Murstaff Industries Pty Ltd v Cross
[2016] QCA 292
•11 November 2016
SUPREME COURT OF QUEENSLAND
CITATION:
Murstaff Industries Pty Ltd & Ors v Cross [2016] QCA 292
PARTIES:
MURSTAFF INDUSTRIES PTY LTD
ACN 010 124 580
(first applicant)
FRANCIS PARA JOHN STAFFORD
(second applicant)
JAMES MURRAY STAFFORD
(third applicant)
JANE DOROTHY STAFFORD
(fourth applicant)
v
KEVIN JAMES CROSS
(respondent)FILE NO/S:
Appeal No 3584 of 2016
DC No 102 of 2015DIVISION:
Court of Appeal
PROCEEDING:
Application for Leave s 118 DCA (Civil)
ORIGINATING COURT:
District Court at Southport – [2016] QDC 51
DELIVERED ON:
11 November 2016
DELIVERED AT:
Brisbane
HEARING DATE:
7 September 2016
JUDGES:
Gotterson and Morrison and Philip McMurdo JJA
Separate reasons for judgment of each member of the Court, each concurring as to the orders madeORDERS:
1. Grant leave to appeal.
2. Allow the appeal.
3. Set aside the orders made in the District Court.
4. Order that the appeal to the District Court be dismissed.
5. Order the respondent to pay the applicants’ costs in the District Court and in this court.
CATCHWORDS:
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – SUMMARY DISPOSAL – SUMMARY JUDGMENT FOR DEFENDANT OR RESPONDENT: STAY OR DISMISSAL OF PROCEEDINGS – where the applicants granted a lease to a third party company – where the lease was assigned to a new lessee by deed – where the respondent director agreed to guarantee to the applicants all money payable by the new lessee and indemnify the applicants against loss or damage incurred or suffered in connection with the new lessee’s failure to comply with any term or condition – where the lessee exercised its option to renew – where the applicants commenced proceedings in the Magistrates Court against the lessee company and respondent guarantor for unpaid rent and outgoings and damages connected with the new lessee’s departure from the subject premises – where the respondent brought an application for summary judgment on the claim against him on the basis that he was not the guarantor of the lessee’s obligations under the lease and assignment deed – where the magistrate dismissed the application – where the District Court allowed the respondent’s appeal – where the applicants contend the learned judge erred in construing the guarantor provisions of the assignment deed – whether on the correct construction of the lease and assignment deed the respondent was obliged to indemnify the applicants against any loss or damage in connection with the lease
Cross v Murstaff Industries Pty Ltd & Ors [2016] QDC 51, overruled
COUNSEL:
G Handran with I Klevansky for the applicants
R M Derrington QC, with R Frigo, for the respondentSOLICITORS:
Worcester & Co for the applicants
Woods Hatcher for the respondent
GOTTERSON JA: I agree with the orders proposed by Philip McMurdo JA and with the reasons given by his Honour.
MORRISON JA: I have read the reasons of Philip McMurdo JA and agree with those reasons and the orders his Honour proposes.
PHILIP McMURDO JA: The applicants granted a lease of premises at Helensvale for a period of three years commencing on 1 March 2008 with an option to renew for a further term of three years. The original lessee’s director guaranteed the punctual payment of rent and the due performance by the lessee of its other obligations under the lease.
The original lessee assigned its interest in May 2009 to a company which I will call the new lessee. Its director, who is the respondent in this court, agreed to pay to the applicants all money payable by the new lessee under the lease on and from the date of the assignment. He further agreed to indemnify the applicants against (relevantly) loss or damage incurred or suffered in connection with the new lessee’s failure to comply with any term or condition of the lease.
In December 2010, the new lessee exercised its option to renew the lease for a further term of three years from 1 March 2011. At least upon the applicants’ case, which for present purposes may be accepted, the result was a new lease for that term.
