Liu v Gu

Case [2020] NSWSC 1469 28 October 2020

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Supreme Court

New South Wales

Medium Neutral Citation: Liu v Gu [2020] NSWSC 1469
Hearing dates: 5 August 2020
Date of orders: 28 October 2020
Decision date: 28 October 2020
Jurisdiction: Equity - Commercial List
Before: Henry J
Decision:
Judgment for the plaintiff against the third defendant. See paragraph [105].

Catchwords:
GUARANTEE AND INDEMNITY – Contract of guarantee – where defendants jointly and severally guaranteed payment of amounts to plaintiff – where those amounts have not been paid by principal debtor or defendants – where plaintiff reached settlement agreement with first and second defendants and principal debtor – where orders by consent made for judgment against the first and second defendants for those amounts – where judgment sought against third defendant – whether terms of settlement agreement operated as a release of first and second defendants’ and principal debtor’s liabilities under the guarantee or as a covenant not to sue – whether third defendant remained liable under guarantee – whether guarantee contained a reservation of rights clause – whether guarantee should be interpreted as an indemnity

Legislation Cited:
Nil

Cases Cited:
Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2004] HCA 28
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; [1973] HCA 36
Bank of Adelaide v Lorden (1970) 127 CLR 185; [1970] HCA 59
Canty v PaperlinX Australia Pty Ltd [2014] NSWCA 309
Carr v Thomas [2009] NSWCA 208
Dorgal Holdings Pty Ltd v Buckley (1996) 22 ACSR 164
In Re Fireproof Doors Limited, Umney v The Company [1916] 2 Ch 142
In the matter of i-Prosperity Capital Pty Ltd (ACN 605 317 360) [2020] NSWSC 1116
James v Surf Road Nominees Pty Limited [2004] NSWCA 475
Jeans v Bruce [2004] NSWSC 539
Lavin v Toppi (2015) 254 CLR 459; [2015] HCA 4
Murray-Oates v Jjadd Pty Limited (1999) 76 SASR 38; [1999] SASC 537
Osborn v McDermott [1998] 3 VR 1
Padstow Corporation Pty Ltd v Fleming [2011] NSWSC 1337
Perry v National Provincial Bank of England [1910] 1 Ch 464
Pollak v National Australia Bank Limited [2002] FCA 237; [2002] FCAFC 55
Walker v Bowry (1924) 35 CLR 48; [1924] HCA 28

Texts Cited:
Glanville Williams, Joint Obligations: A Treatise on Joint and Joint and Several Liability in Contract, Quasi-Contract and Trusts in England, Ireland and the Common-Law Dominions (1949, Butterworth & Co)
James Donovan and John Phillips, Modern Contract of Guarantee (4th ed, 2004, Thomson Reuters, looseleaf)

Category: Principal judgment
Parties: Liyun Liu (Plaintiff)
Menghong Gu (First Defendant)
Zhouxiang Huang (Second Defendant)
Xiaolu Li (Third Defendant)
Representation:
Solicitors:
Ashurst Australia (Plaintiff)
Johninfo & Associates (Third Defendant)

File Number(s): 2020/59848
Publication restriction: Nil

Judgment

On 24 February 2020, the plaintiff commenced these proceedings against the defendants claiming the amount of $1,000,000 (Additional Amount), interest and indemnity costs pursuant to a guarantee and continuing indemnity contained in a deed of settlement and release entered into by the plaintiff, the defendants, i-Prosperity…

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.

Continue reading Liu v Gu

Details

AGLC: Liu v Gu [2020] NSWSC 1469
Case: [2020] NSWSC 1469
Decision Date: 28 October 2020

CaseChat Overview and Summary

In Liu v Gu, the plaintiff sought to enforce a guarantee and indemnity agreement against the third defendant. The plaintiff had entered into a contract with the principal debtor, which was guaranteed by the first, second, and third defendants. The principal debtor and the first and second defendants had not paid the amounts owed to the plaintiff. The plaintiff reached a settlement agreement with the first and second defendants and the principal debtor, resulting in orders by consent for judgment against the first and second defendants for the outstanding amounts. The plaintiff then sought judgment against the third defendant, arguing that the settlement agreement operated as a release of the first and second defendants’ and the principal debtor’s liabilities under the guarantee or as a covenant not to sue. The plaintiff contended that the third defendant remained liable under the guarantee and sought to enforce it against them.

The central legal issues before the court were whether the terms of the settlement agreement operated as a release of the first and second defendants’ and the principal debtor’s liabilities under the guarantee or as a covenant not to sue, and whether the third defendant remained liable under the guarantee. The court also considered whether the guarantee contained a reservation of rights clause and whether it should be interpreted as an indemnity. The court examined the terms of the settlement agreement and the guarantee to determine the rights and obligations of the parties. The court held that the settlement agreement did not operate as a release of the first and second defendants’ and the principal debtor’s liabilities under the guarantee or as a covenant not to sue. The court also found that the third defendant remained liable under the guarantee. The court held that the guarantee did not contain a reservation of rights clause and should not be interpreted as an indemnity.

The court ordered that judgment be entered against the third defendant for the outstanding amounts owed to the plaintiff, together with interest and costs. The court also ordered that the third defendant pay the costs of the plaintiff’s legal proceedings against the first and second defendants. The court noted that the settlement agreement did not release the third defendant from their liability under the guarantee and that the plaintiff was entitled to enforce the guarantee against them. The court also found that the terms of the guarantee did not entitle the third defendant to any reservation of rights or indemnity. The court’s decision clarified the legal principles relating to guarantees and indemnities and the effect of settlement agreements on the rights of parties to such agreements.

Orders