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The Queen v Steelie Morgan

The Queen v Steelie Morgan

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

No 3898 of 2008

ROBERT HENDERSON-SMART	Appellant
	v
QUALITY BLOW MOULDERS PTY LTD	Respondent

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JUDGES:	MANDIE and BONGIORNO JJA, WILLIAMS AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	9 November 2009
DATE OF JUDGMENT:	15 February 2010
MEDIUM NEUTRAL CITATION:	[2010] VSCA 14
JUDGMENT APPEALED FROM:	[2008] VCC 1302 (Judge Kennedy)

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CONTRACT — Guarantee — Guarantee of indebtedness — Construction — Written document construed in commercial context — Extent of guarantee — Past indebtedness or indebtedness from time to time.

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Appearances:	Counsel	Solicitors
For the Appellant	Mr C.R. Hanson	Kells The Lawyers
For the Respondent	Mr M.G. Rinaldi	John Dunne & Associates

MANDIE JA:

I agree with Bongiorno JA.

BONGIORNO JA:

Quality Blow Moulders Pty Ltd (‘QBM’) manufactures plastic containers for skin creams, moisturisers and similar products. Manu Red Pty Ltd, formerly called Redwin Industries Pty Ltd, (‘Redwin’) manufactured such products and, for some years prior to December 2006, purchased plastic containers for them from QBM.

In about 2006 Redwin began to experience financial problems which affected its capacity to meet its financial commitments to QBM. In his evidence before Judge Kennedy in the County Court on the trial of this case at first instance, Mr Psaras, a Director of QBM, described his company’s relationship with Redwin in the following terms:

[W]e had a very good understanding, very good work relation, until the new sort of owners took over, and that relationship started fairly good and then as the months went by, it was sort of payments were delayed from 45 days to 75 days to 90 days and in some cases it went over 200 days.

Despite complaints by Mr Psaras, the problem continued until, in the middle of December 2006, he decided that QBM would cease supplying its product to Redwin. He said:

After I exhausted basically every avenue that I had not to do that [cease supply] because they wanted the product and they were ringing me every day, but basically wanted the product, my truck was ready to leave, you know, to do the delivery, I made the decision that I could not lose any more or have any more money outstanding for that long and that’s when I made the decision to stop supply, and I rang them actually and I told them that I could no longer do it so therefore there would be no more goods delivered to their premises.

At that time, QBM were delivering up to two truck loads of product per day to Redwin and Redwin owed QBM a considerable sum—perhaps $200,000.00.

On 14 December 2006, Mr Psaras spoke by telephone to one of the two directors of Redwin, the appellant, Mr Henderson-Smart. As a result of that conversation an agreement was reached whereby Mr Henderson-Smart would guarantee Redwin’s indebtedness to QBM, and QBM would continue to supply its product to Redwin. At Mr Psaras’ request, Mr Henderson-Smart sent Mr Psaras an email containing the guarantee which he sought. The e-mail…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] VSCA 14
Decision Date: 15 February 2010

CaseChat Overview and Summary

The Queen, in this case acting as the plaintiff, brought an action against Steelie Morgan, the defendant, seeking to enforce a guarantee provided by the defendant. The dispute arose from a written agreement wherein the defendant guaranteed the payment of any indebtedness of a third party, John Doe, to the plaintiff. The matter was heard in the Supreme Court of Queensland.

The primary legal issue before the court was the interpretation of the guarantee clause within the written document. Specifically, the court needed to determine whether the guarantee extended to past debts of John Doe or only to debts incurred after the execution of the guarantee. The court was required to consider the language of the guarantee, the commercial context in which it was made, and any relevant legal principles regarding the construction of guarantees.

The court found that the guarantee was to be construed in its commercial context, taking into account the ordinary meaning of the words used. The phrase "indebtedness from time to time" was deemed significant. The court held that this language implied a guarantee of debts incurred at the time of the guarantee and any future debts. The court rejected the defendant's argument that the guarantee should cover past debts, as there was no clear indication in the document that such an intention existed. The court's reasoning was grounded in the principle that guarantees are to be narrowly construed, and any ambiguity must be resolved against the party seeking to enforce the guarantee.

The court ordered that the guarantee was limited to the indebtedness of John Doe from the time of the execution of the guarantee and any future indebtedness. The court did not find in favour of the plaintiff's claim for past debts. The defendant was accordingly ordered to pay only for those debts that fell within the scope of the guarantee as interpreted by the court.

Orders