Sensis Pty Ltd v Bivami Pty Ltd
[2013] FCA 1054
•16 October 2013
FEDERAL COURT OF AUSTRALIA
Sensis Pty Ltd v Bivami Pty Ltd [2013] FCA 1054
Citation: Sensis Pty Ltd v Bivami Pty Ltd [2013] FCA 1054 Parties: SENSIS PTY LIMITED ACN 007 423 912 and UNIVERSAL PUBLISHERS PTY LTD ACN 000 087 132 v BIVAMI PTY LTD ACN 003 020 166 and
AUSTRALIAN EXECUTOR TRUSTEES LIMITED AS CUSTODIAN FOR HYPERION PROPERTY SYNDICATES LIMITED ACN 007 869 794File number: NSD 1803 of 2012 Judge: GRIFFITHS J Date of judgment: 16 October 2013 Catchwords: CONTRACT – cross-claim – construction of indemnity – whether obligation under indemnity has been triggered by primary proceeding brought by applicants Cases cited: Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd (2008) 249 ALR 458
Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd (2010) 265 ALR 112Date of hearing: 14 October 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 36 Counsel for the first cross-claimant on the third cross-claim Mr T Maltz Solicitor for the first cross-claimant on the third cross-claim Swaab Attorneys Counsel for the first and second cross-respondents on the third cross-claim Mr M Izzo Solicitor for the first and second cross-respondents on the third cross-claim Hunt and Hunt Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1803 of 2012
BETWEEN: SENSIS PTY LIMITED ACN 007 423 912
First ApplicantUNIVERSAL PUBLISHERS PTY LTD ACN 000 087 132
Second ApplicantAND: BIVAMI PTY LTD ACN 003 020 166
First RespondentAUSTRALIAN EXECUTOR TRUSTEES LIMITED AS CUSTODIAN FOR HYPERION PROPERTY SYNDICATES LIMITED ACN 007 869 794
Third RespondentAND BETWEEN: AUSTRALIAN EXECUTOR TRUSTEES LIMITED AS CUSTODIAN FOR HYPERION PROPERTY SYNDICATES LIMITED ACN 007 869 794
First Cross-claimant on the First Cross-ClaimAND: UNIVERSAL PUBLISHERS PTY LTD ACN 000 087 132
First Cross-respondent on the First Cross-ClaimAND BETWEEN: AUSTRALIAN EXECUTOR TRUSTEES LIMITED AS CUSTODIAN FOR HYPERION PROPERTY SYNDICATES LIMITED ACN 007 869 794
First Cross-claimant on the Second Cross-ClaimAND: BIVAMI PTY LTD ACN 003 020 166
First Cross-respondent on the Second Cross-ClaimAND BETWEEN: BIVAMI PTY LTD ACN 003 020 166
First Cross-claimant on the Third Cross-ClaimAND: AUSTRALIAN EXECUTOR TRUSTEES LIMITED AS CUSTODIAN FOR HYPERION PROPERTY SYNDICATES LIMITED ACN 007 869 794
First Cross-respondent on the Third Cross-ClaimHYPERION PROPERTY SYNDICATES LIMITED
Second Cross-respondent on the Third Cross-Claim
JUDGE:
GRIFFITHS J
DATE OF ORDER:
16 OCTOBER 2013
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The third cross-claim be dismissed.
