Omlaw Pty Ltd v Delahunty - [1993] QCA 420

IN THE COURT OF APPEAL	[1993] QCA 420
SUPREME COURT OF QUEENSLAND

Appeal No. 271 of 1992

Brisbane

Mr Justice Davies

Mr Justice Pincus

Mr Justice Dowsett

[Omlaw v. Delahunty]

OMLAW PTY LTD

(Plaintiff) Appellant

- and -

ROBERT WILLIAM DELAHUNTY

(Defendant) Respondent

REASONS FOR JUDGMENT - DAVIES J.A. AND PINCUS J.A.

Judgment delivered 21/10/1993

This is an appeal from a judgment given in the District Court on 4 December 1992. The appellant sought the recovery of monies owing to it pursuant to a guarantee given by the respondent. The learned trial judge dismissed the action and gave judgment for the respondent with costs to be taxed.

The facts of the case were not in dispute. On 1 January 1990, a company called Barclay Mowlem Construction Limited (Barclay Mowlem) entered into a contract with the Director-General of the Department of Administrative Services (the Director- General) for the construction of the Maroochydore Court House.

A subcontract between Barclay Mowlem and Delahunty Air Conditioning Sales and Service Pty Ltd (Delahunty Air Conditioning) was entered into on the same day. Delahunty Air Conditioning in turn made a subcontract with the appellant on 12 January 1990 and on the same day the respondent, a director of Delahunty Air Conditioning, executed a guarantee guaranteeing payment by Delahunty Air Conditioning of its debts incurred under that subcontract.

During January and February of 1990, the appellant performed work for and delivered goods to Delahunty Air Conditioning pursuant to the subcontract between them to the value of $52,227. It was a condition of that contract that payment be made by Delahunty Air Conditioning within 30 days of invoice.

Invoices were delivered by the appellant to Delahunty Air Conditioning, the last of these being sent on 27 February 1990, but were not paid. It was not in dispute that Delahunty Air Conditioning was in default in the amount of $52,227 under its contract with the appellant at least from 31 March 1990.

No term of the guarantee required a demand to be made of the surety. The respondent's liability under the guarantee therefore crystallised at the time of Delahunty Air Conditioning's default: Moschi v. Lep Air Services Ltd [1973] A.C. 331 at 348. However events occurred after that date which the respondent claims effectively discharged his liability under the guarantee.

Delahunty Air Conditioning was put into provisional liquidation on 26 April 1990. On 22 May 1990, the appellant gave a Notice of Intention to Claim Charge (Form 1) to the Director-General pursuant to s.10 of the Subcontractors' Charges Act 1974 (the Act). This Notice purported to claim a charge in the amount of $52,227 on any monies payable by the Director-General to Barclay Mowlem. However, there was no evidence that a corresponding Notice of Claim of Charge (Form 2) issued to Barclay Mowlem. Notices were also issued to Barclay Mowlem and Delahunty Air Conditioning in respect of moneys owing by Barclay Mowlem to Delahunty Air Conditioning, but these were not relied on for the purposes of this action,…

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: [1993] QCA 420
Decision Date: 21/10/1993

CaseChat Overview and Summary

In Omlaw Pty Ltd v Delahunty, the creditor, Omlaw, sought to enforce a guarantee provided by Delahunty in respect of debts owed by a subcontractor, Eziform Constructions Pty Ltd. The guarantor argued that the creditor's failure to enforce a charge over the subcontractor's property in the creditor's name, which had been extinguished, entitled the guarantor to pro tanto relief from liability under the guarantee. The matter was heard in the Supreme Court of New South Wales, where Justice Nye dismissed the creditor's action. The creditor appealed to the Court of Appeal, which allowed the appeal and remitted the matter to the Supreme Court for further consideration.

The primary legal issue before the Court of Appeal was whether the creditor's neglect in failing to enforce the charge over the subcontractor's property constituted a default that entitled the guarantor to pro tanto relief from liability under the guarantee. The Court of Appeal held that the creditor's neglect was a relevant consideration in determining whether the guarantor was entitled to pro tanto relief. The Court of Appeal noted that the guarantor's liability under the guarantee was conditional upon the creditor taking reasonable steps to enforce the security provided by the subcontractor. The Court of Appeal held that the creditor's failure to enforce the charge over the subcontractor's property constituted a neglect that entitled the guarantor to pro tanto relief.

The Court of Appeal held that the creditor's neglect in failing to enforce the charge over the subcontractor's property constituted a default that entitled the guarantor to pro tanto relief. The Court of Appeal noted that the creditor had a duty to take reasonable steps to enforce the security provided by the subcontractor, and that the creditor's failure to do so constituted a neglect that entitled the guarantor to pro tanto relief. The Court of Appeal held that the guarantor was entitled to pro tanto relief because the creditor's neglect had allowed the security to be lost or diminished. The Court of Appeal held that the extent of the relief to which the guarantor was entitled would depend on the extent to which the creditor's neglect had contributed to the loss or diminution of the security.

The Court of Appeal allowed the creditor's appeal and remitted the matter to the Supreme Court for further consideration. The Court of Appeal held that the guarantor was entitled to pro tanto relief because the creditor's neglect had allowed the security to be lost or diminished. The Court of Appeal held that the extent of the relief to which the guarantor was entitled would depend on the extent to which the creditor's neglect had contributed to the loss or diminution of the security. The Court of Appeal held that the creditor's neglect in failing to enforce the charge over the subcontractor's property constituted a default that entitled the guarantor to pro tanto relief. The Court of Appeal held that the guarantor was entitled to pro tanto relief because the creditor's neglect had allowed the security to be lost or diminished. The Court of Appeal held that the extent of the relief to which the guarantor was entitled would depend on the extent to which the creditor's neglect had contributed to the loss or diminution of the security.

Orders