The new lessee failed to pay rent, interest and outgoings as they fell due in that new term. By a proceeding commenced in the Magistrates Court, the applicants claimed from the new lessee, as the first defendant, and from the respondent, as the second defendant, a total of $191,781.22. After the defendants had pleaded to the applicants’ amended statement of claim, the respondent applied for summary judgment on the claim against him pursuant to Uniform Civil Procedure Rules 1999 (Qld) r 293. The application was refused, the magistrate holding there was at least a case to be tried. The respondent appealed to the District Court which allowed the appeal and gave judgment in his favour.
This is an application for leave to appeal against the judgment of the District Court. Because the District Court was exercising its appellate jurisdiction, the applicants may appeal to this court only with leave. This court has heard full argument on the merit of the proposed appeal. The appeal involves questions of the proper construction of the original lease instrument and a deed executed by the parties to effect the assignment in May 2009. For the reasons that follow, I conclude that the District Court erred in giving summary judgment and that the appeal from the Magistrates Court ought to have been dismissed. Leave to appeal should be granted and the appeal allowed.
The lease instrument
The lease was granted by a registered instrument with provisions in the usual way for the payment of rent, outgoings and interest on outstanding sums. It contained a guarantee and indemnity in relevantly the following terms:
“7.2Guarantee
In consideration of the Landlord entering into this document at the request of the Guarantor, the Guarantor irrevocably and unconditionally guarantees to the Landlord the punctual payment by the Tenant of the Guaranteed Money and the performance by the Tenant of the obligations of the Tenant under this document.
7.3Payment on demand under guarantee
If the Tenant defaults in the punctual payment of any of the Guaranteed Money, the Guarantor must pay that Guaranteed Money on demand by the Landlord. The Landlord may demand payment from the Guarantor from time to time and whether or not the Landlord has made demand on the Tenant or any other person.
7.4Compliance
The Guarantor agrees with the Landlord that the Guarantor will use its best endeavours to ensure the Tenant's compliance with the terms of this document.
7.5Indemnity
As a separate covenant, the Guarantor unconditionally and irrevocably Indemnifies the Landlord against all Loss paid, suffered or incurred by the Landlord (including all Loss incurred by the Landlord in the enforcement or attempted enforcement of the obligations of the Tenant or the Guarantor under this document) relating directly or indirectly to:
(a)any failure by the Tenant to pay the Guaranteed Money or to comply with any of its obligations under this document; or
(b)this document or a related security, transaction or document being or becoming unenforceable in accordance with its terms or the priority or effectiveness of any of them being adversely affected.
The Guarantor must pay any amounts payable to the Landlord under this clause 7.5 on demand by the Landlord.
…
7.7Continuing guarantee and indemnity
This Guarantee and Indemnity:
(a)is a continuing guarantee and indemnity;
(b)is irrevocable; and
(c)remains in full force despite termination or expiry of this lease, until all obligations of the Tenant under this document have been performed in full to the Landlord's satisfaction.”
The term “Guarantor” was defined by cl 1.1 as follows:
“Guarantor means each person specified in the reference schedule and any other person required to give a Guarantee and Indemnity from time to time.”
In the reference schedule, a Mr Green was specified as a Guarantor. Clause 1.1 contained these related definitions:
“Guarantee and Indemnity means the guarantee and indemnity in clause 7.
Guaranteed Money means the Rent and all other amounts payable by the Tenant under this document.”
By cl 8.2, the lessee was entitled to transfer or sublease if the conditions there specified were complied with to the lessor’s satisfaction. The relevant conditions within cl 8.2 were as follows:
“(f)in the case of a Transfer, the Tenant, the Guarantor and the Proposed Tenant enter into a deed with the Landlord under which:
(i)the Proposed Tenant covenants to comply with the Tenant's obligations under this document;
(ii)the Tenant releases the Landlord from any claim which the Tenant has or may have against the Landlord relating to this document or the Tenant's use or occupation of the Building; and
(iii)the Tenant and the Guarantor are released from their obligations under this document;
…
(n)if the Proposed Tenant is a corporation whose shares are not listed on the official list of the Australian Stock Exchange Limited ABN 98 008 624 691 or another stock exchange approved by the Landlord, the directors and shareholders of the Proposed Tenant or any other person approved by the Landlord give a guarantee of and indemnity relating to the performance by the Proposed Tenant of its obligations under this document in favour of the Landlord;”
By cl 18.1 it was provided that if the lessee continued to occupy or use the premises after the expiry of the original term with the lessor’s prior consent, then the lessee would be holding over as a tenant from month to month. By cl 18.2 it was agreed that either party might terminate that monthly tenancy by giving at least one month’s notice to the other party.