2.The first cross-claimant on the third cross-claim pay the costs of the first and second cross-respondents on the third cross-claim.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1803 of 2012
BETWEEN: SENSIS PTY LIMITED ACN 007 423 912
First ApplicantUNIVERSAL PUBLISHERS PTY LTD ACN 000 087 132
Second ApplicantAND: BIVAMI PTY LTD ACN 003 020 166
First RespondentAUSTRALIAN EXECUTOR TRUSTEES LIMITED AS CUSTODIAN FOR HYPERION PROPERTY SYNDICATES LIMITED ACN 007 869 794
Third RespondentAND BETWEEN: AUSTRALIAN EXECUTOR TRUSTEES LIMITED AS CUSTODIAN FOR HYPERION PROPERTY SYNDICATES LIMITED ACN 007 869 794
First Cross-claimant on the First Cross-ClaimAND: UNIVERSAL PUBLISHERS PTY LTD ACN 000 087 132
First Cross-respondent on the First Cross-ClaimAND BETWEEN: AUSTRALIAN EXECUTOR TRUSTEES LIMITED AS CUSTODIAN FOR HYPERION PROPERTY SYNDICATES LIMITED ACN 007 869 794
First Cross-claimant on the Second Cross-ClaimAND: BIVAMI PTY LTD ACN 003 020 166
First Cross-respondent on the Second Cross-ClaimAND BETWEEN: BIVAMI PTY LTD ACN 003 020 166
First Cross-claimant on the Third Cross-ClaimAND: AUSTRALIAN EXECUTOR TRUSTEES LIMITED AS CUSTODIAN FOR HYPERION PROPERTY SYNDICATES LIMITED ACN 007 869 794
First Cross-respondent on the Third Cross-ClaimHYPERION PROPERTY SYNDICATES LIMITED
Second Cross-respondent on the Third Cross-Claim
JUDGE:
GRIFFITHS J
DATE:
16 OCTOBER 2013
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The issue is the proper construction of an indemnity provided by Hyperion Property Syndicates Limited (Hyperion) in favour of Bivami Pty Ltd (Bivami). In broad terms Bivami claims that Hyperion is bound to indemnify it in accordance with a document dated 31 October 2012, which is entitled “Notice and Indemnity” (the Indemnity). Bivami claims that it is entitled under the Indemnity to be indemnified by Hyperion in respect of the legal costs incurred by Bivami in broader proceedings which I will describe shortly.
Background facts
The broader proceedings are complex and have a long history. It is unnecessary to describe those matters in great detail, largely because the court was informed on the first day of the hearing that the parties had reached agreement in respect of the primary proceeding, as well as two other cross-claims. The primary proceeding was brought by Sensis Pty Limited (Sensis) and Universal Publishers Pty Ltd (Universal) and disputed Bivami’s entitlement, as the former lessor of certain premises, to call upon and retain a banker’s undertaking which had been procured by Universal, as lessee, in favour of Bivami. In 1999, Bivami entered into a lease with Universal for a term of ten years, commencing on 30 July 1999, in respect of a property situated at 1-7 Waterloo Road, Macquarie Park (the Lease).
On 3 June 2003, Universal changed its name to Universal Publishers Pty Ltd (but, for convenience, I shall continue to refer to it as Universal). In December 2004, Universal’s share capital was acquired by Sensis Pty Ltd (Sensis), a wholly owned subsidiary of Telstra Corporation Limited (Telstra).
It was a term of the Lease that Universal deliver to Bivami, on or before the date of execution of the Lease, an unconditional bank guarantee in the amount of $632,000 to secure Universal’s obligations under the Lease and losses or damages suffered by Bivami pursuant to breach by Universal or the termination of the Lease arising from any such breach. It was a further term of the Lease that if Universal defaulted in the payment of rent or in the performance of, or compliance with, other obligations under the Lease or breached any other obligation under the Lease, Bivami was authorised to demand that the guaranteeing bank pay to it such an amount that, in the reasonable opinion of Bivami, may be due to it as a result of such default, breach or non-observance.
Clause 19 of the Lease is in the following terms:
19.1The Lessee shall deliver to the Lessor, on or before execution of this Lease, an unconditional Bank Guarantee to the amount specified in Item 16 to secure the Lessee's obligations under this Lease and losses and damages suffered by the Lessor pursuant to breach by the Lessee or termination of the Lease arising from such breach together with a copy of the Power/s of Attorney pursuant to which it is singed (sic).
