Watson v Scott

Case [2015] QCA 267

SUPREME COURT OF QUEENSLAND

CITATION:

William James Watson & May Marlene Watson as trustee for the WJ & MM Watson Superannuation Fund v Scott [2015] QCA 267

PARTIES:

WILLIAM JAMES WATSON & MAY MARLENE WATSON AS TRUSTEE FOR THE WJ & MM WATSON SUPERANNUATION FUND
(appellants)
v
CHRISTOPHER ALEXANDER SCOTT
(respondent)

FILE NO/S:

Appeal No 1252 of 2015
DC No 3518 of 2014

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:


District Court at Brisbane – Unreported, 12 January 2015

DELIVERED ON:

8 December 2015

DELIVERED AT:

Brisbane

HEARING DATE:

26 June 2015

JUDGES:

Margaret McMurdo P and Morrison and Philippides JJA
Separate reasons for judgment of McMurdo P; joint reasons of Morrison and Philippides JJA, concurring as to the orders made

ORDERS:

1.   Allow the appeal with costs.

2.   Set aside orders 1 and 3 made on 12 January 2015.

3.   Instead order that judgment be entered for the appellants against the respondent.

4.   The respondent is to pay the appellants’ costs of the proceeding at first instance.

CATCHWORDS:

PROCEDURE – COURTS – QUEENSLAND – SUMMARY JUDGMENT – where the appellants, as trustees for their superannuation fund, employed the respondent as their accountant – where the respondent was a certified practising accountant, a partner in an accounting firm, and at all material times controlled Denbraise Pty Ltd – where the appellants and the respondent entered into a property syndicate agreement whereby the appellants’ superannuation fund advanced money to Denbraise, repayable by a specified date or earlier upon certain events arising – where the appellants or companies associated with them entered into consecutive agreements with the Denbraise in similar terms, approximately annually, each time extending the repayment date, and sometimes increasing the loan amount – where the respondent recommended an insurance clause in the agreement to ensure that should he die or become incapacitated the appellants would be reimbursed the full amount of their advance – where Denbraise defaulted under the agreement – where the appellants subsequently terminated the agreement and demanded repayment of all amounts owing, which Denbraise failed to meet – where the appellants then made demand on the respondent as guarantor – where the coversheet of the agreement stated that the agreement was between the appellants’ superannuation fund as “Lender”, Denbraise as “Borrower”, and the respondent as “Guarantor” – where under the heading “Parties” there was no reference to “Guarantor” – where under the heading “Operative Parts” “Definitions and Interpretation” the term “Guarantor” was defined as meaning, inter alia, the person shown in the Schedule who has guaranteed the borrower’s obligations and performance under the agreement – where in the Schedule to the agreement, the respondent was described as “Guarantor” – where the agreement did not contain a stand alone operative guarantee clause stating that the guarantor was liable to the appellants for Denbraise’s debts – where the Special Condition to the agreement, required the borrower to take out a life assurance and trauma $600,000 policy showing the lender as mortgagees – where the Special…

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AGLC
Watson v Scott [2015] QCA 267
Case
[2015] QCA 267
Decision Date

CaseChat Overview and Summary

In Watson v Scott, the appellants, as trustees of a superannuation fund, sought summary judgment against the respondent, who was their accountant and a certified practising accountant, on the basis of a guarantee or under the Australian Consumer Law. The appellants had advanced money to a company, Denbraise Pty Ltd, controlled by the respondent. The agreement between the parties contained an insurance clause but did not explicitly state that the respondent was liable for Denbraise's debts. The appellants argued that the respondent's obligations extended to guaranteeing Denbraise's performance. The primary judge found that neither the guarantee nor the Consumer Law claim was sufficiently clear to warrant summary judgment, and the appellants appealed this decision.