Clause 21 provided for the lessee’s option to renew the lease for a further term. It relevantly provided as follows:
“21.1Option
Subject to clauses 21.3, 21.5 and 25.2, the Landlord must grant the Tenant a lease of the Building for the Further Term if the Tenant exercises its option to renew the lease of the Building for the Further Term by giving notice to the Landlord between six and three months, both dates inclusive, before the Expiry Date. The option is not exercisable before or after that period.
21.2Lease for Further Term
The lease for the Further Term will:
(i)commence on the day after the Expiry Date and expire on the last day of the Further Term; and
(ii)in the Landlord's absolute discretion, be a new lease or an extension of this lease otherwise on the same terms as this document …
…
21.4Execution of new documents
If the Tenant exercises the option to renew the lease of the Building for the Further Term under and in accordance with clause 21.1:
(a)the document for the new lease, including the Guarantee and Indemnity by the Guarantor, will be prepared by the Landlord's solicitors;
(b)the Tenant must return the document for the new lease or the extension of this lease, as the case may be, properly executed by the Tenant to the landlord or its solicitors within 20 Business Days after it is given to the Tenant or its solicitors; and
(c)the Guarantor must, and the Tenant must procure the Guarantor to, return the document for the new lease, including the Guarantee and Indemnity, properly executed by the Guarantor to the Landlord or its solicitors within 30 Business Days after it is given to the Tenant or its solicitors.
21.5Failure to execute new documents
If the Tenant or the Guarantor fails to comply with clause 21.4, then the Tenant is taken to have repudiated the agreement for the lease for the Further Term resulting from the Tenant's exercise of the option to renew the lease of the Building for the Further Term and the Landlord may by notice to the Tenant accept the repudiation. If the Landlord accepts the Tenant's repudiation then:
(a)if the Term has not expired, this lease will end on the Expiry Date; or
(b)if the Term has expired, the Tenant is taken to be a monthly tenant and clause 18 will apply.
The Landlord's rights under this clause 21 are not in substitution for or derogation from any other rights the Landlord may have under this document or at law or in equity, including its rights under clause 19.”
The assignment deed
The assignment was effected by a deed dated 1 May 2009. The parties to the deed were the applicants, the original lessee, Mr Green, the new lessee and the respondent as the new guarantor. The deed contained the following recitals:
“A.The Landlord is the registered proprietor of the land on which the Centre is constructed.
B.The existing Tenant occupies the Premises as tenant under the Lease.
C.The existing Tenant has requested the consent of the landlord to the assignment of the Lease to the New Tenant.
D.The Landlord consents to an assignment of the Lease from the Existing Tenant to the New Tenant on the conditions of this deed.
E.The Existing Guarantor has guaranteed the obligations of the Existing Tenant under the Lease.
F.The New Guarantor guarantees the obligations of the New Tenant under this deed and the Lease.
…”
By cl 3 of the deed, the new lessee agreed to comply with “the Lease” after the date of the assignment (1 May 2009).
As to the guarantors, cl 7 of the deed provided as follows:
“7.1Existing Guarantor
The Existing Guarantor consents to the assignment and variation of the Lease effected by this deed
7.2New Guarantor
7.3Guarantee and Indemnity
In consideration of the Landlord consenting to the assignment of the lease to the New Tenant, the New Guarantor irrevocably and unconditionally agrees to:
(i)pay to the Landlord upon demand all money payable by the New Tenant under the Lease or this deed on and from the Assignment Time; and
(ii)indemnify the Landlord against all actions, liabilities, penalties, claims, demands, loss or damage incurred or suffered directly or indirectly in connection with the New Tenant’s failure to comply with any term or condition of the Lease or this deed.
