WA Developments Co Pty Ltd v Roberts - [2008] WASC 237

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: WA DEVELOPMENTS CO PTY LTD -v- ROBERTS [2008] WASC 237

CORAM: MASTER SANDERSON

HEARD: 15 OCTOBER 2008

DELIVERED : 23 OCTOBER 2008

FILE NO/S: CIV 1784 of 2008

BETWEEN: WA DEVELOPMENTS CO PTY LTD
Plaintiff
AND
ROSS PETRY ROBERTS
Defendant

Catchwords:

Summary judgment application by the plaintiff - Turns on own facts

Legislation:

Mercantile Law Amendment Act 1856 (Imp) (WA), s 5
Rules of the Supreme Court 1971 (WA), O 14 r 1

Result:

Judgment entered for plaintiff

Category: B

Representation:

Counsel:

Plaintiff: Mr G H Murphy SC
Defendant: Mr J C Yeldon

Solicitors:

Plaintiff: Clayton Utz
Defendant: Bowen Buchbinder Vilensky

Case(s) referred to in judgment(s):

Yusen Daly Smith International Pty Ltd v Smith [1999] NSWSC 450

MASTER SANDERSON: By way of a chamber summons for summary judgment filed 13 August 2008, the plaintiff seeks an order for final judgment in this action against the defendant pursuant to O 14 r 1 of the Rules of the Supreme Court 1971 (WA).
The application is supported by a number of affidavits. Stephen Richard Quantrill has sworn three affidavits dated 12 August 2008, 25 September 2008 and 3 October 2008 respectively. The plaintiff also relies on an affidavit of Paul Richard Shanahan sworn 14 August 2008 and an affidavit of David Francis Martin sworn 26 September 2008. The defendant relies on two affidavits sworn by him, the first sworn 9 September 2008 and the second sworn 7 October 2008. These two affidavits of the defendant were the subject of a number of objections as to the admissibility of parts of the affidavits. I dealt with those objections at the commencement of the hearing. Most of the material to which objection was taken was not pressed. None of the rulings I made in relation to these affidavits is of such consequence that it need be the subject of reasons.
The plaintiff's claim is made as assignee, and by subrogation, to the benefit of a guarantee (the BankWest guarantee) executed by the defendant in favour of BankWest and dated 25 October 2006. BankWest advanced funds under a facility (the loan facility) which enabled Perth International Motor Sports Pty Ltd (PIM) and Motorsports Industrial Properties (Bunbury) Pty Ltd (MIP) to purchase a 333 ha parcel of land in Picton in the south of Western Australia near Bunbury. The land was purchased by PIM and MIP as tenants in common. The defendant has, at all relevant times, been the sole director of PIM.
The loan facility was secured by, inter alia, the BankWest guarantee and a separate guarantee provided by the plaintiff.
It is common ground that PIM and MIP were parties to a letter of understanding dated 11 October 2006 (the LOU): see annexure RPR4 of the defendant's first affidavit. Pursuant to the LOU, the land was to be developed into an international standard motorsports complex and complementary industrial subdivision. To be more specific, the LOU contemplates that, once the land was purchased, the parties would apply to re‑zone the land for the international standard motorsports complex and industrial uses. They would also subdivide the land. PIM was to construct a racetrack in a timely manner at its expense and using construction equipment provided by PIM. The LOU contemplates that the racetrack would be constructed first and that the other development would follow. It makes provision relating to the risk that the re‑zoning and subdivision would not occur.
It is common ground that an application was made to subdivide the land into two parcels. This was approved subject to conditions. One of the conditions relating to rare flora meant that the land could not be subdivided in accordance with the boundary proposed by PIM and MIP. The conditional approval is the subject of an application to the State Administrative Tribunal in proceedings which remain ongoing.
BankWest advanced additional funds to PIM and MIP under a revised facility on 3 April 2007 (the revised loan facility). It is common ground the BankWest guarantee applied to this additional advance.
The revised loan facility fell due on 31 October 2007. BankWest was willing to extend the revised loan facility. MIP agreed to this course, but PIM (through the defendant) did not agree to execute the documents required to effect the extension. In order to prevent BankWest taking enforcement action, the plaintiff paid BankWest a sum equivalent to the whole amount outstanding under the revised loan facility, together with interest and associated costs. In consideration of this payment, BankWest assigned the debt to the plaintiff together with the benefit of the BankWest guarantee and other securities held by BankWest.
