Supervision Business Systems Pty Ltd v Pacific Pines Central Real Estate Pty Ltd and Anor

[2011] QDC 317

DISTRICT COURT OF QUEENSLAND

CITATION: Supervision Business Systems Pty Ltd v Pacific Pines Central Real Estate Pty Ltd and Anor [2011] QDC 317

PARTIES:   Supervision Business Systems Pty Ltd

(Plaintiff)   

v

Pacific Pines Central Real Estate Pty Ltd

(First Defendant)

and

David Rhys Owen

(Second Defendant)

FILE NO:   107 of 2009

PROCEEDING:                    Application for summary judgment

ORIGINATING                    District Court, Southport
COURT:

DELIVERED ON:                2 December 2011

DELIVERED AT:                 Southport

HEARING DATE:                11 November 2011

JUDGE:   Judge C.F. Wall Q.C.

ORDER: Judgment for the Second Defendant against the Plaintiff plus costs

CATCHWORDS:                  Practice – Summary Judgment application by second defendant against plaintiff – lease of shop premises by First Defendant – breach of lease by tenant – liability of Second Defendant pursuant to guarantee and indemnity – guarantor’s obligations – indemnity part of guarantee – absence of signature by guarantor – guarantor not liable under guarantee & indemnity

LEGISLATION:                   Uniform Civil Procedure Rules r 293

Property Law Act 1974 s 56(1)

COUNSEL:      Mr J McDonald for the Plaintiff
  Mr I Kennedy (solicitor) for the Second Defendant

SOLICITORS:  Parker Simmons for the Plaintiff
  McLaughlins for the Defendants

HIS HONOUR:  This is an application by the second defendant
pursuant to Rule 293 of the Uniform Civil Procedure Rules that
judgment be given for the second defendant against the
plaintiff on the basis that the plaintiff has no real prospect
of succeeding on its claim against the second defendant and
there is thus no need for a trial of that claim.

On the 30th of November 2006, the plaintiff leased shop
premises to the first defendant.  The lease is contained in a
Contract of Lease for a Retail Shop, Exhibit DRO2 to the
affidavit of the second defendant.

The plaintiff alleges the first defendant breached the terms
of the lease and owes it $66,685.65.  The plaintiff also
alleges that the second defendant is liable pursuant to a
guarantee and indemnity contained in the lease.  On the
present application, the second defendant contends it is not
so liable and therefore the plaintiff has no case against him.

There is a factual dispute between the parties which is
highlighted by paragraphs 8 to 11 of the second defendant's
affidavit, paragraphs 3 to 4 of the affidavit of Mark Parker
filed on the 8th of November 2011 and paragraphs 6, 7 and 8 of
the third amended defence and counterclaim of the defendants. It is not possible to resolve this conflict on the present
application except to say that the absence of any signature by
the second defendant as guarantor seems to more support the
second defendant than the plaintiff.

The fate of the present application depends on the meaning to be ascribed to the contract and to clause 17 of the standard lease conditions which are part of the contract.  The contract provides that it comprises the following parts:  (A), Items schedule, (B), Standard Conditions and (C), any Special
Conditions.

The standard conditions incorporate items from the Items
Schedule.  Item G records that the guarantor is David Reece
Owens, the second defendant, and states his address.  The
Items Schedule contemplates that the contract be signed by the
guarantor, the tenant and the landlord. So far as the guarantor is concerned, that is consistent with section 56(1) of the Property Law Act 1974, which provides:

"(1) No action may be brought upon any promise to guarantee
any liability of another unless the promise upon which such
action is brought, or some memorandum or note of the promise,
is in writing, and signed by the party to be charged, or by
some other person by the party lawfully authorised."

In the present case only the tenant and the landlord have
signed.  The guarantor has not.  I'm told that the second
defendant signed as sole director and secretary of the tenant
and a director of the landlord signed.  Each other page of the
contract is initialled by those two persons on behalf of the
landlord and the tenant.

