Valstar v Silversmith

Case [2009] NSWCA 80

New South Wales


Court of Appeal


CITATION: Valstar v Silversmith; Valstar v Van Veizen [2009] NSWCA 80
HEARING DATE(S): 6 April 2009
 
JUDGMENT DATE: 
20 April 2009
JUDGMENT OF: McColl JA at 1; Basten JA at 2; Sackville AJA at 3
DECISION: Valstar v Silversmith - 1. Appeal dismissed. 2. Appellant to pay the Respondent's costs of the appeal.
Valstar v Van Veizen - 1. Appeal dismissed. 2. Appellant to pay the Respondent's costs of the appeal.
CATCHWORDS: MORTGAGES - whether guarantors liable to mortgagee as principal debtors - effect of principal debtor clause - GUARANTEE AND INDEMNITY - discharge of surety - whether variation of mortgage discharged surety - whether principal debtor clause excluded discharge
LEGISLATION CITED: Contracts Review Act 1980 (NSW)
Conveyancing Act 1919 (NSW)
Real Property Act 1900 (NSW)
Trade Practices Act 1974 (Cth)
CATEGORY: Principal judgment
CASES CITED: Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; 217 CLR 424
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; 162 CLR 549
Bridgestone Australia Ltd v GAH Engineering Pty Ltd [1997] 2 Qd R 145
Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370
Credit Lyonnais Australia Ltd v Darling (1991) 5 ACSR 703
HAG Import Corpn (Aust) Pty Ltd v Krosnienskie Huty Szkla "Krosno" SA [2005] FCAFC 97
Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288
Re Taylor; Ex parte Century 21 Real Estate Corporation (1995) 130 ALR 723
Stadium Finance Co Ltd v Helm (1965) 109 Sol J 471
The Fletcher Organisation Pty Ltd v Crocus Investments Pty Ltd [1988] 2 Qd R 517
Tito v Waddell (No 2) [1977] 1 Ch 106
Wood Hall Ltd v Pipeline Authority [1979] HCA 21; 141 CLR 443
TEXTS CITED: J O'Donovan and J Phillips, Modern Contract of Guarantee
PARTIES: Nicholas Valstar (appellant)
John Paul Silversmith (respondent)
Nicholas Valstar (appellant)
Augustine Van Veizen (respondent)
FILE NUMBER(S): CA 40158 of 2008; 40159 of 2008
COUNSEL: W G Muddle SC/R E Quickenden (appellant)
N Obrart (respondents)
SOLICITORS: Cutlers The Law Firm (appellant)
Keith Hurst & Associates (respondents)
LOWER COURT JURISDICTION: District Court
LOWER COURT FILE NUMBER(S): DC 1066 of 2008
DC 1074 of 2008
LOWER COURT JUDICIAL OFFICER: Ainslie-Wallace DCJ
LOWER COURT DATE OF DECISION: 9 May 2008






                          CA 40158 of 2008
                          CA 40159 of 2008

                          McCOLL JA
                          BASTEN JA
                          SACKVILLE AJA

                          Monday 20 April 2009

VALSTAR v SILVERSMITH


VALSTAR v VAN VEIZEN

Judgment

1 McCOLL JA: I agree with Sackville AJA.

2 BASTEN JA: I agree with the orders proposed by Sackville AJA and with his Honour’s reasons.

3 SACKVILLE AJA: Two appeals have been brought from a judgment of the District Court entering a verdict for the respondents (the defendants in the proceedings at first instance). The appellant (the plaintiff below) sued each of the respondents in separate proceedings in the District Court for the sum of $240,000, plus interest of $138,568.75. These amounts were said to be due pursuant to…

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AGLC
Valstar v Silversmith [2009] NSWCA 80
Case
[2009] NSWCA 80
Decision Date

CaseChat Overview and Summary

The New South Wales Court of Appeal considered the liability of guarantors to a mortgagee in *Valstar v Silversmith*. The dispute concerned whether the guarantors were liable as principal debtors under the terms of a mortgage, and whether a variation to the mortgage discharged their obligations as sureties.

The court was required to determine two primary legal issues. Firstly, whether a clause within the mortgage, which stated the mortgagor and any guarantor were to be taken as principal debtors, rendered the guarantors liable as principal debtors in their own right, thereby excluding them from the protections afforded to sureties. Secondly, the court had to consider whether any variation to the mortgage agreement operated to discharge the guarantors from their obligations under the deed of guarantee.

The Court of Appeal, with McColl JA, Basten JA, and Sackville AJA all providing reasons, held that the "principal debtor clause" did not exclude the guarantors from the equitable doctrine of discharge of a surety where the principal debt was varied without their consent. The court reasoned that the clause was intended to ensure the mortgagee could pursue guarantors directly, but it did not alter the fundamental relationship of surety and principal debtor in equity. Consequently, the variations to the mortgage, which increased the principal debt, were found to have discharged the guarantors from their liability.

The appeal was dismissed, and the appellant was ordered to pay the respondent's costs of the appeal.

Orders

Orders of the court

Valstar v Silversmith - 1. Appeal dismissed. 2. Appellant to pay the Respondent's costs of the appeal. Valstar v Van Veizen - 1. Appeal dismissed. 2. Appellant to pay the Respondent's costs of the appeal.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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