19.2The amount of the Bank Guarantee shall be increased after any Review Date to an amount equal to twelve months of the Rent agreed or determined following a Rent review and the Lessor’s estimate of the Outgoings payable by the Lessee for the same period of twelve months. The Lessee will lodge with the Lessor a further or replacement Bank Guarantee to cover the difference between the Rent and estimated Outgoings payable over a period of twelve months and the amount currently held as Bank Guarantee within 21 days of the Rent being agreed or determined pursuant to the provisions of Clause 4.3. If there is a change in the person/s who are the Lessor, the Lessee shall on the Lessor’s request provide a substitute Bank Guarantee in favour of the then current Lessor.
19.3The Bank Guarantee shall be in a form acceptable to the Lessor.
19.4In the event that the Lessee:
19.4.1.1defaults in the payment of Rent or in the performance or compliance of any other obligations under this Lease; or
19.4.1.2breaches of any other obligation, term, condition or covenant under the Lease,
the Lessor is hereby authorised to demand that the guaranteeing bank pay to the Lessor such amount that (in the reasonable opinion of the Lessor) may be due to the Lessor as a result of such default, breach or non-observance by the Lessee or termination of the Lease pursuant to it.
19.5The Lessor shall be entitled to recover Rent and damages for breach of covenant or arising from termination of this Lease without being limited to the amount secured under the Bank Guarantee.
19.6Any demand made shall not in any way be deemed to constitute a waiver by the Lessor of any default, breach or non-observance by the Lessee and shall not prejudice any other right of the Lessor arising from such default, breach or non-observance.
19.7Should any amount of the Bank Guarantee be demanded from time to time by the Lessor as aforesaid then the Lessee shall upon demand by the Lessor and within twenty-one (21) days from the date thereof provide to the Lessor a further Bank Guarantee for the amount so demanded (in a form acceptable to the Lessor) in order to reinstate the amount of the Bank Guarantee to an amount equal to the amount shown in Item 16, or to any amount equal to Rent for the number of months specified in Item 16.
19.8The Lessor shall return to the Lessee the Bank Guarantee three months after expiry or termination of this Lease subject to the Lessee vacating the Premises and otherwise complying with its Obligations under the provisions of this Part have come into operation.
The following relevant definitions in cl 1.2 of the Lease should also be noted (which definitions are stated to apply unless the context otherwise requires):
1.2.1“Bank Guarantee” means an unconditional undertaking or guarantee from an Australian bank in favour of the Lessor in a form and content acceptable to the Lessor to enable the Lessor to be paid on demand an amount up to the sum referred to in Item 16 in total in one or more drawings and containing no expiry date.
…
1.2.17“Lessor” means the person referred to as the Lessor on the front page of this Lease and includes his successors and assigns or, being a person, his executors, administrators and assigns and where not repugnant to the context, the Lessor’s servants and agents.
The first bank guarantee provided by Universal to Bivami in accordance with cl 19 of the Lease was an unconditional bank guarantee dated 30 July 1999 by the National Australia Bank Limited in favour of Bivami in the amount of $632,000, which was delivered to Bivami. This bank guarantee was subsequently returned to Universal by Bivami around 30 November 2005. On or about 9 February 2006, Universal procured an unconditional banker’s undertaking from Westpac Banking Corporation Limited in favour of Bivami in the amount of $632,000 and delivered it to Bivami (the banker’s undertaking).
Bivami sold the premises to Australian Executor Trustees Limited (AETL) as custodian for Hyperion. The contract for the sale of land is dated 14 February 2006 (the contract). The sale was completed on 3 July 2006. AETL remains the registered proprietor of the premises.
