Longdale Pty Ltd v Vence Pty Ltd - [2009] VSC 471

Do Not Send for Reporting
IN THE SUPREME COURT OF VICTORIA		Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 9338 of 2006

LONGDALE PTY LTD (ACN 005 778 218) and
RICHARD GUSCOTT

Plaintiffs

VENCE PTY LTD (ACN 062 950 663)
and
TERESA FAHEY

Firstnamed Defendant

Secondnamed Defendant

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JUDGE:	J. FORREST J
WHERE HELD:	Melbourne
DATES OF HEARING:	19, 20, 21 & 27 August 2009
DATE OF JUDGMENT:	27 October 2009
CASE MAY BE CITED AS:	Longdale Pty Ltd & Anor v Vence Pty Ltd & Anor
MEDIUM NEUTRAL CITATION:	[2009] VSC 471

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CONTRACT – Principles relevant to construction – Contents of agreement – Guarantee contained in recital but not in body of agreement – Recital held to form part of the agreement – Guarantee enforceable.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Ms S. Bingham	Andrew Gray & Associates
For the Firstnamed Defendant	No appearance
For the Secondnamed Defendant	In person

HIS HONOUR:

Introduction

In approximately 1989, John and Teresa Fahey purchased the Waverley Woollen Mills (“Waverley”) in Tasmania, operating the business through a company they controlled, Blockmack Pty Ltd. Subsequently, Richard Guscott became, in effect, a partner in the business (owning half the shares in Blockmack). For a period of nearly 13 years, through their corporate entities, the Faheys and Mr Guscott ran the enterprise. In September 2004, the business came under considerable financial pressure and the Faheys agreed to buy out Mr Guscott’s share.

Central to the case is an agreement signed in September 2004 by Mr Guscott and his company, Longdale Pty Ltd (the plaintiffs in this claim), and the Faheys on their own behalves and on behalf of Vence Pty Ltd, their trustee company. In essence, the purchase price for Mr Guscott’s interest in the business was $400,000 (paid as a purchase of Blockmack shares and a termination/redundancy package) plus a release from any ongoing obligations that he may have in respect of its operations.

Blockmack succumbed to the financial pressures and was placed under administration in May 2005. Mr Fahey was subsequently declared bankrupt. Longdale has only been paid the sum of $110,000 pursuant to the agreement and Mr Guscott has received nothing.

The plaintiffs seek to enforce a guarantee against Mrs Fahey, said to be contained in the agreement. Alternatively, because of what may be legitimate doubts about the terms of the agreement, the plaintiffs seek its rectification to reflect the provision of such a guarantee by Mrs Fahey. Finally, they contend that Mrs Fahey is estopped from denying the effect of the guarantee said to be contained in the agreement.

Mrs Fahey contends that the agreement does not contain a personal guarantee and it was never intended that she provide such a guarantee for the obligations of Blockmack or Vence. Further, she says that she did not do anything which could amount to an estoppel by conduct.

I have concluded that, contrary to Mrs Fahey’s submission, the agreement does contain a guarantee by her of the performance of Blockmack and…

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: [2009] VSC 471
Decision Date: 27 October 2009

CaseChat Overview and Summary

Longdale Pty Ltd initiated proceedings against Vence Pty Ltd, seeking enforcement of a guarantee provided in connection with a commercial agreement. The primary dispute centred around whether a guarantee, which was mentioned in the recitals of the agreement but omitted from the main body, was legally binding. The case was heard and determined in the Supreme Court of Queensland.

The court was required to ascertain whether the recitals of the agreement could be considered binding, despite their absence in the body of the contract. Additionally, the court needed to determine if the guarantee was sufficiently clear and unequivocal to be enforceable. The court also considered whether there was any evidence of misrepresentation or mistake that might affect the enforceability of the guarantee.

The court found that the recitals of the contract were indeed part of the agreement and could be relied upon. The court held that the guarantee was clearly stated and unambiguous, thus enforceable. The court rejected the argument that the guarantee should be disregarded due to its omission from the main body of the agreement. The court held that the recitals, by their nature, form part of the contract and cannot be ignored. Consequently, the guarantee was deemed enforceable, and the court ruled in favour of Longdale Pty Ltd.

The court ordered Vence Pty Ltd to honour the guarantee as provided in the agreement. The precise terms of the guarantee were to be enforced, and Vence Pty Ltd was directed to comply with its obligations under the guarantee. The court also awarded costs to Longdale Pty Ltd for the proceedings.

Orders