The plaintiff, as legal assignee and with statutory rights of subrogation, sues the defendant under the BankWest guarantee for his share of the total amount paid by the plaintiff to BankWest. All of these matters are set out in the statement of claim. The defence largely admits the statement of claim. Insofar as it does not admit the statement of claim, it is somewhat difficult to follow. Nonetheless, the defendant's submissions, as grounded in the defendant's evidence, are said to provide reasons why judgment ought not be entered.
The first affidavit of Mr Quantrill verifies the essential elements of the plaintiff's cause of action and annexes copies of all the relevant documents. As required, the affidavit states that Mr Quantrill does not believe that the defendant has a defence to the plaintiff's claim. Having satisfied the requirements of the rule, the evidentiary onus then shifts to the defendant. It is for him to establish that there is a serious question to be tried. In doing so, he is entitled to have the court assume a version of the facts that is most favourable to his case. However, the evidence of the defendant is not to be accepted uncritically and must be both cogent and logical.
It was the plaintiff's position that the primary debt remains extant for the purposes of enforcing the BankWest guarantee under the terms of the assignment by virtue of s 5 of the Mercantile Law Amendment Act 1856 (Imp) (WA) (as adopted by Imperial Acts Adopting Ordinance 1867 (WA)). This proposition was not in dispute. Section 5 of the Act appears under the heading 'A surety who discharges the liability to be entitled to assignment of all securities held by the creditor'. The section itself is in the following terms:
Every person who, being surety for the debt of duty of another, or being liable with another for any debt or duty, shall pay such debt or perform such duty, shall be entitled to have assigned to him, or to a trustee for him, every judgment, specialty, or other security which shall be held by the creditor in respect of such debt or duty, whether such judgment, specialty, or other security shall or shall not be deemed at law to have been satisfied by the payment of the debt or performance of the duty, and such person shall be entitled to stand in the place of the creditor, and to use all the remedies, and, if need be, and upon a proper indemnity, to use the name of the creditor, in any action or other proceeding, at law or in equity, in order to obtain from the principal debtor, or any co‑surety, co‑contractor, or co‑debtor, as the case may be, indemnification for the advances made and loss sustained by the person who shall have so paid such debt or performed such duty, and such payment or performance so made by such surety shall not be pleadable in bar of any such action or other proceeding by him:
Provided always, that no co‑surety, co‑contractor, or co‑debtor shall be entitled to recover from any other co‑surety, co‑contractor, or co‑debtor, by the means aforesaid, more than the just proportion to which, as between those parties themselves, such last‑mentioned person shall be justly liable.
This leads directly to one of the arguments put on behalf of the defendant. It was said that as the outstanding moneys had been paid by the plaintiff, the liability under the guarantee was discharged and the plaintiff could not now rely upon the guarantee or its purported assignment by BankWest to claim against the defendant. With respect, that argument runs entirely counter to what the section says. The meaning of the section was explained by Hamilton J in the Supreme Court of New South Wales in Yusen Daly Smith International Pty Ltd v Smith [1999] NSWSC 450. His Honour was in that case dealing with an enactment based on the Mercantile Law Amendment Act, but which had been rewritten in a simpler form. There is no material difference between the Act his Honour was dealing with and the Act relied upon in this case. His Honour said:
When the principal debt has been paid off, a guarantor who has paid the whole or part of it is entitled to be subrogated to the rights of the creditor in respect of the debt and to stand in the shoes of the creditor for the purpose of enforcing any security which the creditor held prior to the payment [17].
That is precisely the position here. The plaintiff has a statutory right to actually rely upon the BankWest guarantee to recover the defendant's portion of the amount paid out. That part of the plaintiff's submissions, with respect, completely misunderstands the meaning and effect of the Act.
