Pozzan v Gibbons - [2006] SASC 163

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
POZZAN v GIBBONS
[2006] SASC 163
Judgment of The Honourable Justice Perry
5 June 2006
CORPORATIONS - LEGAL CAPACITY AND RELATIONS WITH OUTSIDERS - EXECUTION OF DOCUMENTS - GENERALLY
Where document executed by Kangaroo Island Ferries Pty Ltd ("KIF") and two natural persons was described in the body of the document as a "deed" - where KIF's execution clause did not contain the words "executed as a deed" - whether deed validly executed pursuant to s 127(3) or s 127(4) of the Corporations Act 2001 (Cth) - Held: deed validly executed.
Law of Property Act 1936 s 41; Corporations Act 2001 (Cth) s 127, referred to.

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
The plaintiff, the defendant and Kangaroo Island Ferries Pty Ltd ("KIF") entered into a "Deed of Loan Agreement" whereby the defendant purported to provide security for a loan of $300,000 from the plaintiff to KIF - a memorandum of mortgage was executed by the plaintiff and the defendant, pursuant to the Deed of Loan Agreement - whether the terms of the mortgage should be rectified as not representing the agreement between the parties, in that it created a personal guarantee or indemnity by the defendant of KIF's debt - Held: the mortgage creates either a guarantee or indemnity, and that guarantee or indemnity being contemplated by the parties, no case for rectification is made out.
Meagher, Gummow and Lehane's Equity: Doctrines and Remedies Meagher R, Haydon D, Leeming M, Butterworths LexisNexis, Australia, 2002, considered.

GUARANTEE AND INDEMNITY - DISCHARGE OF SURETY - GIVING TIME
Kangaroo Island Ferries Pty Ltd ("KIF") defaulted on repayments pursuant to loan agreement - defendant "instrumental in getting the parties together" to arrange for extra time within which to pay - whether defendant's obligations as guarantor discharged due to lack of consent to variation - held: unclear that binding variation was formed - the defendant's participation in the negotiation is properly construed as consent to any variation that was formed - the defendant's obligations were not discharged by the giving of time - judgment entered for the plaintiff against the defendant for the full amount of the principal and interest to the date of judgment.
Hancock v Williams (1942) 42 SR (NSW) 252; The Modern Contract of Guarantee O'Donovan and Phillips, LBC Information Services 1996 (3rd edition) at 339 et seq; Wren v Emmett Contractors Pty Ltd (1969) 43 ALJR 213, considered.

POZZAN v GIBBONS
[2006] SASC 163
Civil

PERRY J. The plaintiff, Dorian Justin Pozzan, sues in his capacity as trustee of the Pozzan Family Trust. He claims against the defendant the sum of $300,000 plus interest and other relief.
The plaintiff alleges that the defendant personally guaranteed repayment of a loan of that amount made by the Pozzan Family Trust on or about 28 November 2003. The loan was to a company with which the defendant was associated, namely Kangaroo Island Ferries Pty Ltd (“KIF”). KIF is now in liquidation.

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.

Continue reading Pozzan v Gibbons

Details

AGLC: Pozzan v Gibbons [2006] SASC 163
Case: [2006] SASC 163
Decision Date: 5 June 2006

CaseChat Overview and Summary

In the matter of Pozzan v Gibbons, the plaintiff, a financial controller for a credit union, sued the defendant, a business partner, for repayment of a $300,000 loan made to Kangaroo Island Ferries Pty Ltd, a company involved in a ferry service. The defendant argued that the loan agreement and the mortgage securing repayment were unenforceable. The court had to determine the enforceability of the documents in question. The key issue was whether the document executed by Kangaroo Island Ferries and two natural persons was validly executed as a deed. The court considered whether the deed was validly executed under section 127(3) or 127(4) of the Corporations Act 2001 (Cth).

The court held that the deed was validly executed. The execution clause for Kangaroo Island Ferries did not contain the words "executed as a deed," but the body of the document described it as a "deed." The court found that the omission did not affect the validity of the deed as it was clear from the document's body that it was intended to be a deed. The court relied on section 127(3) of the Corporations Act 2001 (Cth), which states that a corporation can execute a document as a deed if the document is described as a deed or if it is signed by a director or secretary in the presence of another director or secretary. The court found that the document was validly executed as a deed, and therefore enforceable.