…”
The renewal of the lease
On 15 December 2010, the respondent, signing as “CEO and Director” over the name “Jena Steigmeier on behalf of [the new lessee]” wrote to the applicants’ agent as follows:
“Notice of Exercise of Option
We hereby give notice that [the new lessee] exercises its option to extend their [sic] Lease Agreement at the above premises for a further term of 3 years in accordance with the attached letter.”
(The “attached letter” was not within the evidence before the magistrate or the District Court.)
Clause 21.4 of the lease instrument, as set out above, provided that if the option to renew the lease was exercised, a new lease, including a Guarantee and Indemnity by the Guarantor, would be prepared by the lessor’s solicitors and executed by the Lessee and the Guarantor. The applicants’ solicitors prepared a lease renewal deed but it was not executed.
In their amended defence, the respondent and his company pleaded that the notice of exercise of the option was delivered outside the permitted time and was of no effect. They further pleaded, in the alternative, that by not executing that document the respondent and his company “are taken to have repudiated the agreement to lease for a further term” with the consequence that, by cl 21.5, the new lessee was taken to have been a monthly tenant under cl 18. That was contested by the applicants, who maintained that there was a renewed lease for three years notwithstanding the non‑execution of the documents according to cl 21.4. But the magistrate’s reasons for judgment record that, for the purposes of the summary judgment application, it was conceded that there had been a further term resulting from the exercise of the option to renew. In the District Court, his Honour noted the same concession.[1]
[1][2016] QDC 51 at [4]. The concession was repeated in the respondent’s outline of argument in this court at [20].
The plaintiffs’ pleaded case
The amended statement of claim pleaded the fact of the original lease and the terms of the assignment of that lease, including the agreement by the respondent to pay all money payable by the new lessee “under the Lease” and to indemnify the applicants against any loss or damage suffered in connection with its failure to comply with its terms and conditions.
The applicants pleaded that the option to renew was exercised with the consequence that there was a lease for a further term of three years commencing on 1 March 2011. It alleged a failure by the new lessee to pay rent, outgoings and interest, under the new lease, in certain sums.
The applicants pleaded that by a letter dated 21 October 2013, the applicants’ solicitors had demanded from the respondent the amounts then owing for rent, interest and outgoings. It pleaded that the new lessee vacated the premises on 30 June 2013 and the applicants incurred expense in finding a new tenant. It also alleged that the respondent’s company had failed to repair, redecorate and clean the premises according to other terms of the lease, as a result of which the applicants incurred expense.
In the pleading the applicants claimed the same relief against both the respondent and his company as follows:
“1.Damages for breach of contract in the amount of $191,781.22.
2.In the alternative money due and owing pursuant to the lease in the amount of $191,781.22. …”
The judgment of the Magistrates Court
The magistrate described the application as one by the respondent for summary judgment “on the basis that [the respondent] is not the guarantor of the obligations of the first defendant, the subject of the statement of claim.” After setting out certain terms of the lease and the assignment deed, her Honour noted that “the [respondent’s] obligations are defined by reference to paragraph 7.3 of the Assignment [Deed].” She said that “it is not a case of [the respondent] having agreed to assume the obligations of the original guarantor as if he were named in the Lease as the original guarantor. Rather [the respondent] guaranteed the obligations of the first defendant under ‘the lease’.”[2] Her Honour then reasoned as follows:
“[19] The definition of the “Lease” in the Assignment specifically refers to a lease commenced 1 March 2008 with an expiry of 28 February 2011. However in clause 1.1 of the Assignment, the “Term” is defined to mean “the term of the Lease and includes the term of any options for renewal and any overholding under the Lease. Accordingly, the second defendant has guaranteed all money payable by the Tenant under the Lease, the term of which includes any options for renewal.
