Penhorwood v Rojone Pty Ltd - [2008] NSWSC 1274

CITATION: Penhorwood v Rojone Pty Ltd [2008] NSWSC 1274
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 28 November 2008

JUDGMENT DATE :
28 November 2008

JUDGMENT OF: Harrison J

EX TEMPORE JUDGMENT DATE: 28 November 2008

DECISION: 1. Set aside the decision of Magistrate Freund of 17 June 2008 and remit the matter to her for determination in accordance with my decision.
2. I will hear the parties on the question of costs.

CATCHWORDS: APPEAL – s 39 Local Court Act 2007 and s 75A Supreme Court Act 1970 – whether question of law – where Magistrate decided that a guarantor was estopped from disputing the indebtedness of the principal debtor as the result of its failure to contest a statutory demand resulting in an order for the company to be wound up – HELD – no issue estoppel – error of law found – matter remitted to the Local Court for determination

LEGISLATION CITED: Local Court Act 2007
Supreme Court Act 1970
Corporations Act 2001 (Cth)

CATEGORY: Principal judgment

CASES CITED: 420093BC Ltd v Bank of Montreal 128 DLR (4th) 488
Australian Beverage Distributors Pty Ltd v Cranswick Premium Wines Pty Ltd [2004] NSWSC 877
Blair v Curran [1939] HCA 23; (1939) 62 CLR 464
Canon Australia Pty Ltd v Patton [2007] NSWCA 246
Cornick Pty Ltd v Brains Master Corporation [1995] FCA 1710; (1995) 19 ACSR 20
Gracechurch Holdings Pty Ltd v Breeze (1992) 7 WAR 518
JEM Developments Pty Ltd v Hansen Yuncken Pty Ltd [2006] NSWSC 1378; (2006) 60 ACSR 393

PARTIES: Sean Dean Penhorwood (Plaintiff)
Rojone Pty Ltd (Defendant)

FILE NUMBER(S): SC 13482 of 2008

COUNSEL: M J Windsor SC with M T Hutchings (Defendant)

SOLICITORS: ERA Legal (Plaintiff)
McIntosh McPhillamy & Co (Defendant)

LOWER COURT JURISDICTION:

LOWER COURT FILE NUMBER(S): 6948/06

LOWER COURT JUDICIAL OFFICER : Freund LCM

LOWER COURT DATE OF DECISION: 17 June 2008

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HARRISON J

28 November 2008

13482 of 2008 Simon Dean Penhorwood v Rojone Pty Ltd
JUDGMENT – EX TEMPORE

1 HIS HONOUR: On 17 June 2008 her Honour Magistrate Freund published her reasons for judgment in proceedings between Rojone Pty Ltd ("the defendant") and Simon Dean Penhorwood ("the plaintiff"). The proceedings had been heard by her Honour over six days commencing in July 2007 and concluding in December 2007. In those proceedings the defendant had sued the plaintiff on a deed of guarantee and indemnity dated 26 October 2004 given by the plaintiff in favour of the defendant in respect of the liabilities of Satrak Pty Ltd to the defendant. The plaintiff was at all material times a director of Satrak Pty Ltd which was for all relevant purposes under his direction and control.

2 Her Honour found a verdict in favour of the defendant in the sum of $42,617.83. She ordered the plaintiff to pay the defendant's costs of…

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: [2008] NSWSC 1274
Decision Date: 28 November 2008

CaseChat Overview and Summary

Penhorwood, the appellant, appealed against the decision of a magistrate of the Local Court of New South Wales, which found that Rojone Pty Ltd, the respondent, was estopped from denying the liability of the principal debtor under a guarantee. The dispute arose when Penhorwood, the creditor, issued a statutory demand against the principal debtor. Rojone, the guarantor, did not contest the statutory demand, which resulted in the principal debtor being wound up. Penhorwood then sought to recover the debt from Rojone under the terms of the guarantee. Rojone argued that it was not liable as the principal debtor had been wound up, and that it should be estopped from being held liable under the guarantee due to its failure to contest the statutory demand.

The legal issue before the court was whether Rojone was estopped from denying liability under the guarantee due to its failure to contest the statutory demand. The court had to determine whether the doctrine of issue estoppel applied in this situation, and if so, whether it was appropriate for the magistrate to have applied it in this case. The court also had to consider whether the magistrate had made an error of law in his decision.

The court found that the doctrine of issue estoppel did not apply in this situation, as it was not appropriate to estop Rojone from denying liability under the guarantee due to its failure to contest the statutory demand. The court held that the doctrine of issue estoppel was not intended to apply in cases where the party seeking to be estopped had not participated in the proceedings in which the issue was decided. The court found that the magistrate had made an error of law in his decision, as he had not considered whether the doctrine of issue estoppel applied in this situation. The court remitted the matter to the Local Court for determination.

The court did not make any final orders in this appeal, but rather remitted the matter to the Local Court for further consideration. The court found that the magistrate had made an error of law in his decision, and that the matter should be reconsidered in light of the court's findings. The court did not provide any guidance on how the Local Court should proceed with the matter, leaving it to the Local Court to determine the appropriate course of action.

Orders