Macquarie Bank Limited v Glenn Craig Thomas

[2010] NSWSC 843

CITATION:	Macquarie Bank Limited v Glenn Craig Thomas [2010] NSWSC 843
HEARING DATE(S):	27 July 2010
JUDGMENT DATE :	30 July 2010
JUDGMENT OF:	Hammerschlag J
DECISION:	Judgment for the plaintiff against the third defendant for $250,000
CATCHWORDS:	CONTRACT – guarantee – consideration – guarantee contained in multiparty development finance agreement – where third defendant one of a number of guarantors – recital records that at the request of the borrower and the guarantors the lender has agreed to provide the facility to the borrower – sufficient consideration disclosed
CATEGORY:	Principal judgment
CASES CITED:	Lau v Leff (1968) 70 SR (N.S.W.) 150 Australian Woollen Mills Pty Ltd v the Commonwealth (1954) 92 CLR 424 Coghlan v S H Lock (Australia) Ltd (1987) 8 NSWLR 88 Breusch v Watts Development Division (1987) 10 NSWLR 311
PARTIES:	Macquarie Bank Limited - Plaintiff Glenn Craig Thomas - Third Defendant
FILE NUMBER(S):	SC 2010/69172
COUNSEL:	J. Stephenson [Plaintiff] M.W. Sneddon with C.E. Alexander [Third Defendant]
SOLICITORS:	Watson Mangioni Lawyers Pty Limited [Plaintiff] C.L. Purcell [Third Defendant]

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

HAMMERSCHLAG J

30 JULY 2010

2010/69172 MACQUARIE BANK LTD –v- GLENN CRAIG THOMAS

JUDGMENT

1 HIS HONOUR: The plaintiff bank sues the third defendant for $250,000 on a guarantee which he gave and which is contained in an instrument styled Development Finance Agreement, to which I will refer as “the Agreement”.

2 The Agreement commences with the following Recitals and Preamble:

This is the Development Finance Agreement for the Facility made on the date appearing in Item 1 of the Schedule between the party in Item 2 of the Schedule (‘the Lender’) and the parties in Item 3 of the Schedule (‘the Customer’) and Item 4 of the Schedule (‘the Guarantor’).
Recitals
At the request of each Relevant Person the Lender has agreed to provide the Facility to the Customer.
Preamble
This Agreement includes the Schedule and any Annexures. (emphasis added)

3 Clause 1 of the Agreement provides that “’Relevant Person’ means a severable reference to the Customer and each Guarantor“. Item 2 of the Schedule identifies the plaintiff as the Lender.

4 Item 3 of the Schedule identifies the Customer as Yalinbah Pty Ltd in its own right and as trustee for the Kaglean Trust. The Kaglean Trust was established by Deed of Settlement dated 13 October 2003. It is a discretionary trust of which the third defendant is a (but not the sole) beneficiary.

5 Item 4 of the Schedule to the Agreement identifies the third defendant as a Guarantor. It identifies three other guarantors including Gauge Boy Pty Ltd, a company of which the third defendant has at all material times been a shareholder and the sole director and secretary.

6 Under the Agreement, the plaintiff agreed to make the Facility (being a loan of up to $8,169,000) available to the Customer for the purposes of a project described in Item 9 of the Schedule as follows:

Description of the Project:
(i) All necessary and desirable steps comprising the refinance of the Customer’s existing loan with the Lender for the Property described in item 8(i), the demolition of the improvements presently erected in that Property, the design and construction of a building comprising nine apartments on that Property and the sale of all parts of the building in accordance with the Feasibility.
(ii) All necessary and desirable steps comprising the refinance of the Property described in Item 8(ii) and the minor development and refurbishment of that Property.

7 The Property is described in Item 8 of the Schedule as follows:

The Property:
(i) Lot 6 in Deposited Plan 986910 and Lot 7 in Deposited Plan 737771 being all the land comprised in Certificates of Title Folio Identifiers 6/986910 and 7/737771 and known as 31-33 Marine Drive, Tea Gardens.
(ii) Lease No U926247 of Lot 157 in Deposited Plan 823722 being all the Land comprised in Certificate of Title Folio Identifier 157/823722 and known as the Boathouse Marina.