…
[22]It is relevant that for the purpose of this application the second defendant concedes that the option was validly exercised. Guarantor is defined under the Lease to ‘mean[s] each person specified in the reference schedule and any other person required to give a Guarantee and Indemnity from time to time.’ The person named in the reference schedule is not the second defendant.
[23]As the second defendant has guaranteed only the obligations of the first defendant under the Lease, but has not assumed the obligations of the Guarantor under the Lease, there is certainly scope for arguing that upon the exercise of the option there was no obligation on the first defendant to procure, and no obligation on the part of the second defendant to provide, a Guarantee under paragraph 21.4 of the Lease.
[24]However, that does not derogate from the obligation of the second defendant as Guarantor pursuant to the Assignment whereby under paragraph 7.3 it guaranteed the obligations of the first defendant under the New Lease, the term of which (pursuant to clause 1.1) includes the period covered by the exercise of the option.
[25]In those circumstances I am not satisfied that the plaintiff has no real prospect of succeeding in all or part of the claim and that there is no need for a trial of the claim or part of the claim, and the application for summary [judgment] is dismissed.”
[2]Paragraph [18] of the Reasons.
In essence, the magistrate held that by cl 7.3 of the assignment deed, the respondent had guaranteed the performance of the new lessee’s obligations under not only the original lease but also the renewed lease. The perceived basis for that conclusion appears from paragraph [19] of her Honour’s reasons. Under cl 7.3, the respondent guaranteed his company’s performance of “the Lease”, an expression which took its meaning from the definition of “Term” in the assignment deed, where that meant the term of the original lease and the term of any renewed lease.
The judgment of the District Court
The reasons for judgment in the District Court had effectively three parts. The first was that in which the judge explained his disagreement with the reasoning of the magistrate. The second was his Honour’s rejection of an argument by the [present] applicants that the [present] respondent was liable upon the basis of an implied term of the assignment deed.[3] Such a term had not been pleaded but his Honour considered the argument. He rejected it because, in his view, the assignment deed was effective without such an implied term, the term was not obvious and it contradicted an express term, namely cl 7.3 of the deed. I do not understand that this second argument is pressed in this court. Thirdly, his Honour considered another argument, also unpleaded, that the respondent was liable to the applicants upon the basis of the indemnity in cl 7.3(b) of the assignment deed.
[3][2016] QDC 51 at [24].
As to the first point, his Honour reasoned as follows. Any obligation of the respondent as the new guarantor came from cl 7 of the assignment deed, the respondent having been a party to that deed but not, of course, to the original lease. The respondent’s obligation under cl 7.3(a) was to pay all money payable by the new lessee under the “Lease” on and from 1 May 2009. Like the magistrate, his Honour considered that the question turned on the meaning of the expression “the Lease” in cl 7.3.
His Honour noted that cl 1.1 of the assignment deed provided that “words beginning with capital letters are defined in clause 1.2” and that cl 1.2 defined “Lease” to mean “the lease of the premises in Item 3 as varied by this deed.” Item 3 identified the Lease as follows:
“Lease
Commenced 1 March 2008
Expiry 28 February 2011”
His Honour then said:
“[17] Reading clause 7.3(a) with the relevant parts of clauses 1.1 and 1.2 supports the appellant’s contention that the guarantee only related to the obligations under the lease for the period from the Assignment Time to the stated expiry date in item 3.”
His Honour then turned to the magistrate’s reliance on the meaning of the word “Term” which, as I have set out above, was defined in cl 1.2 of the assignment deed as including the term of any “options for renewal”.[4] His Honour noted, correctly, that the word “Term” did not appear in the definition of “Lease” and nor did it appear in cl 7.3 or in the definition of any word used in cl 7.3.[5]
[4]His Honour noted that the magistrate had incorrectly referred to this as cl 1.1 in her reasons.
[5][2016] QDC 51 at [19].
The word “term” was used in cl 7.3(b) but, as his Honour said, that was a reference to a contractual term rather than a period of time.[6]
[6][2016] QDC 51 at [20].
