Ryobi Kiso(S) Pte Ltd v Menz

[2016] WASC 166

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   RYOBI KISO(S) PTE LTD -v- MENZ [2016] WASC 166

CORAM:   MASTER SANDERSON

HEARD:   19 MAY 2016

DELIVERED          :   19 MAY 2016

PUBLISHED           :  3 JUNE 2016

FILE NO/S:   CIV 1037 of 2016

BETWEEN:   RYOBI KISO(S) PTE LTD

Plaintiff

AND

GRAHAM HARGRAVE MENZ
Defendant

Catchwords:

Summary judgment - Enforcement of guarantee - Turns on own facts

Legislation:

Nil

Result:

Summary judgment granted

Category:    B

Representation:

Counsel:

Plaintiff:     Mr J E Scovell

Defendant:     Mr F Snobar

Solicitors:

Plaintiff:     HWL Ebsworth Lawyers

Defendant:     Hale Legal

Case(s) referred to in judgment(s):

McNamee v R & I Bank of Western Australia Ltd [1994] NSWCA 201

1. MASTER SANDERSON:  This was the plaintiff's application for summary judgment.  At the conclusion of the argument I advised the parties I would enter summary judgment against the defendant.  I said I would publish reasons for my decision.  These are those reasons.

2. The statement of claim sets out what is in fact quite a simple claim.  On or about 5 September 2013 ANZ Bank and Compile‑Ryobi Australia Pty Ltd  (Compile‑Ryobi) entered into a written loan agreement.  Throughout the statement of claim and the submissions Compile‑Ryobi is referred to as 'the Company'.  It is a separate and distinct company from the plaintiff.  I will refer to it as the Company in these reasons.

3. The loan agreement comprised a number of different documents and contained certain terms and conditions.  The documents themselves and the terms and conditions are not presently relevant.  What is relevant is that as part of the suite of documents there was a deed of guarantee entered into between ANZ and the defendant.  Pursuant to that guarantee the defendant guaranteed the loan agreement up to an amount of $900,000.

4. On 6 July 2015 ANZ transferred and assigned all of its rights under the loan agreement and the guarantee to the plaintiff.  The Company had defaulted under the loan agreement and it is pleaded that as a result the defendant became liable to pay $900,000 and accrued interest pursuant to the guarantee.  Demand was made and payment was not forthcoming.  The plaintiff sued for $900,000 plus interest and costs.

5. There was no dispute between the parties as to the applicable principles in an application for summary judgment.  The facts pleaded in the statement of claim must be verified by affidavit.  That was done.  The onus then shifts to the defendant to establish there is a serious question to be tried.  The version of events most favourable to the defendant must be accepted for the purposes of a summary judgment application.

6. Counsel for the defendant commenced his submissions by highlighting various Company arrangements.  He pointed out the plaintiff was a subsidiary of Ryobi Kiso Holdings Ltd which was floated on the Singapore Stock Exchange on 1 January 2010.  (He referred to this corporation as 'RK Holdings'.)  RK Holdings is the parent company, or ultimate holding company, of the plaintiff, Ryobi Ground Engineering Pte Ltd and Ryobi Compile Holdings Pty Ltd.  RK Holdings holds 70% of Compile Australia Pty Ltd and 70% of Compile‑Ryobi.

7. The defendant is a director of GFS Management Services Pty Ltd (GFS).  Mr Tiong Siew Ong is also a director of RK Holdings, and a number of other subsidiaries including Compile Australia and Compile‑Ryobi.  The defendant was for a time a director of Compile Australia and Compile‑Ryobi.  In fact the defendant established Compile Australia in 1999.

8. The defendant met Mr Ong in March 2003.  The friendship flourished and in November of 2003 Compile‑Ryobi was incorporated with Mr Ong and the defendant each owning 50% of the issued capital.  When RK Holdings listed in Singapore Mr Ong suggested that RK Holdings should acquire a controlling interest in Compile‑Ryobi and Compile Australia so that Mr Ong would not have any conflict of interest between the companies.  Subject to a share purchase agreement, a shareholder's agreement and an intellectual property deed RK Holdings, through its subsidiaries, acquired a 70% interest in Compile‑Ryobi and Compile Australia.

