Westpac Banking Corporation v Schwerdtfeger - [2016] QSC 173

SUPREME COURT OF QUEENSLAND

CITATION:

Westpac Banking Corporation v Schwerdtfeger & Anor [2016] QSC 173

PARTIES:

WESTPAC BANKING CORPORATION
ABN 33 007 457 141

(plaintiff)

v
DANIEL CARL SCHWERDTFEGER

(first defendant)
LAURA SCHWERDTFEGER (ALSO KNOWN AS LAURA APRILE OR LAURA CONNOLLY)
(second defendant)

FILE NO:

BS 4240 of 2014

DIVISION:

Trial Division

PROCEEDING:

Trial

DELIVERED ON:

4 August 2016

DELIVERED AT:

Brisbane

HEARING DATES:

21, 22 March 2016; 1, 15, 27 April 2016

JUDGE:

Atkinson J

ORDERS:

1. The defendants are to pay to the plaintiff the sum of $8,580,000, owed as a debt as at 5 March 2014, pursuant to the guarantee and indemnity entered into on 9 July 2008.

2. Unless the defendants file and serve written submissions on costs within 14 days, with any submissions in response by the plaintiff within seven days of receipt of those submissions, the defendants are to pay the plaintiff’s costs on the standard basis.

CATCHWORDS:

GUARANTEE AND INDEMNITY – THE CONTRACT OF GUARANTEE – CONSTRUCTION AND EFFECT – GENERALLY – where the plaintiff entered into a business finance agreement with the corporate trustee of the defendants’ family trust – where the defendants guaranteed the trustee’s obligations under the business finance agreement – where the business finance agreement was subsequently varied on two occasions – where the defendants signed their consent to each variation – whether the variations to the business finance agreement discharged the defendants’ obligations as guarantors

Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; [1987] HCA 15, considered
Holme v Brunskill (1877) 3 QBD 495, applied
Vivlios v Westpac Banking Corporation [2010] QCA 230, cited

COUNSEL:

M J Luchich for the plaintiff

The defendants appeared on their own behalf

SOLICITORS:

Minter Ellison for the plaintiff

The defendants appeared on their own behalf

Each of the defendants entered into a contract guaranteeing payment of debts to the Westpac Banking Corporation. The bank claimed against each defendant payment of $8,580,000 as the amount said to be owing under the contract of guarantee as varied after the debtor had defaulted. The defendants alleged that they were not liable as the contract which was the subject of the guarantee was varied and the guarantee was entered into as a result of misrepresentations by the bank. These reasons explain why those defences are not available and the defendants are liable to pay the amounts they guaranteed.
The defendants executed a guarantee and indemnity in favour of the bank on 9 July 2008. The borrower whose debt was guaranteed was Doxa LM Pty Ltd as trustee for the DLJ & G Family Trust (“Doxa”). The DLJ & G Family Trust is the family trust of the defendants who were married to each other and remain business partners. Each of the defendants is an experienced business person. The guaranteed obligations were said to be:
“all liabilities and obligations of [Doxa] (alone or with others) now or in the future under or in respect of any of the following…

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.

Continue reading Westpac Banking Corporation v Schwerdtfeger

Details

AGLC: Westpac Banking Corporation v Schwerdtfeger [2016] QSC 173
Case: [2016] QSC 173
Decision Date: 4 August 2016

CaseChat Overview and Summary

In the matter of Westpac Banking Corporation v Schwerdtfeger, the plaintiff, a banking corporation, pursued the defendants, who had acted as guarantors in a business finance agreement (BFA), for the recovery of a debt owed under the agreement. The dispute arose from the contention that the guarantors' obligations under the guarantee were discharged by subsequent variations to the BFA, which the guarantors had consented to.

The central legal issue for the court was whether the guarantors' consent to variations of the BFA and the guarantee discharged their obligations under the guarantee. The court had to determine whether the guarantors' consent to the variations effectively nullified any potential discharge of their liability under the guarantee.

The court found that the guarantors' consent to the variations of the BFA and the guarantee was decisive. Citing the decision in Holme v Brunskill, the court held that if a surety consents to an alteration of the contract guaranteed, they remain liable under the guarantee. The court applied this principle to conclude that since the defendants had consented to the variations, they were not discharged from their obligations. Additionally, the court dismissed the defendants' argument that the availability of certain funds was a condition precedent to their obligation to repay the loans, finding that this was not supported by the evidence.

The court ordered the defendants to pay the sum of $8,580,000 owed under the guarantee and further directed that unless the defendants filed written submissions on costs within 14 days, they would be liable for the plaintiff's costs on the standard basis.