His Honour thereby concluded that the magistrate had erred in interpreting the word “Lease” in cl 7.3(a) by reference to the word “Term”. Absent any relevance of the word “Term”, the “Lease” in cl 7.3(a) was the original lease for a period of three years from 1 March 2008. It did not include the lease for a further term from March 2011. Therefore cl 7.3(a) did not oblige the respondent to pay to the applicants anything from the lessee’s default under the lease for the further term.
I go then to the third matter discussed by his Honour, which was the argument based upon cl 7.3(b) of the assignment deed. Clause 21.4 of the Lease provided for the preparation and execution of documents on the occasion of the exercise of the option to renew. Clause 21.4(c) required the lessee to procure “the Guarantor” to return the document for the renewed term, “including the Guarantee and Indemnity”, executed by “the Guarantor”. The same clause required the Guarantor himself or herself to execute the document. But because the respondent (unlike the original Guarantor, Mr Green) was not a party to the lease instrument, clause 21.4 was not a contractual promise by him. What had to be considered was the promise, within cl 21.4(c), by the lessee.
By the assignment deed, the new lessee became obliged to perform the Lease from 1 May 2009. Upon the exercise of its option to renew, the new lessee became bound by, amongst other terms, cl 21.4(c). And upon his execution of the assignment deed, the respondent became obliged to indemnify the applicants against the consequences of any default by the new lessee in compliance with the Lease, including cl 21.4(c). However his Honour reasoned that the respondent was not “the Guarantor” within cl 21.4.
As earlier noted, the term Guarantor was defined by the lease to include not only Mr Green, but also “any other person required to give a Guarantee and Indemnity from time to time”. The expression “Guarantee and Indemnity” was defined to mean the guarantee and indemnity under cl 7 of the Lease. His Honour reasoned as follows:[7]
“The [respondent] was not a person who was required to give a Guarantee and Indemnity in the terms of clause 7 of the lease. Instead, by virtue of clause 7.3 of the assignment, the [respondent] gave a different (and more confined) guarantee and indemnity pursuant to that separate instrument and dealing. The [respondent] did not thereby become a Guarantor pursuant to the extended definition of that word in the lease or become bound by the same obligations which Mr Green had assumed under clause 7 of the lease.”
His Honour’s reasoning on this third argument was concluded as follows:
“[26] It should be noted that the indemnity, as provided for in clause 7.3 of the assignment, is itself confined to compliance with a term or condition of the “Lease”, as defined [for] the deed. For the reasons given earlier, it is therefore, in so far as a failure to comply with any term or condition of the Lease, an indemnity with respect to the period which expired on 28 February 2011 rather than any renewed period. Even if that were considered to extend to the so called failure upon which the plaintiff foreshadows reliance (and putting to one side any question of waiver or discharge) for the reasons earlier stated, the second defendant did not fall within the extended definition of “Guarantor” as someone who was required to give a Guarantee and Indemnity (as defined) at any time, but rather entered into a different guarantee and indemnity by way of a separate dealing, which placed upon him no requirement to execute a further guarantee for a further term.”
[7][2016] QDC 51 at [13].
Consideration of the judgments
In my respectful view, the District Court judge was correct in his analysis of the reasoning of the magistrate. The magistrate’s use of the word “Term” as a step in the construction of cl 7.3(a) of the assignment deed was in error. The expression “the Lease” was to be given its defined meaning unless the context otherwise required. Like the judge, I would accept that the term should have its defined meaning, with the consequence that cl 7.3(a) did not oblige the respondent to pay to the applicants money which became payable under the renewed lease.
However I disagree with the reasoning of the judge as to the operation of cl 7.3(b). This question turns upon the scope of cl 21.4 of the Lease. His Honour’s view was that the respondent was not within the extended definition of “Guarantor”. It is there that I disagree with his Honour’s reasoning.