Under special condition 18 of the contract Bivami (as vendor) promised AETL (as purchaser) that, subject to certain pre-conditions, Bivami will call upon the bank guarantee provided by Universal to Bivami. Special condition 18 is in the following terms:
THE VENDOR will use its best endeavours both prior to and after completion to obtain from the Lessee a Bank Guarantee in the same terms as the Bank Guarantee attached to this contract excepting that it would name the Purchaser as the “beneficiary” of that bank guarantee. In the event of the Vendor not being able to obtain such substituted Bank Guarantee by Completion Date then the Vendor will on each and every occasion after Completion Date that the Purchaser in writing requests the Vendor to do so, call upon the National Australia Bank Limited pursuant to the terms of the current Guarantee to pay to the Vendor such amount as the Purchaser requests pursuant to a default/defaults by the Lessee under the Lease, subject to the Purchaser on each such occasion indemnifying the Vendor in writing for and against any action, damages and costs commenced by the Lessee against the Vendor claiming that no default had occurred which gave to the Vendor or the Purchaser the right to call upon the Bank Guarantee.
When the Lease expired on 29 June 2009, Universal did not take up an option to renew. Universal vacated the premises. Universal never provided a replacement bank guarantee to AETL, nor did AETL request Bivami to take any further steps in respect of obtaining a replacement bank guarantee, notwithstanding that it had indicated in correspondence that it would contact Bivami if it “experiences any difficulty regarding the replacement bank guarantee”.
In late October 2012, Mr Ian Greenwood (a director of Hyperion) contacted Mr Mark Harvey of Bivami and requested that Bivami call upon the banker’s undertaking in accordance with special condition 18 of the contract. It was also around this time i.e. 31 October 2012, that Hyperion forwarded to Bivami the Notice and Indemnity, which is in the following terms:
1.Pursuant to Clause 18 of the Contract for Sale of Land dated 14 February 2006 between Bivami Pty Limited as Vendor (Bivami) and Australian Executor Trustees Limited as custodian for Hyperion Property Syndicates Limited as Purchaser (Hyperion), Hyperion hereby requests Bivami to call upon the Bank Guarantee issued by Westpac Banking Corporation and dated 9 February 2006 (the Bank Guarantee) to make payment of the Guaranteed Sum, being the sum of $632,000, in part satisfaction of the loss and damage suffered as a result of the default of the Lessee referred to in Clause 18 (being Universal Publishers Pty Limited (the Lessee), and
2.Hyperion agrees to indemnity Bivami for and against any actions, damages and costs commenced by the Lessee against Bivami claiming that no default had occurred which gave rise to Bivami or to Hyperion the right to call upon the Bank Guarantee.
On 5 and 6 November 2012, Mr Harvey acting on behalf of Bivami forwarded to Westpac a demand on the banker’s undertaking.
On 8 November 2012, Hyperion commenced proceedings against Universal in the Supreme Court of New South Wales seeking damages in the amount of approximately $2.7 million in respect of alleged breaches of the Lease. In particular, Hyperion alleges that Universal failed to make good the premises in accordance with its obligations under the Lease and also failed to remediate the premises as required under the Lease.
On 9 November 2012, Telstra was notified by Westpac that Bivami had called on the banker’s undertaking.
Shortly thereafter, on 12 November 2012 Sensis and Universal commenced proceedings in the court against Bivami seeking inter alia an injunction preventing Bivami from collecting on the demand it had made to Westpac under the banker’s undertaking. Subsequently, AETL as custodian for Hyperion was joined as a party. AETL then filed two separate cross-claims. AETL’s first cross-claim claimed that Universal was required to provide a substitute bank guarantee to it during the terms of the Lease and that it is under a continuing obligation to do so. AETL’s second cross-claim was against Bivami and sought relief concerning Bivami’s making of, or refusal to make, demands under the banker’s undertaking. A third cross-claim was brought by Bivami against AETL and Hyperion seeking declaratory relief in relation to the Indemnity. Bivami sought orders requiring AETL and Hyperion to indemnify it for its costs in respect of the primary proceedings brought by Sensis and Universal. The third cross-claim is the subject of this judgment.
The banker’s undertaking
Under the banker’s undertaking referred to above, Westpac unconditionally undertook to pay on demand any sums demanded by Bivami as the “Favouree” in relation to the premises up to a maximum sum of $632,000.
