St George Bank Ltd v Field

[2007] NSWSC 902

CITATION:	St George Bank Limited v Archer Philip Field [2007] NSWSC 902 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	8 August 2007
JUDGMENT DATE :	8 August 2007
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	McDougall J at 1
DECISION:	See paragraph [21] of judgment
CATCHWORDS:	PRACTICE AND PROCEDURE – Practice Note SC Eq 3 – Whether amended commercial list response should be struck out – Whether plaintiff entitled to summary judgment – No question of principle.
LEGISLATION CITED:	Section 420A of the Corporations Act Trade Practices Act National Parks and Wildlife Act 1974
CASES CITED:	Buckeridge v Mercantile Credits Limited (1981) 147 CLR 654 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [No 6] [2007] NSWSC 124 The Commonwealth of Australia v Verwayen (1990) 170 CLR 394
PARTIES:	St George Bank Limited (Plaintiff) Archer Philip Field (Defendant)
FILE NUMBER(S):	SC 50053/07
COUNSEL:	P Dowdy (Plaintiff) G Rundle (Defendant)
SOLICITORS:	Henry Davis York (Plaintiff) Archer Philip Field (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

8 August 2007 (ex tempore – revised 8 August 2007)

50053/07 ST GEORGE BANK LIMITED v ARCHER PHILIP FIELD

JUDGMENT

1 HIS HONOUR: On 24 May 2004 the plaintiff (St George) agreed to advance up to $5.88 million to Jenolan Caves Resort Pty Limited (JCR) pursuant to a commercial bill facility, the terms of which were described in a letter of 21 April 2004 from St George to JCR. One of the terms of that facility was that the defendant (Mr Field) should give an unlimited guarantee and indemnity. Mr Field acknowledged that obligation by his execution of the letter. In fact, as the letter made plain, Mr Field had executed a deed of guarantee and indemnity in favour of the bank some seven years earlier, on 8 May 1997. It is uncontested that the effect of the letter of offer, accepted by Mr Field, is that his guarantee and indemnity of 8 May 1997 extends to the facility granted by the letter of offer.

2 The terms of the letter of offer provided that it would have a duration of 12 months from the first drawdown under the facility. They contemplated also that bill might be rolled over from time to time, but on the proper construction of the document there is no promise in it to extend the facility beyond the term of 12 months from the first drawdown.

3 The facility was not extended. On 4 November 2005, St George made a demand on JCR for payment of the amount owing under the facility. Some seven months later, on 8 June 2006, St George made demand on Mr Field pursuant to his guarantee. Some nine months later again, on 23 April 2007, St George commenced these proceedings, seeking to recover against Mr Field under the guarantee.

4 Mr Field’s first attempt to file a commercial list response was completely inadequate, and it was accepted that the response so filed should be struck out. Mr Field was given another opportunity to file a commercial list response. He availed himself of this, in a document filed on 26 July 2007.

5 That documents states the following ten issues:

1. Did the plaintiff, by the conduct of its servants and agents, discharge the guarantee, thereby relieving the defendant of any obligations under the guarantee?

2. Whether the plaintiff, by the conduct of its servants and agents was in breach of Section 52 of the Trade Practices Act ?

3. Whether the conduct of the plaintiff, by its servants and agents, was such that is unjust in equity for the Plaintiff to seek to enforce the guarantee?

4. Was the plaintiff, itself or by its receiver and manager, in breach of Section 420A of the Corporations Act?

5. Did the conduct of the plaintiff diminish the value of the security held by the plaintiff thereby discharging the guarantee?

6. Was the conduct of the plaintiff and particularly in the period December, 2004 to June 2006 in breach of the notion of good faith?

7. Was the conduct of the plaintiff indifferent to the interests of the mortgagor thereby not acting in good faith?

8. Did the plaintiff sell the 99 year lease held by JCR lease to the Trust at undervalue?

9. In the event the Court holds that the plaintiff at all material times knew that the State Government was operating the Trust in breach of the National Parks and Wildlife Act, 1974 and the Trust could not enforce any alleged breaches under any provisions of the lease did the plaintiff act in the best interest of JCR and the defendant in privately selling the lease and the improvements to the Trust at a lessor value than its true value or the cost of the improvements and in so doing reducing the value of JCR?

10. In the circumstances was it reasonable for the plaintiff to give JCR seven days to repay its loan in full when the plaintiff had taken approximately six months to carry out its own due diligence?

6 In a section headed “Response to Pleadings” the document says the following:

1. As to paragraph 7 the defendant says that in JCR’s previous dealings with the plaintiff the plaintiff rolled over the facilities and at no time prior to 26 September, 2005 did the plaintiff make any representation to JCR or the defendant that it was not prepared to continue the facilities then existing. To the best of the defendant’s knowledge JCR had never been in default with the plaintiff.

7 It is apparent that the document fails in any way to engage, let alone comply, with the relevant requirements of Practice Note SC Eq 3. Paragraph 10 of that Practice Note requires the list response to set out the defendant’s view in summary form of the nature of the dispute, the issues likely to rise, the response to the plaintiff's contentions including any legal grounds for opposition to the relief claimed and other matters. Paragraph 11 requires that those contentions should avoid formality, admit or deny the allegations made, state the defendant's allegations with adequate particulars and again identify the legal grounds for opposition to the relief claimed.

8 As will be seen, the only paragraph of the plaintiff's contentions to which any response is stated is para 7. That paragraph alleges that JCR defaulted under the terms of the facility by failing to pay the money owing under it on the expiry date, 26 September 2005. The response to that paragraph is no response at all.