The legal issues before the court were whether the primary judge erred in refusing summary judgment on the guarantee and Consumer Law claims, and whether the respondent had a real prospect of successfully defending the claim. The court held that the primary judge's decision not to grant summary judgment on the Consumer Law claim was correct, as it required a full consideration of the background and context of the other case brought against the respondent. As for the guarantee, the court noted that the agreement should be construed objectively, based on what a reasonable person would have understood the terms to mean. The court found that the terms of the agreement were not clear enough to conclude that the respondent was liable for Denbraise's debts as a guarantor.

The court allowed the appeal, set aside the orders made by the primary judge, and ordered that judgment be entered for the appellants against the respondent. The respondent was also ordered to pay the appellants' costs of the proceeding at first instance. This decision highlights the importance of clearly defining obligations in a contract and the need for a thorough examination of the context and background of a case when determining liability.

Orders

Orders of the court

1. Allow the appeal with costs.

2. Set aside orders 1 and 3 made on 12 January 2015.

3. Instead order that judgment be entered for the appellants against the respondent.

4. The respondent is to pay the appellants’ costs of the proceeding at first instance.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

As to the appellants’ Consumer Law claim, the respondent emphasises it was limited in the summary judgment application to the claim that the respondent did not disclose to them that he was being sued as guarantor under a similar contract and had pleaded a defence to it. The judge rightly found the respondent had a reasonable basis to defend this claim. The respondent’s position on that claim is entirely consistent with his position in the present case.Conclusion I am unpersuaded that the primary judge erred in refusing summary judgment on the appellants’ Consumer Law claim. It was not possible to reach a concluded view on that matter without fully considering, at the least, details of and the background to the other case brought against the respondent and his defence to it and making findings of fact about what the parties said, knew and did in this case. On the material before the primary court it could not be said under r 292 Uniform Civil Procedure Rules 1999 (Qld) that the respondent had no real prospect of successfully defending the claim so that there was no need for a trial. If that were the appellants’ only ground of appeal, the appeal would be dismissed. The real question in this appeal is whether the respondent is liable for Denbraise’s debt as guarantor under the agreement. In construing the terms of the agreement, this Court must discover the objective intention of the parties as embodied in the words used in the agreement. The parties’ subjective intentions are irrelevant. The meaning of the agreement is to be determined by what a reasonable person would have understood the terms to mean; evidence of pre-contractual negotiations is only admissible if it provides knowledge of surrounding circumstances and relates to objective facts known directly or inferentially to both parties: Byrnes v Kendle.[15]The agreement should be construed in a commercially sensible way although minds may differ as to what equates to “business commonsense”: Maggbury Pty Ltd v Hafele Australia Pty Ltd.[16] In construing a commercial contract a court should know the commercial purpose of the contract. This will usually require knowledge of the background and the context to the transaction.[17] The apparent purpose or object can be inferred from the express and implied terms of the contract and from any admissible evidence of surrounding circumstances.[18] But evidence of surrounding circumstances is admissible to assist in the interpretation of a contract only if the language is ambiguous or susceptible of more than one interpretation; it is not admissible to contradict the language of the contract when it has a plain meaning: Codelfa Construction Pty Ltd v State Rail Authority (NSW)[19] and Western Export Services Inc v Jireh International Pty Ltd.[20] Where the terms of the agreement are unambiguous, extrinsic evidence may inform but cannot contradict the meaning of the contract.[21] Courts in construing an agreement must find the objective meaning of what the parties agreed to, not what they meant to agree to.[22][15][2011] HCA 26; (2011) 243 CLR 253, [59], [98].[16][2001] HCA70; (2001) 210 CLR 181, [43].[17]Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989, 995 – 996; Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, 350; Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323, [109] – [111].[18]Olympic Holdings Pty Ltd v Windslow Corporation Pty Ltd (in liq) [2008] WASCA 80; (2008) 36 WAR 342, [41]; Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323, [112] – [114].[19][1982] HCA 24; (1982) 149 CLR 337, Mason J, 350, 352.[20][2011] HCA 45, [3] – [5].[21]Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323, [116].[22]Byrnes v Kendle [53], [98] – [99]; Red Hill Iron Ltd, [121].

Ratio Decidendi

Legal Principle Established

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