The court dismissed the defendant's defences and ordered the defendant to pay the plaintiff the principal sum of $300,000, together with interest to the date of judgment, a total of $391,161.60. The court also ordered that the defendant pay the plaintiff's costs of the action. The claim for possession of the properties subject to the mortgage was referred to a Master for further hearing and determination.

Orders

Orders of the court

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Background

Background to the litigation

In his defence, the defendant admits the making of the loan to KIF and admits that he offered security to the plaintiff over the properties to secure its repayment. However, he pleads that both the loan agreement and the mortgage are unenforceable against the defendant for reasons which I will refer to in due course. Further, he denies that he agreed to give a personal guarantee.Background The plaintiff is employed as the financial controller for a credit union based in Queensland. Together with his wife, the defendant operates a kiosk at Cape Jervis. For some time before the transactions now in question, the kiosk business included a booking service for Philanderer Ferries, a ferry service operating between Cape Jervis and Kangaroo Island. At some time before the transaction in question in this action was entered into, the defendant struck up a business relationship with Prakash Dhupelia. In correspondence between the parties and throughout the proceedings, he has been called “Prakash”. To avoid confusion, I will continue to describe him by that name. The defendant and Prakash decided to establish a new ferry service between Sunset Cove Resort (formerly Wirrina Cove Resort) and Kangaroo Island. KIF was incorporated by Prakash with the intention that it be the operating vehicle for the proposed new service. Later, in about July 2003, the defendant was responsible for the incorporation of Australian Capital & Equity (South Australia) Pty Ltd (“ACE”) which became trustee of a unit trust, named the Friends of Kirk Unit Trust. The unit trust was set up to receive investments of money from individual contributors, as a means of financing the acquisition of the ferry to be operated by KIF. The plaintiff’s brother, Edgar Pozzan, has qualifications as a marine engineer and was known to Prakash. Prakash introduced Edgar Pozzan to the defendant. Subsequently, Edgar Pozzan was engaged to inspect vessels which could be deployed as a ferry and which were available for sale on the international market. Eventually a vessel was chosen for that purpose. KIF was to be the purchaser. Arrangements for the financing of the purchase were made. It became necessary to find a deposit of $300,000. By this stage Edgar Pozzan was employed by KIF as manager of marine operations. At some time in 2003, Edgar Pozzan introduced the plaintiff to the defendant when the plaintiff was visiting South Australia from Queensland. The defendant invited Edgar Pozzan to invest in ACE, to help finance the project. The plaintiff and his brother said that they were not interested in investing in ACE. After the plaintiff had returned to Queensland, the defendant asked Edgar Pozzan to ascertain whether the plaintiff might be interested in a loan to KIF, rather than an investment with ACE. The defendant informed Edgar Pozzan that he could offer as security for repayment of the loan a mortgage over two properties which he owned which he said were worth $600,000. The loan which was contemplated was $300,000.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

PERRY J

As I am disposed to allow the money claim, there is no need to address further the claim for misrepresentation.Conclusion The various defences fail. There will be judgment for the plaintiff for the principal moneys lent, that is, $300,000, together with interest. Mr Keith tendered a calculation of interest, adopting the 20 per cent default rate. The total, including interest to the date of judgment, that is, 5 June 2006, is $391,161.60. Mr Manetta did not raise any objection to the calculation, but in fairness to him, I will give him an opportunity to speak to the calculation before judgment is sealed. The judgment will speak from today. Subject to any correction of the calculation of interest, the order of the Court is:1.Judgment for the plaintiff against the defendant in the sum of $391,161.60 inclusive of interest to the date of judgment.2.Order:(a)dismissing the counterclaim(b)that the plaintiff’s claim for possession of the properties the subject of the mortgage in question be referred to a Master for further hearing and determination in light of the reasons for judgment published this day.(c)that the defendant pay to the plaintiff the plaintiff’s costs of action to be taxed.

Ratio Decidendi

Legal Principle Established

Established by: PERRY J

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