Orders

Orders of the court

1. The defendants are to pay to the plaintiff the sum of $8,580,000, owed as a debt as at 5 March 2014, pursuant to the guarantee and indemnity entered into on 9 July 2008.

2. Unless the defendants file and serve written submissions on costs within 14 days, with any submissions in response by the plaintiff within seven days of receipt of those submissions, the defendants are to pay the plaintiff’s costs on the standard basis.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The Court cited with approval the decision of Cotton LJ in Holme v Brunskill:[4]“The true rule in my opinion is, that if there is any agreement between the principals with reference to the contract guaranteed, the surety ought to be consulted, and that if he has not consented to the alteration, although in cases where it is without inquiry evident that the alteration is unsubstantial, or that it cannot be otherwise than beneficial to the surety, the surety may not be discharged; yet, that if it is not self-evident that the alteration is unsubstantial, or one which cannot be prejudicial to the surety, the Court, will not, in an action against the surety, go into an inquiry as to the effect of the alteration, or allow the question, whether the surety is discharged or not, to be determined by the finding of a jury as to the materiality of the alteration or on the question whether it is to the prejudice of the surety, but will hold that in such a case the surety himself must be the sole judge whether or not he will consent to remain liable notwithstanding the alteration, and that if he has not so consented he will be discharged.” (emphasis added)[4] (1877) 3 QBD 495 at 505-506. It follows that if the surety has consented to the alteration it is not discharged.[5][5] See also Vivlios v Westpac Banking Corporation [2010] QCA 230. That is what happened in this case. The guarantors executed Guarantee Variation 1, consenting to the variation of the BFA and the guarantee, before BFA Variation 1 was executed by Doxa; and they executed Guarantee Variation 2, consenting to the variation to the BFA and the guarantee, on the same day the BFA Variation 1 was executed by Doxa. The principle set out in Ankar does not relieve them of liability. It follows that, as the defendants as guarantors consented to the variations, the variations do not prevent them from being bound by the terms of the guarantee as amended. Although not pursued in the defendants’ oral or written submissions, their pleadings allege that throughout their negotiations with the plaintiff’s representatives it was understood by all parties that the development and sale of the Double D property was essential to enable the repayment of all monies loaned under the BFA. The defendants’ Further Amended Defence asserted not only that the plaintiff was aware that the release of Tranche 2 funds was fundamental to Doxa repaying all loans but also that the availability of Tranche 2 funds was a condition precedent to the need to repay Tranche 1. In the Further and Better particulars to their defence, the defendants asserted that oral statements made by the plaintiff’s representatives on 27 separate occasions were to the effect that:“the total loan package to [Doxa] for which the first and second defendants would provide guarantees, consisted of funding, sufficient and adequate to enable the completion of the proposed Currumbin developments, specifically Double D… that would discharge the guarantor’s [sic] obligations.”

CITATION:	Westpac Banking Corporation v Schwerdtfeger & Anor [2016] QSC 173
PARTIES:	WESTPAC BANKING CORPORATION ABN 33 007 457 141 (plaintiff) v DANIEL CARL SCHWERDTFEGER (first defendant) LAURA SCHWERDTFEGER (ALSO KNOWN AS LAURA APRILE OR LAURA CONNOLLY) (second defendant)
FILE NO:	BS 4240 of 2014
DIVISION:	Trial Division
PROCEEDING:	Trial
DELIVERED ON:	4 August 2016
DELIVERED AT:	Brisbane
HEARING DATES:	21, 22 March 2016; 1, 15, 27 April 2016
JUDGE:	Atkinson J
ORDERS:	1. The defendants are to pay to the plaintiff the sum of $8,580,000, owed as a debt as at 5 March 2014, pursuant to the guarantee and indemnity entered into on 9 July 2008. 2. Unless the defendants file and serve written submissions on costs within 14 days, with any submissions in response by the plaintiff within seven days of receipt of those submissions, the defendants are to pay the plaintiff’s costs on the standard basis.
CATCHWORDS:	GUARANTEE AND INDEMNITY – THE CONTRACT OF GUARANTEE – CONSTRUCTION AND EFFECT – GENERALLY – where the plaintiff entered into a business finance agreement with the corporate trustee of the defendants’ family trust – where the defendants guaranteed the trustee’s obligations under the business finance agreement – where the business finance agreement was subsequently varied on two occasions – where the defendants signed their consent to each variation – whether the variations to the business finance agreement discharged the defendants’ obligations as guarantors Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; [1987] HCA 15, considered Holme v Brunskill (1877) 3 QBD 495, applied Vivlios v Westpac Banking Corporation [2010] QCA 230, cited
COUNSEL:	M J Luchich for the plaintiff The defendants appeared on their own behalf
SOLICITORS:	Minter Ellison for the plaintiff The defendants appeared on their own behalf