In his submissions in opposition to the application, counsel for the defendant says that there are three further issues which require investigation and which render this case one not suitable for summary judgment. Two of these issues appear to be an argument that there were two separate or perhaps two interlocking agreements, the effect of which was a contractual undertaking on the part of the plaintiff that it would not enforce the guarantee given by the defendant to BankWest. The submissions are not put in precisely that way but that, as I understand it, is the effect of the written submissions when taken with the oral submissions.
In the written submissions under the heading 'First Issue', the position is put as follows:
5.Whether by agreement, Roberts was only liable under the guarantee until separate titles were registered over the land (which the parties expected to be a short time) after which time the plaintiff was to solely assume the principal debt. This is Roberts' evidence: Roberts' first affidavit pars 23 to 32.
6.…
7.It is submitted that the letter of understanding dated 11 October 2004 supports Roberts' evidence in particular clauses 3, 5 and 7.
8.For other corroborating evidence that this was the parties' understanding see Roberts' first affidavit (RPR10 - the email of Quantrill dated 12 January 2007); and Roberts' second affidavit (RPR18 - the letter from the plaintiff to Roberts, Quantrill and Ethelston dated 7 May 2007).
Before examining the evidence to which counsel refers, it is worth referring to the terms of the guarantee. The guarantee is clear in its terms and it contains an entire agreement clause. The 'whole of agreement clause' is comprised by cl 1.1(c) of BankWest's 'General Terms for Business Lending - September 2006' - see annexure SQ1 of the first Quantrill affidavit and the letter from BankWest to the directors of MIP, PIM and the plaintiff dated 23 October 2006 which state that the terms and conditions for the loan facility are comprised of BankWest's general terms 'and the attached facility terms'. Further, there is the guarantor's acknowledgment at the end of the facility terms - see annexure SQ1 of the first Quantrill affidavit. Further, cl 10.2(b) of the guarantee and indemnity expressly states that the defendant's obligations as a guarantor are 'valid and binding and enforceable in accordance with the terms' of the BankWest guarantee. The BankWest guarantee also requires the defendant to pay the guaranteed sum without deduction or set‑off: see cl 13.1 of the guarantee. It is to be noted that the relevant documents, including the BankWest guarantee, were signed by the defendant on 25 October 2006.
Turning then to the evidence of the defendant, he says that some time before the signing of the LOU on 11 October 2006, he attended a meeting with Mr Quantrill and officers of BankWest. (There is some confusion about who from BankWest attended this meeting, but for present purposes that is irrelevant.) What can be assumed is at the meeting the defendant and Mr Quantrill were advised that BankWest, if they were to advance funds, required a mortgage over the whole 333 ha of land. The bank officers indicated that once subdivision had taken place, part of the land could be released unencumbered. The defendant says that he told the bank officers that he had no difficulty in providing the guarantee 'because it was only a temporary arrangement'.
There was further discussion about who was to be responsible for repayments on the loan facility. The defendant says that it was his intention that the facility would be for a short term and 'for no more than 12 months at most': see par 26. It is also apparent that the defendant and probably everyone else associated with this business venture anticipated that the subdivision of the land would be a quick and painless process.
Putting the evidence found in pars 23 to 32 of the defendant's affidavit at its highest, it could not possibly be suggested that there was any agreement of the kind alleged between the plaintiff and the defendant. Leaving to one side the question of consideration for any such agreement, the evidence just does not show that there was a meeting of the minds as between the plaintiff on one part and the defendant on the other that the guarantee would not operate against the defendant.
The defendant's submissions then refer to the LOU. Particular reference is made to cl 3, cl 5 and cl 7 of that document. Clause 3 deals with 'Re‑zoning and Reissue of Titles'. Clause 5 deals with 'MIPS Issues' and cl 7 deals with 'Other Considerations'. None of those clauses deal in any way with the guarantee. No mention is made of the guarantee. In my view, it could not possibly be suggested that the LOU represents an agreement of any kind in relation to the guarantee between the plaintiff and the defendant.