8 Clause 15 contains the Guarantee upon which the plaintiff sues. It provides as follows:

GUARANTEE AND INDEMNITY
15.1. The Guarantor unconditionally and irrevocably guarantees payment to the Lender of the Obligations.
15.2. If the Customer does not pay the Obligations to the Lender on time and in accordance with this Agreement the Guarantor agrees to pay the Obligations to the Lender on demand from the Lender (whether or not demand has previously been made on the Customer). A demand may be made at any time from time to time.
15.3. As a separate undertaking, the Guarantor indemnifies the Lender against all liability or loss arising from and any costs, charges or expenses incurred in connection with the Obligations not being recoverable from the Guarantor under clause 15.1 or clause 15.2 or from the Customer because of any circumstance whatsoever.
15.4. The Guarantor acknowledges incurring obligations and giving rights under this Agreement for valuable consideration received from the Lender.
15.5. The guarantee and indemnity contained in this clause is a continuing security and extends to all the Obligations and other money payable under this clause. The Guarantor waives any right it has of first requiring the Lender 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 the guarantee and indemnity contained in this clause.
15.6. The liabilities under this clause of the Guarantor as a guarantor, principal debtor or indemnifier and the rights under this clause of the Lender are not affected by anything which might otherwise have that effect at law or in equity including, without limitation, one or more of the following:
(a) ( Indulgence ): the Lender or another person granting time or other indulgence to, compounding or compromising with or releasing the Customer or any Guarantor or other person;
(b) ( Delay ): acquiescence, delays, acts, omissions or mistakes on the part of the Lender; or
(c) ( Variation ): any variation or novation of a right of the Lender, or alteration of a document, in respect of the Customer including, without limitation, an increase in the Facility Limit or other variation to the Facility. (emphasis added)

9 Clause 1 defines Obligations, relevantly to mean all the obligations and liabilities of each Relevant Person to the Lender under or by reason of any Transaction Document. It, in turn defines Transaction Document to include the Agreement.

10 Item 4 of the Schedule contains the following provision:

Notwithstanding any other provision of any Transaction Document:
(a) the liability of Glenn Craig Thomas is limited to the sum of $250,000.00 plus the amount not exceeding $150,000.00 of Advances expended in relation to the property being Lot 157 in Deposited Plan 823722 being all the land comprised in Certificate of Title Folio Identifier 157/823722 and known as the Boathouse Marina; and
(b) the liability of Gauge Boy Pty Limited is limited to its interest as tenant under Lease Number U926247 of Lot 157 in Deposited Plan 823722 being all the land comprised in Certificate of Title Folio Identifier 157/823722 and known as the Boathouse Marina.

11 It is not in dispute that the Lender advanced money to the Customer and that as at 4 June 2010, the sum of $10,696,214.46 was due and payable to the Lender under the Agreement. On that day, the Lender obtained summary judgment against Craig Engel Thomas and Karen Brenda Baker each of whom is also a Guarantor.

12 It is also not in dispute that no amount has been expended in relation to the Property described in Item 4 of the Schedule. The maximum liability of the third defendant under his guarantee is accordingly $250,000. Clause 25.1 of the Agreement provides for a certificate by an officer of the plaintiff as to the amount payable to it by a Relevant Person. As at 2 July 2010, according to such a certificate, the amount due and owing by the third defendant to the plaintiff is $250,000.

13 The third defendant raises one defence to the plaintiff’s claim. He puts that the plaintiff has failed to prove that it gave valuable consideration for the promise upon which it has sued.

14 Given that the guarantee is not in a contract under seal, in order to enforce it against the third defendant, the plaintiff must show, on the balance of probabilities, that it gave valuable consideration: Lau v Leff (1968) 70 SR (N.S.W.) 150 at 152. There must be a connection between a promise sought to be enforced and the consideration which is alleged to support it: Australian Woollen Mills Pty Ltd v the Commonwealth (1954) 92 CLR 424 at 456-7.

15 The third defendant’s contention is insupportable.

16 The terms of the Agreement itself (which include the third defendant’s guarantee) leave no room for doubt that the third defendant’s guarantee was given in consideration for the provision by the plaintiff of the Facility to the Customer.

17 In cl 15.4 the third defendant acknowledged incurring obligations and giving rights under the Agreement for valuable consideration received from the Lender. Although the clause does not itself describe the valuable consideration, the Recital records that at the request of each Relevant Person (which includes the third defendant) the Lender agreed to provide the Facility to the Customer.

18 The third defendant did not put that, contrary to the Recital, he made no request. He proffered no evidence to suggest otherwise. There is no dispute that the Lender not only agreed to provide the Facility, but actually provided it.

19 The terms of the Recital establish the reciprocity between the request by the third defendant, whose only capacity as party to the Agreement is as a guarantor, and the provision by the plaintiff of accommodation to the Customer.

20 In Coghlan v S H Lock (Australia) Ltd (1987) 8 NSWLR 88, in a passage referred to with approval by McHugh JA in Breusch v Watts Development Division (1987) 10 NSWLR 311 at 314, Lord Oliver of Aylmerton delivering the judgment of the Privy Council said: “there is…no reason why an advance of money pursuant to a request made contemporaneously with or prior to the guarantee should not constitute a good consideration for the sureties’ promise to pay”. That is this case.

21 This conclusion renders it unnecessary to consider a submission by the plaintiff that consideration is also to be found in the indirect benefits received by the third defendant via the Kaglean Trust and his interest in Gauge Boy Pty Ltd.

22 The orders of the Court are accordingly:

a Judgment for the plaintiff against the third defendant for $250,000;

b The third defendant is to pay the plaintiff’s costs of the proceedings against him.

23 All exhibits are to be returned.

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