Ramsay and Ramsay v Aira Pty Ltd File No. SCGRG 92/1548 Judgment No. 3653 Number of Pages 4 Guarantee and Indemnity

[1992] SASC 3653

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA FULL COURT King C.J.(1), Cox(2) and Matheson(3) JJ.

CWDS
Guarantee and indemnity - actions against surety - contract of guarantee - construction of contract - whether subsequent document extending guarantee to cover debts of companies in group other than debtor named in guarantee, and addressed to one only of two creditors, operated in favour of the other creditor.

HRNG ADELAIDE, 7 October 1992 #DATE 7:10:1992
Counsel for appellants:            Mr D.G.W. Howard
Solicitors:  Esau Meister and Associates
Counsel for respondent:            Mr S.H. Milazzo
Solicitors:  Fisher Jeffries

ORDER
Appeal dismissed, respondent to pay the appellants' costs of the appeal, to be taxed.

JUDGE1 KING C.J. The plaintiff in this action is and was, at all material times, a member of a group of companies consisting of, in addition to itself, Heating Controls Pty Ltd and Crockford Robertson Pty Ltd. The plaintiff was itself known at certain of the relevant times as Heating Controls Sales Pty Ltd. 2. The group was engaged in the business of importing manufacturing and marketing products related to commercial heating and air conditioning. The group was operated, on the evidence, as a single administrative unit. That is to say, the companies had a common administration and a common head office address. 3. The first defendant in the action is a company which, at all material times, also was part of a group of companies. That group consisted of a number of companies engaged in air conditioning work. 4. The second and third defendants were the directors of a number - although apparently not all - of the companies in what I will call the Ramsay group. 5. On 3 September 1986, one of the companies in the Ramsay Group, Ramsay Air Conditioning (Vic) Pty Ltd, signed a supply agreement and credit application directed to Heating Controls Sales Pty Ltd, that is to say, the present plaintiff. On the same day, the directors of that company, the second and third defendant, signed a guarantee in favour of Heating Controls Pty Ltd and Heating Controls Sales Pty Ltd guaranteeing "punctual payment of all sums of money now due or owing or which may hereafter become due or owing by the debtor to you". The debtor was named as Ramsay Air Conditioning (Vic) Pty Ltd. 6. In October 1987, another document, prepared by the accountant of the Heating Controls Group, was signed by the second and third defendant. The construction of that document was the issue in the District Court at the trial of the action and is the issue canvassed before us on the appeal. 7. That document is as follows:
    "To: The Managing Director, Heating Controls Pty. Ltd.,
         144 Colchester Road, Kilsyth, 3137.
    This is to confirm that the Directors' Guarantees signed by us
    for Ramsay Air Conditioning (Vic.) Pty. Ltd., are now to be
    deemed valid for all our companies as per attached list.
    Signed". 8. It is signed, as I have already said, by the second and third defendants. The companies on the list attached to the document are the first defendant, namely, Ramsay Air Conditioning (SA) Pty Ltd, the company which signed the credit application and supply agreement in March 1986, namely, Ramsay Air Conditioning (Vic) Pty Ltd, and three other Ramsay Group Companies. 9. On 5 October 1989, an order form was was signed for Ramsay Air Conditioning Group and was addressed to, and forwarded to, the present plaintiff under its present name, that is to say, Aira Pty Ltd. The order was for three boilers and three gas cowls. Those goods were delivered in due course and the debt, which is the subject of the action, is the price of those goods. 10. Summary judgment was obtained in the District Court against the first defendant for the amount of that debt. The action proceeded to trial in the District Court against the second and third defendants. 11. The argument raised on behalf of the second and third defendants was that the enlargement of the guarantee in October 1987 applied only in favour of Heating Controls Pty Ltd being the company shown as the addressee of the document. The learned judge rejected that argument and held that the document also applied in favour of the plaintiff. He gave judgment against the second and third defendants. They have appealed to this court. 12. His Honour found on undisputed evidence that all sales on behalf of the Heating Control Group had, since about 1983, been made by the plaintiff company. All transactions with the Ramsay group therefore, at any relevant time, in relation to the supply of air conditioning components, were between the plaintiff company and one or other of the Ramsay companies. There were no transactions which could give rise to any indebtedness to Heating Controls Pty Ltd by any of the Ramsay companies. His Honour inferred that it was the common intention of the parties that the enlargement of the guarantee in October 1987 was to apply in favour not only of Heating Controls Pty Ltd but also of the plaintiff company. 13. That conclusion was challenged by Mr Howard on the appeal before us. He argued that the document entered into in October 1987 should be construed as providing that the enlargement of the guarantee to cover the indebtedness of companies other than Ramsay Air Conditioning (Vic) Pty Ltd, should be in favour of Heating Controls Pty Ltd only. His argument, therefore, was that the guarantee did not guarantee indebtedness arising out of the supply of goods by Heating Controls Sales Pty Ltd to Ramsay Air Conditioning (SA) Pty Ltd. 14. I think that in assessing this argument, it is important to consider the terms of the original guarantee, that is to say, the document entered into on 3 March 1986. That guarantee was in favour of both companies, namely, Heating Controls Pty Ltd and Heating Controls Sales Pty Ltd. It guaranteed the indebtedness of the named debtor, Ramsay Air Conditioning (Vic) Pty Ltd, to both of those companies. On the same day, the credit application and supply agreement was addressed to Heating Controls Sales Pty Ltd. 15. The document signed in October 1987 by its terms simply extends the original guarantee to cover debts incurred by four named companies in addition to Ramsay Air Conditioning (Vic) Pty Ltd. There is nothing in the text of the document to indicate an intention to vary the parties in whose favour the guarantee was given. It is significant too, I think, that one of the companies listed is the company Ramsay Air Conditioning (Vic) Pty Ltd with respect to whose debts the second and third defendant had clearly given a guarantee in favour of both companies. Mr Howard is forced to rely, in support of his proposed construction of the document, entirely upon the fact that it is addressed to the managing director of only one of the companies, namely, Heating Controls Pty Ltd. I think that when one considers the fact that the Heating Controls Group was operated as a single group, with a single administration, and that that must have been known to the second and third defendants as a result of their dealings with that group, that point loses its significance. There is a good deal of evidence in the documentation that both groups prepared and exchanged correspondence and other documentation without any particular concern for the name of the company specified on any particular document. 16. I do not think that there is any ambiguity about the document entered into in October 1987. I do not think that the identity of the addressee is significant. It seems to me that the document in its terms does no more than extend the original guarantee to cover the indebtedness of additional companies. 17. If, however, there is any ambiguity in the terms of the document, one is entitled to look at the extrinsic evidence in order to determine the identity of the intended parties. The fact that all sales were made to the Ramsay group by the plaintiff company and that there were no dealings between any member of the Ramsay group and Heating Controls Pty Ltd, which could give rise to indebtedness, indicates very strongly, to my mind, that the common intention of the parties was that the enlargement of the guarantee in October 1987 was intended to apply to the companies in whose favour the original guarantee was given. 18. It seems to me that the conclusion which the learned judge came to, on that basis, is quite correct but, for myself, I would not have need to have recourse to extrinsic evidence. 19. It seems to me that, construing the documents, according to their terms, the guarantee extends to cover the indebtedness of the first defendant to the plaintiff. In my opinion, therefore, the appeal should be dismissed. The order of the court is appeal dismissed, and that the respondent pay the appellants' costs of the appeal, to be taxed.

JUDGE2 COX J. I would dismiss the appeal for the reasons that have been given by the Chief Justice.

JUDGE3 MATHESON J. I also agree.