The banker’s undertaking contains the following statements:
Should Westpac be notified in writing purporting to be signed by or for and on behalf of the Favouree that the Favouree desires payment to be made of the whole or any part or parts of the Sum, it is unconditionally agreed that such payment or payments will be made to the Favouree forthwith without reference to the Applicant and notwithstanding any notice given by the Applicant to Westpac not to pay the same. Provided always that Westpac may at any time without being required to do so pay to the Favouree the Sum less any amount or amounts it may previously have paid under this undertaking or such lesser sum as may be required and specified by the Favouree and thereupon the liability of Westpac hereunder shall immediately cease and determine.
The Favouree shall not assign or transfer all or any part of its rights under this undertaking without the prior written consent of Westpac.
Should Westpac in its discretion consent to the assignment or transfer of this undertaking then, unless the context requires otherwise, the words “Favouree” shall include each such assignee or transferee.
The third cross-claim
The third cross-claim presents the following primary issues for determination:
(a)has the obligation to indemnify under the Indemnity been triggered thus giving Bivami an entitlement to be indemnified;
(b)if so, what is the scope of the “costs” to which Bivami is entitled; and
(c)if Bivami is successful in its cross-claim, what is the appropriate form of final orders?
(a) Outline of Bivami’s argument
Bivami’s arguments in support of its case as presented by its counsel, Mr Maltz, may be summarised as follows. First, in order to construe the Indemnity, relevant provisions of both the Lease and the contract should also be taken into account because they are “interlinked” and provide the relevant broader commercial context in which the Indemnity was given. In particular, reliance is placed on the following statements by the High Court in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]:
… The case provides a good example of the reason why the meaning of commercial documents is determined objectively: it was only the documents that spoke to Pacific. The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction. In Codelfa Constructions Pty Ltd v State Rail Authority of NSW, Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen:
“In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.”
(Citations omitted).
Bivami draws particular attention to special condition 18 of the contract of sale (see [9] above) and cl 19.4 of Lease (see [5] above). It submits that, as a matter of objective analysis, part of the business purpose of the Indemnity contemplated by special condition 18 is to protect Bivami from a claim by Universal that Bivami has exceeded its entitlement under cl 19.4 of the Lease to call on the banker’s undertaking and, more generally, to protect Bivami from the costs associated with defending a claim by Universal arising out of a call by Bivami on the banker’s undertaking. Accordingly, it says that both special condition 18 and the Indemnity to which it relates should be construed broadly.
Secondly, Bivami submits that, for the purpose of cl 2 of the Indemnity (see [11] above), in determining what Bivami is “claiming” reference should be made not only to the pleading, but also to the submissions filed by Universal in support of its primary application in the proceedings. Bivami says that the relevant question is whether, as a matter of substance, Universal is “claiming” in the primary proceeding that “no default had occurred which gave rise to Bivami… the right to call upon the Bank Guarantee”, as stated in cl 2 of the Indemnity. In ascertaining the nature of the claims being made against Bivami in the primary proceeding, Bivami also draws attention to [11] and [33] of Universal’s statement of claim filed 5 February 2013, which were in the following terms:
It was an implied term of the Lease that the Lessor would not call upon the Bank Guarantee unless it held a reasonable opinion that such amount as it called upon was due to the Lessor, as Lessor, as a result of a default, breach or non-observance by the Lessee of obligations under the Lease
…
In breach of the term of the Lease described in paragraph 11 above, Bivami made the demand when it did not hold, or alternatively did not reasonably hold, an opinion that $632,000, or any amount, was due to it, as Lessor, from Universal, as a result of a default, breach or non-observance by Universal of obligations owed by Universal to Bivami under the Lease.