Mr M J McDonald of counsel for the plaintiff submitted that
the second defendant was also initialing as guarantor, but, with respect, I do not read the document or the initials that way.

In the absence of any signature by the second defendant as
guarantor, he cannot be liable on the guarantee.

The plaintiff submits that by clause 17, the second defendant
has both guaranteed the tenant's obligations and separately
agreed to indemnify the landlord against any loss or liability
arising from or connected with the tenant's obligations and
that there is no requirement for that indemnity to be in
writing.

I agree that there is a difference between a guarantee and an
indemnity, but in the circumstances of the present case:
(a)  clause 17 clearly includes as part of the guarantee an
indemnity.  There is not, in my view, an indemnity separate from the clause 17 guarantee.  Clause 17 makes it a term of the guarantee that the guarantor also indemnify as part of the guarantee and as part of the guarantor's obligations, the landlord. Clause 17.2.3 clearly includes an obligation to indemnify as part of and not separate to the guarantee. Notwithstanding Mr McDonald's argument, the plaintiff's case against the second defendant, as pleaded, is not that he is liable on an oral indemnity, see paragraphs 5, 6 and 7 of the amended statement of claim. In these circumstances, in order to hold the second defendant liable on the indemnity part of the guarantee, the guarantee must first be signed by the guarantor.
(b)  alternatively, the contract clearly contemplates that before there can be any liability on the indemnity if it is to be regarded separately, it must be signed. The contract does not contemplate liability on an oral indemnity even though, depending on circumstances, an oral indemnity can attract liability.  Relevant parts of clause 17 are:

“17  GUARANTEE AND INDEMNITY

17.1     Where Item G is completed with the name or names of
         any person or persons, the succeeding provisions of
         this clause 17 apply.

17.2     In this clause 17, unless the context requires
         otherwise:
         17.2.1    'Contract' means this Contract;
         17.2.2    'Guarantor' means the person or persons
  named in Item

17.2.3    'Guarantor's  obligations' means the obligations of
         the Guarantor as set out in clause 17.3 or in any
         stipulation of this Contract to which clause 17.3
         relates.

...

17.3     In consideration of the Landlord at the request of
         the Guarantor entering into this Contract, the
         Guarantee unconditionally (and jointly and severally
         where there is more than one Guarantor):
         (a)  guarantees the tenant's obligations;

(b)  indemnifies the Landlord against any loss or
              liability the Landlord incurs arising from or
              connected with the Tenant's Obligations.

17.4     Each of the Guarantor's Obligations:

(a) is a principal obligation and will no the be
              treated as ancillary or collateral to any other
              right or obligation however treated or arising;

(b)  may be enforced against the Guarantor without
              the  Landlord first being required to exhaust
              any remedy it may have against the Tenant or to
              enforce any security it may hold with respect
              to the Tenant's Obligations;

(c)  is a continuing guarantee and indemnity for the
              whole of the Tenant's Obligations and will be
              irrevocable and will remain in full force and
              effect until discharged."

Notwithstanding the plaintiff's case as pleaded in paragraph 7
of the amended statement of claim, the insertion of a name in
Item G cannot by itself make the named person liable under
clause 17, otherwise any name could be inserted.  The name of
the person who signs the contract as guarantor is the name to
be inserted in Item G.  The item to which clause 17.2.2 must
refer is clearly Item G.

The plaintiff contends that there is a triable issue, namely
whether or not there is an indemnity which has been entered
into by the second defendant.  I am, with respect, unable to
agree.  The indemnity here is clearly expressed to be part of
the guarantee and the guarantor's obligations even though
clause 17 is headed "Guarantee and Indemnity".

In my view, the second defendant is entitled to the judgment
it seeks.  The plaintiff has no real prospect of succeeding on
its claim against the second defendant and there is therefore
no need for a trial of that claim. 

For these reasons, I give judgment for the second defendant against the plaintiff.  I order that the plaintiff pay the second defendant's costs of and incidental to the proceeding, including this application, to be assessed on the standard basis unless agreed.

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