9. In addition to the agreements mentioned above the defendant entered into an executive service agreement with Compile‑Ryobi which made him the executive director of that company.  The precise terms of these agreements are not relevant for reasons set out below.  At present it is enough to note the agreements were made in 2012.  It was in 2013 the loan facility was entered into and the defendant provided the guarantee to ANZ.  The defendant saw the circumstances surrounding the giving of the guarantee as relevant.  In counsel's written submissions he put the position as follows:

   29.At the time the Defendant entered into the Individual Guarantee and Indemnity he was visited by Ms Wendy Tan, the Office Manager at Ryobi Kiso.  On the day the Defendant entered into the Individual Guarantee and Indemnity he was told by Ms Wendy Tan that if he did not sign the documents, Compile Ryobi would to be unable to secure its loan and the company would be unable to continue trading.

   30.The Defendant believed that there was an urgency to enter into the Guarantee and Indemnity and the ANZ Loan Facility Agreement, and felt pressured into signing these documents.

10. On 28 February 2014 the defendant entered into a deed of termination settlement and amendment.  The effect of the deed was to terminate the defendant's executive directorship of Compile‑Ryobi and it made wide reaching amendments to the shareholder's agreement.  There is no doubt the deed significantly reduced the rights of the defendant.  But there is nothing in the evidence which would suggest the deed was for any reason ineffective.  On behalf of the defendant it was pointed out that although the deed purported to annexe the shareholder's agreement and certain other agreements it did not in fact do so.  Even if this were the case (and for the purposes of this application it has to be accepted that was so), it does not seem to me to in any way alter the position.  The defendant does not deny that he entered into the deed or that it had effect consistent with its terms.

11. Against that factual background the defendant raised a number of arguments.  First, he challenged the validity of the assignment of the debt from ANZ to the plaintiff.  In my view there was no substance to this submission.  There is no prohibition against assignment of the debt or assignment of the guarantee.  Of course notice of the assignment is required and that was given.  What had happened of course is that the plaintiff paid out the debt to ANZ and accordingly obtained an assignment of the rights the bank had under its security documentation.  That included the rights pursuant to the guarantee.  There is nothing exceptional or unusual in that process and nothing which would render the guarantee unenforceable.

12. Next it was submitted the rights of the creditor against the principle debtor had been varied such that the guarantor was released.  Reliance was placed on the decision of McNamee v R & I Bank of Western Australia Ltd [1994] NSWCA 201. In his written submissions counsel formulated the defendant's position as follows:

    50.The security has been fundamentally altered under the Deed of Assignment of Debt.  No mention is made of the standing letters of credit to the ANZ Singapore in the sum of approximately $4,000,000, thereby substantially increasing the Defendant's exposure and risk without his knowledge, consent or consideration.

13. In fact there has been no alteration of the defendant's exposure and risk.  He gave a guarantee limited to $900,000.  He is not exposed beyond that amount.  It matters not that the principal debtor may have had its exposure increased.  That is irrelevant to the defendant.  The decision in McNamee has no relevance.

14. The defendant says that he may have a third party claim.  It is doubtful this would provide a defence to the plaintiff's claim in any event but even if it were relevant the defence is not born out by the facts.  It is true that under the shareholder's agreement any director or shareholder giving a guarantee was provided with an indemnity.  But after the plaintiff entered into the deed that protection was eliminated.  As I have already indicated the deed was effective and accordingly any rights against the third party which may have protected the defendant's position were removed.

15. The defendant maintained, although it must be said in a rather half‑hearted fashion, that he had entered into the guarantee under duress and the guarantee was therefore liable to be set aside.  I have set out above the circumstances in which the defendant says he entered into the guarantee.  There are no facts which could be said to give rise to a defence of duress at law.  It may be the defendant felt pressured and that for financial reasons he had little room to manoeuvre.  But that is not duress and the facts in this case could not support such a finding.

16. Finally, there were a number of matters which were raised under the rubric of unconscionable conduct.  These matters really relate to the deed and whether or not the deed by its terms was unfair to the defendant.  In my view there was nothing unfair about the deed at all.  But even if there was 'unfairness' there is no evidence of unconscionable conduct.  There is nothing in the facts of this case which would warrant a conclusion the plaintiff had acted in a fashion which would warrant the intervention of a court of equity.

17. For these reasons I was satisfied summary judgment ought be granted to the plaintiff.  I will make orders accordingly.