9 The amended commercial list response does set out, under the heading "Nature of the Dispute," some 19 paragraphs of assertions. Those assertions do not identify the nature of the dispute. Nor do they identify the factual or legal basis of the ten issues stated.

10 In short, the document fails completely to comply with the relevant requirements of the Practice Note.

11 Mr Rundle of counsel, who appeared for Mr Field, referred to the prescription to avoid formality. But that prescription does not mean that the requirements of the Practice Note should not be met. More importantly, it does not mean that the commercial list response should fail to state with adequate clarity the nature of the case to be made out. The obligation to do that serves two important purposes. One is giving some measure of natural justice to the plaintiff, by identifying the case that it has to meet. The other is to enable the real issues in dispute to be defined, so that the Court can deal with them as quickly and as efficiently as possible. I made those points in my judgment in Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [No 6] [2007] NSWSC 124 at paras [277] to [287]. I see no reason to retreat from what I there stated. The application of those principles to the amended commercial list response in this case demonstrates that it fails completely to meet those fundamental requirements to which I have referred.

12 It is therefore plain that the amended commercial list response must be struck out.

13 St George moved for summary judgment. Mr Rundle submitted that Mr Field should have a further opportunity to articulate a defence.

14 A consideration of this issue requires some reference to the terms of the deed of loan and guarantee. It is expressed to be an unconditional and irrevocable guarantee, payable on demand (cl 2.1). The guarantor must not delay payment for any reason (again, cl 2.1). Payment is required to be made in full (cl 3.1). The inference available from those provisions is made explicit by cl 3.2 which reads as follows:

3.2 Payment without deduction or set-off

Guaranteed Money must be paid in full without any deduction. The Guarantor waives all rights of set-off, combination or counterclaim in relation to payment of Guaranteed Money.

15 Clause 5.2.1 is also relevant. It makes it plain that the guarantor's liabilities and the rights of St George are not affected by a number of matters, including the granting of time, laches, acts omissions or mistakes, and anything else which might at law or in equity have the effect of breaching or discharging the guarantor’s liability.

16 Further, there is a certification clause: cl 9.4. That is in the usual form, making a written statement conclusive evidence, except in the case of manifest error, of the amounts stated in it. Such a statement is in evidence. It certifies the liability of Mr Field to St George as at the date it was signed. There is no doubt that it was signed by someone authorised to do so under cl 9.2.

17 Against that background, it is therefore necessary to consider the issues that might be raised. I have set them out above. A number of those issues refer to conduct of St George, by its servants and agents, which has the effect of discharging the guarantee, or of relieving Mr Field of liability under it, or of making it unjust for St George to seek to enforce the guarantee. On the face of things, they are all rights that Mr Field has bargained away by the clauses of the guarantee to which I have referred. It is clear that the courts will give effect to such a bargain: see Mason CJ in The Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 407. In the particular context of a guarantee, see the decision of Brennan J in Buckeridge v Mercantile Credits Limited (1981) 147 CLR 654 at 675. To the extent that Mr Field wishes to raise those issues, they are issues that are foreclosed by the terms to which I have referred.

18 There is an important distinction to be drawn between a defence that impeaches the guarantee itself, and a defence that impeaches the exercise of rights under the guarantee. Clauses of the kind to which I have referred may not prevent a defence being raised to liability under a guarantee where it is said (for example) that the taking of the guarantee was itself affected by some vitiating circumstance. But no such issue is raised in this case. There is no challenge to the validity of the guarantee. The allegations that I have summarised seek to attack the exercise of rights under it. In my view that is the kind of exercise prohibited by the terms of the guarantee which terms, as I have said, are to be enforced according to their wording.

19 The other group of issues relates to what might be said to be equitable waste on the part of St George, or its receiver, relating to the exercise of its powers. For various reasons, Mr Field wishes to argue that by reason of some (presently unspecified) conduct, St George diminished the value of the security, or failed to obtain the best price for it, thereby increasing the amount of his loss. If there is such a claim (and I have to say that neither the amended commercial list response, nor Mr Field’s lengthy affidavit sworn on 28 June 2007, nor the four folders of exhibits referred to in that affidavit give any clue as to what it might be), that can be dealt with at some appropriate time. Again, the terms of the guarantee make it clear that matters of cross-claim are not to be relied upon by way of defence. It follows, apart from anything else, that the giving of judgment in favour of St George would not create any estoppel preventing Mr Field from raising any cross-claim that might be maintainable.

20 In those circumstances, I do not think that there is any utility in giving Mr Field yet a further opportunity to seek to articulate some defence. Nothing has been put, either supported by evidence or even based on submissions from the bar table, that would indicate a defence that can stand in the face of the contractual provisions to which I have referred, explained as they are by the authorities to which I have referred.

21 In the circumstances, I think, St George is entitled to the relief that it claims. I therefore make the following orders:

1. Order that the amended commercial list response filed on 26 July 2007 be struck out.

2. Direct entry of judgment in favour of the plaintiff in the sum of $6,800,632.72, together with interest on the principal component of that sum from 2 August 2007 until the date of entry of judgment.

3. Direct that the exhibits remain with the papers for 28 days and that they be held or disposed of thereafter in accordance with the rules.

4. Order the defendant to pay the plaintiff's costs of the proceedings.

11/09/2007 - File number on coversheet - Paragraph(s) front page para 8