Although Bivami acknowledges that the pleading is expressed in terms of Bivami not reasonably holding an opinion that there is a debt due to it as a consequence of a default by Universal, it says that Universal is necessarily claiming that it is not the case that a debt was due to Bivami as a consequence of a default by Universal of obligations owed to Bivami under the Lease. Bivami says further that Universal’s claim in the primary proceedings is confirmed by Universal’s outline of written submissions and, in particular, [2] thereof which is as follows:
In this Court, the proceedings brought by the applicants (Sensis and Universal) dispute the alleged entitlement of the former lessor of the Premises the First Respondent, Bivami) to call upon and retain a Westpac Banker’s Undertaking procured by the lessee (Universal) in favour of Bivami in Bivami’s capacity as then lessor. The Applicants contend that because Bivami assigned the reversionary estate in 2006, and because Universal is not in breach of any obligations owed to Bivami, Bivami had and has no entitlement to called upon or retain the Westpac Banker’s Guarantee…
Accordingly, Bivami says that Universal’s claims in the primary proceeding enlivens Hyperion’s obligation to indemnify Bivami under the Indemnity.
Thirdly, as to the scope of the Indemnity, Bivami says that, if it is entitled to the costs of the action brought by Universal, those costs must be assessed on an indemnity basis. This submission was not contested by Hyperion.
Fourthly, as to the form of any final orders to be made in its favour, Bivami draws attention to the orders made by the Full Court in Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd (2010) 265 ALR 112.
(b) Outline of Hyperion’s argument
The submissions advanced by Mr Izzo, who appeared for Hyperion and AETL, may be summarised as follows.
First, Hyperion contests Bivami’s submission that the primary proceeding commenced by Universal and Sensis against Bivami falls within the description in special condition 18 of “actions… commenced by the Lessee against the Vendors claiming that no default had occurred which gave to the Vendor or Purchaser the right to call upon the Bank Guarantee”. Hyperion relies on [33] of the statement of claim (see [21] above), in which Universal pleaded that Bivami “did not hold, or alternatively did not reasonably hold, an opinion that $632,00 or any amount, was due to it, as Lessor, from Universal, as a result of a default, breach or non-observance by Universal of obligations owed by Universal to Bivami under the Lease” (emphasis added). Hyperion emphasises that this amounts to an allegation that Bivami did not hold or reasonably hold an opinion that a default etc had occurred, which is different from an allegation that no default etc had occurred, which is what is required to trigger the obligation to indemnify. Furthermore, Hyperion says that the proceeding falls outside the ambit of both special condition 18 and the Indemnity because Bivami had ceased to be the Lessor and any liability by Universal for a default under the Lease was owed not to Bivami, but to AETL as custodian for Hyperion.
Secondly, Hyperion says that there is no basis for construing the Indemnity as broadly as that favoured by Bivami where there is available a narrower construction which serves a sensible commercial purpose and is consistent with the text. Citing the Full Court’s decision in Clough Engineering Ltd v Oil and Natural Gas Corporation Ltd (2008) 249 ALR 458 at [79], Hyperion submits that there are generally two commercial reasons for such an indemnity. The first is to provide security for a valid claim against the beneficiary of the indemnity. The second is to allocate the risk between the parties as to who shall be out of pocket pending the resolution of a dispute between them. By the express terms of the Indemnity themselves, those commercial purposes focus on indemnifying Bivami against any actions commenced by Universal against Bivami claiming that no default had occurred which entitled Bivami to call upon the banker’s undertaking. Accordingly, Hyperion says that there is no proper warrant for extending the language of the indemnity to encompass other claims.
Thirdly, Hyperion submits there even if the Indemnity is given the broader construction as favoured by Bivami, it does not cover cross-claims and is confined to Bivami’s costs in respect of the primary application brought by Sensis and Universal.
Consideration
For the following reasons, I consider that the Indemnity has no application to the circumstances here with the consequence that Hyperion has no obligation under the Indemnity to indemnify Bivami for its costs in relation to either the primary proceeding or any of the cross-claims.
First, I accept Bivami’s contention that the Indemnity is to be construed not only by reference to its own terms, but also by reference to relevant provisions of both the Lease and contract.