The term Guarantor was defined to include “any other person required to give a Guarantee and Indemnity from time to time.” His Honour reasoned that that did not include the respondent because, as it happened, he gave a different (and more confined) guarantee and indemnity in the assignment deed. Under such an interpretation, a person would become a Guarantor only if that person in fact gave a Guarantee and Indemnity in the terms of cl 7 of the Lease. That interpretation cannot be accepted, because the relevant person is one required to give a guarantee and indemnity, whether or not such a person does in fact do so. The definition is not in terms of [Mr Green] “and any other person who has given a Guarantee and Indemnity from time to time.”
The expression “a person required to give a Guarantee and Indemnity” suggests the need for some legal entitlement of the lessor to call for that person to give the security. It cannot have been intended that the expression would refer to any person from whom the lessor might wish to have such a security.
That entitlement of the lessor could not be an entitlement as against the proposed further guarantor, because such a person, not being a party to the lease, would not be bound by the lease to provide a guarantee. Rather the entitlement of the lessor to a guarantee and indemnity must be an entitlement as against the lessee. The word “required” refers to a requirement, that is to say a demand for a guarantee, which, as between the lessor and the lessee, the lessor is entitled to make.
Apart from cl 8.2(n), there was no provision of the lease which entitled the lessor to require the provision of a (further) guarantee. It is cl 8.2(n) which provided the possibility, expressed within the definition of “Guarantor”, of the inclusion of someone other than Mr Green within that expression.
The definition of “Guarantor” does refer to a person required to give a “Guarantee and Indemnity”, a term which is defined by cl 1.1 of the lease to mean “the guarantee and indemnity in clause 7.” However the use of the upper case within that definition of Guarantor should not be used to distort the apparent intention for the operation of the definition of “Guarantor” in combination with cl 8.2(n).
And strictly speaking, the guarantee and indemnity in cl 7 could apply only to the original Guarantor, Mr Green. For example, cl 7.2 provides that the guarantee is given “in consideration of the Landlord entering into this document.” Thus it would not be possible for “any other person” to give a guarantee and indemnity in precisely the terms of that in cl 7. The evident intent was that the term “Guarantor” should extend to anyone required to give a guarantee and indemnity through the operation of cl 8.2(n).
His Honour observed that the terms of the guarantee and indemnity provided under the assignment deed differed from those in cl 7. Although the differences were not explored in his reasons, at least one difference, of course, was that the respondent’s guarantee and indemnity was limited to the new lessee’s performance. But as I have said, the definition of “Guarantor” operated according to what the lessor could require under cl 8.2(n). If it could be relevant to consider the terms of the guarantee actually given, the relevant comparison would be between that guarantee and what cl 8.2(n) required. As I have said, cl 8.2(n) did not require a guarantee in the precise terms of cl 7 of the lease.
His Honour expressed some reservation as to whether the indemnity provided for in cl 7.3 of the assignment deed could extend beyond “the period which expired on 28 February 2011”. This was because the indemnity in cl 7.3 was confined to compliance with a term or condition of the Lease. That the indemnity under cl 7.3 is confined to compliance with the (original) lease can be accepted. But as I have discussed, it was that lease which, by cl 21.4, obliged the lessee to procure the execution of the respondent as a “Guarantor” of the document described in cl 21.4 and within the term of the original lease.
Conclusion and orders
In my conclusion the judgment of the District Court was in error in rejecting the applicants’ argument in reliance upon cl 7.3(b) of the assignment deed. The District Court ought to have upheld that argument. On the evidence presented in the application for summary judgment and on the agreed premise that the option to renew had been exercised, the new lessee had breached cl 21.4(c) of the Lease and the applicants were affected by that breach by being unable to recover from the respondent, as debts due and owing under a guarantee, the sums which it claimed. By cl 7.3(b) of the assignment deed, the respondent was obliged to indemnify the applicants against any such loss. There was a sufficient basis for the applicants’ claim that the application for summary judgment should not have been refused. The District Court ought to have dismissed the appeal.
I would order as follows:
(1)Grant leave to appeal.
(2)Allow the appeal.
(3)Set aside the orders made in the District Court.
(4)Order that the appeal to the District Court be dismissed.
(5)Order the respondent to pay the applicants’ costs in the District Court and in this court.
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