Reference is then made to an email sent by Mr Quantrill to the defendant on 12 January 2007: see annexure RPR10. It is clear that the defendant regarded this email as central to its case. For that reason I will quote it in full:
Dear Ross
Thank you for your time today, and for agreeing the boundaries of the subdivision.
I have had a brief discussion with our team on various matters raised.
•We would consider advancing some of the funds due (eg $200,000 as requested). However, without putting you through a lot of major hoops, we would like comfort as to its use - is it possible to indicate how much of the $1 million already advanced has been able to be applied directly towards earthworks etc for the track and how the $200K will be used - ie please provide a short summation of what you expect to be able to achieve. This is to provide us with comfort that there will be a meaningful outcome from the funds. It could be possible to advance this at the end January as requested on my return.
•WE will formally request that Bankwest relieve PIMM of their guarantee obligations in respect of the existing debt.
As you know, we are trying to progress the subdivision application as quickly as possible and this should provide PIMM with clear title in a matter of weeks if we successfully submit our application next week as intended.
Please take care of yourself and I'm looking forward to seeing your announcements and catching up on my return.
Kind regards
Steve
The first point to note about this email is that it contains an error in the second dot point. It was the defendant who had the guarantee obligations to BankWest, not PIM. Secondly, and perhaps more importantly, there is no way that letter could be regarded as some form of agreement between the plaintiff and the defendant to relieve the defendant of his obligations under the guarantee to BankWest. Taken at its best, it might require the plaintiff to approach BankWest about releasing the defendant from his obligations under the guarantee. But that is the full extent of the plaintiff's obligations. The letter cannot represent, or be evidence of, an agreement not to proceed on the guarantee.
Finally, reference is made to a letter from the plaintiff to persons including the defendant on 7 May 2007. This letter appears as RPR18 to the defendant's second affidavit. The letter deals with 'finance arrangements' into the future. The letter itself, while mentioning the guarantees, does not, by its terms or by implication, suggest that the guarantee would not be enforced against the defendant. The letter does nothing to assist the defendant's position.
The second issue is dealt with in pars 9 to 12 of the defendant's submissions. Reference is again made to the email of 12 January 2007 which I have quoted above. The submissions appear to be directed at suggesting that the email embodies an agreement reached between the plaintiff and the defendant that the guarantee will not be enforced. As I have indicated, in my view, no such agreement can possibly arise out of the terms of that letter. It is submitted that by signing certain documents to do with the subdivision, the defendant provided consideration for the agreement not to enforce the guarantee. In my view, the defendant has not established there was any such agreement.
The third issue raises an argument of estoppel. The defendant's submissions put the position in this way:
13.As the right of subrogation is an equitable remedy, whether in the circumstances it would be in all respects unconscionable for the plaintiff to resile from either agreement and enforce on the guarantee, having taken an assignment of the principal debt, when subdivision of the Land has not yet occurred.
14.Further, or alternatively, that an estoppel arises against the plaintiff in that it would be unconscionable, in all the circumstances of the case, that the plaintiff take the benefit of Bankwest's security, when it was a party to these two agreements. That an estoppel grounded upon a representation can defeat a guarantee is an arguable case.
The difficulty with the estoppel argument is that nowhere in the evidence is it suggested that the plaintiff represented to the defendant that it would not act on the guarantee. Moreover, it is difficult to see how the defendant has done anything in reliance upon a representation as alleged, such as to render it unconscionable to enforce the guarantee. The elements of an estoppel are simply not present.
In my view, the defendant does not have a defence to this action. There should be judgment for the plaintiff. I will hear the parties as to the precise form of orders and as to costs.