guarantee and the effect of the novation
The Guarantee is broadly drawn, as reflected in Clause 2.1, 2.2(a) and 2.3 extracted above. Clause 3 states that the Guarantee is continuing and irrevocable.
The Guarantee makes express provision for the effect of any amendments to the Facility Agreement or other Transaction Documents in Clause 5, in particular Clauses 5(b), (c), (h) and (n).
Clause 14.10 of the Guarantee provides for the assignment of the Guarantee and/or the Transaction Documents that took place between IBAL and the plaintiff.
Clause 14.7 of the Guarantee provides for the provision of a certificate to the guarantor as conclusive and binding of the amount owing and the guarantor’s indebtedness in respect of that amount.[22]
[22]Dobbs v National Bank of Australasia Ltd (1935) 53 CLR 643; PNG Development Bank v Manton [1982] VR 1000.
The first defendant was a party to the Variation Deed and signed the Variation Deed in his capacity as ‘Guarantor’. Clause 7.2 of the Variation Deed reflects that the Guarantor consents to the novation. Clause 7.3 of the Variation Deed notes that the Guarantor requests the novation and recognises that the Guarantee continues in full force.
In McMahon v National Foods Milk Ltd,[23] the Court of Appeal found that it could be inferred from the conduct of parties to a novation that they had agreed that a guarantee given in relation to the obligations of the original debtor would extend to the obligations of the new debtor.
[23](2009) 25 VR 251 at 284 and 287.
The effect of the Variation Deed and the intent of the parties to the Variation Deed could not be clearer. There is no ambiguity in the Guarantee’s provisions so that it should be construed in favour of the first defendant.[24] In these circumstances, there is no cause to construe any clauses in favour of the guarantor. The agreement of the commercial parties is clear and must be upheld. Here, the first defendant has expressly agreed to the novation and to his guarantee responding to meet the obligations of BSI 2 in respect of the Novated Facility Agreement.[25]
[24]See Ankar Proprietary Limited v National Westminster Finance (Australia) Limited (1987) 162 CLR 549, 561.
[25]Ref: paragraphs [33]-[40] above.
Assignment by IBAL to the plaintiff
Subject to any contrary agreement, a creditor may assign its rights under a principal contract and the benefit of a guarantee of such contract without the guarantor’s consent. The guarantor remains bound by the guarantee, and the assignee can then enforce the guarantee in accordance with its terms.[26]
[26]McNamee v R and I Bank Western Australia Ltd (Unreported Judgments of Supreme Court of New
South Wales Court of Appeal, 7 December 1994); GE Commercial Corporation (Australia) Pty Ltd v Wallis & Wallis [2015] NSWSC 704.
In addition, pursuant to Clause 14.10 of the Guarantee, the first defendant expressly agreed that IBAL may assign its rights and interest in the guarantee.
Obtaining independent legal and financial advice
The first defendant signed a certificate waiving independent legal and financial advice on 28 February 2011 in relation to the Facility Agreement and Guarantee.[27] The first defendant also signed a certificate waiving independent legal and financial advice undated in respect of the Variation Deed.[28]
[27]CB301-302.
[28]Exhibit “A”, Tab 13.
Further, a failure to obtain independent legal advice in and of itself is not ordinarily a defence. It might be a relevant factual matter if an allegation was made about vitiating conduct such as duress, undue influence or unconscionable conduct, however no such allegations have been made in this proceeding.
Decision
I am satisfied that the Guarantee continued to operate following the novation of the facility agreement from BSI to BSI 2, including because:
(a) the Facility Agreement was signed by the first defendant in his capacity as Guarantor;
(b) the Guarantee is broadly drawn and Clause 3 states that the Guarantee is continuing and irrevocable;
(c) Clause 5 of the Guarantee states that any variation of the facility agreement would not abrogate the Guarantee;
(d) the first defendant was a party to the Variation Deed and signed the Variation Deed in his capacity as ‘Guarantor’; and
(e) The novation had occurred as a result of the request of BSI and the ‘Obligors’, including the first defendant pursuant to Clause 7.3(a) of the Variation Deed.
I am satisfied, for the reasons referred to above, that the terms of the Facility Agreement, Guarantee, Variation Deed and Novated Facility Agreement clearly establish the first defendant’s liability to IBAL for the debt owed by BSI 2.
I am satisfied that the assignment by IBAL to the plaintiff under the Assignment Agreement was effective and did not extinguish or limit the first defendant’s liability under the Guarantee. Clause 14.10 of the Guarantee permitted IBAL to assign its rights to the plaintiff under the Guarantee. Further, the assignment did not remove or materially alter the first defendant’s liability under the Guarantee and because of the operation of Clauses 13.11 and 12.13 of the General Terms and Conditions, Version December 2008 and Version February 2012, respectively.[29]
[29]Ref: [28] and [40] above.
The contents of the ‘Investec Certificate’, produced pursuant to Clause 14.7 of the Guarantee, complied with the principles in Dobbs v National Bank of Australasia Ltd,[30] and thereby stands as conclusive of the amount owing and the guarantor’s indebtedness in respect of that amount. Further, the plaintiff’s evidence[31] established the fulfilment of necessary notices and demands relied upon by the plaintiff.[32]
[30](1935) 53 CLR 643.
[31]Exhibit “A”, Tab 14
[32]Plaintiff’s Statement of Claim dated 30 September 2014, [15]-[18].
The first defendant’s assertion that he did not receive legal or financial advice at the time of signing the Variation Deed goes nowhere, as a result of the certificate the first defendant signed waiving legal and financial advice which referred specifically to the Variation Deed. In this regard, I also note that I accept the plaintiff’s submission that without other vitiating conduct, a complaint of a failure to receive legal and financial advice does not of itself amount to a defence.
Accordingly, I find that the demand made to the first defendant on 21 November 2013 by the plaintiff in accordance with the Guarantee was properly made and that the first defendant has failed to make payment to the plaintiff in accordance with that demand.
For the above reasons I am satisfied that on the terms of the Facility Agreement, Guarantee, Variation Deed, Novated Facility Agreement and Assignment Agreement set out above, that the first defendant is liable to the plaintiff in the amount of $1,350,000, plus interest in the amount of $123,897.83, as so capped pursuant to Clause 2.4 of the Guarantee Deed.
The plaintiff is therefore entitled to judgment against the first defendant in the sum of $1,350,000, plus interest, plus indemnity costs pursuant to Clause 14.1 of the Guarantee.
Orders
I order:
(a) Judgment be entered against the first defendant in favour of the plaintiff in the amount of $1,350,000.
(b) The first defendant pay the plaintiff interest in the amount of $123,897.83.
(c) The first defendant pay the plaintiff’s costs calculated on the full indemnity basis in accordance with clause 14.1 of the Guarantee to be taxed in the absence of agreement.
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