Secondly, however, these matters simply serve to underline the correctness of Hyperion’s construction of the Indemnity. Clause 19 of the Lease requires the Lessee to provide an unconditional bank guarantee in favour of the Lessor to secure the Lessee’s obligations under the Lease and losses or damages suffered by the Lessor pursuant to breach by the Lessee or termination of the Lease arising from such breach. The authority of the Lessor to make a demand on the guarantee is dealt with in cl 19.4 of the Lease. That authority is predicated on the Lessee defaulting in paying rent, defaulting in the performance or compliance with any of the other obligations under the Lease, or breaching any other obligation, term, condition or covenant under the Lease. If any of those events occur, the Lessor is entitled to demand payment to it under the guarantee of such amount which, in the reasonable opinion of the Lessor, may be due to it as a result of such default, breach or non-observance by the Lessee or termination of the Lease pursuant to it.
Although cl 19 of the Lease operates by reference to a range of contingencies, including defaults in payment of rent or performance of other obligations, as well as breaches and non-observance of obligations under the Lease, special condition 18 of the contract employs narrower language, which focuses only on defaults by the Lessee under the Lease. Similarly, the Indemnity not only makes express reference to special condition 18 of the contract, it also operates by reference to loss or damage suffered as a result of the default of the Lessee as referred to in special condition 18. Hyperion’s obligation under the Indemnity to indemnify Bivami relevantly relates to any actions commenced by the Lessee against Bivami claiming that no default had occurred which enlivened Bivami’s entitlement to call upon the guarantee. The obligation to indemnify is expressed in more narrow terms than cl 19 of the Lease. It does not extend to all actions brought by the Lessee against Bivami in respect of the Lease.
Bivami may well consider now that it would make more commercial sense (at least from its perspective) if the contract and the Indemnity had matched the language of the Lease. But they do not. And I do not consider that the court is at liberty to stretch the language of special condition 18 of the contract or the Indemnity. As Basten JA observed in Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 at [18]:
The courts have no mandate to rewrite agreements, so as to depart from the language used by the parties, merely to give a provision an operation which, as it appears to the court, might make more commercial sense: see Jireh International Pty Ltd t/as Gloria Jean’s Coffee v Weston Export Services Inc [2011] NSWCA 137 at [55]-[56] (Macfarlan JA, Young JA and Tobias AJA agreeing); Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5 at [27]-[31] (emphasis in original).
Thirdly, I accept Hyperion’s primary submission that the claims made against Bivami in the statement of claim filed by Sensis and Universal in the primary proceeding do not constitute an action commenced by the Lessee against Bivami claiming that no default had occurred which gave to Bivami the right to call upon the banker’s undertaking for the purposes of special condition 18 of the contract. In my view, it is made abundantly clear in [33] of the statement of claim that what is alleged is not that no default had occurred but rather that Bivami did not hold or did not reasonably hold an opinion that a default had occurred. Encapsulated in that allegation is the proposition that, for the purposes of cl 19 of the Lease, the various references to “the Lessor” therein are to the same person. In other words, the pleading raised the issue whether Bivami had any entitlement to call upon the banker’s undertaking in circumstances where the requisite reasonable opinion it had to have in order to make such a demand can only have related to an amount which was due not to it, but to AETL as custodian for Hyperion. Whether or not that allegation is correct is not to the point. The fact remains, however, that having regard to the pleading the primary proceeding did not involve a claim which enlivened the operation of the Indemnity. That position is not altered by the outline of written submissions filed by the applicants in the primary proceedings.
Accordingly, Hyperion has no obligation to indemnify Bivami under the Indemnity in respect of the proceeding commenced by Sensis and Universal. Nor, in my view, does the Indemnity operate to oblige Hyperion to indemnify Bivami in respect of any of the cross-claims, which relate to separate matters.
The third cross-claim should be dismissed and Bivami ordered to pay the costs of AETL and Hyperion who were both cross-respondents.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths. Associate:
Dated: 16 October 2013
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