- Unreported Judgment
SUPREME COURT OF QUEENSLAND
13 March 2002
8 March 2002
Judgment be given for the applicant against the respondent in the sum of $1,073,453.82.
CONTRACT – GUARANTEE – whether guarantee of overdraft facility determined when account was operated in credit – guarantor gave no written notice determining liability as required by guarantee
CONTRACT – GUARANTEE – agreement to release guarantee – no consideration for agreement – whether promise to release guarantee made for the benefit of the guarantor – Property Law Act 1974, ss 55(1), (6)
ESTOPPEL – BY REPRESENTATION – representation by silence – no duty to speak
ESTOPPEL – BY REPRESENTATION – need for clear and unambiguous statement
PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – summary judgment for the plaintiff – UCPR, r 292 – where defences must fail or are fanciful – exercise of discretion
Property Law Act 1974 s 55
UCPR r 292
Australia and New Zealand Banking Group Limited v Barry  2 QdR 12
Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491
Low v Bouverie  3 Ch 82
McPhee v Zarb  QSC 4
Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313
Peldan v Romano  QSC 463
Williams v Frayne (1937) 58 CLR 710
I R Perkins for the plaintiff / applicant
S E Brown for the first defendant / respondent
Mallesons Stephen Jaques for the plaintiff / applicant
Hawthorn Cuppaidge & Badgery for the first defendant / respondent
 MULLINS J: This is an application by the plaintiff (“the applicant”) for judgment pursuant to r 292 of the UCPR against the first defendant (“the respondent”).
 It is not in issue that the respondent executed a guarantee and indemnity dated 23 February 1999 (“the guarantee”) in favour of the applicant in respect of the overdraft facility granted by the applicant to Harts Group Financial Services Pty Ltd (“HGFS”) on 12 February 1999.
 What is in issue is whether the respondent’s guarantee continued until 21 May 2001 when the applicant alleges HGFS was in default under the overdraft facility or whether the applicant is estopped from asserting the continued existence of that guarantee.
 The applicant bears the onus of showing that the conditions for ordering judgment under r 292 of the UCPR have been satisfied: Australia and New Zealand Banking Group Limited v Barry  2 QdR 12, 19, Peldan v Romano  QSC 463 at para . Those conditions are that the respondent has no real prospect of successfully defending all or a part of the applicant’s claim and there is no need for a trial of the claim or the part of the claim. The approach to be taken in considering whether the conditions provided for in r 292 of the UCPR have been satisfied is set out by Wilson J in McPhee v Zarb  QSC 4 as follows:
“They are not simply a reformulation of the test which applied to a plaintiff’s application for summary judgment under the former Supreme Court Rules – namely, whether the defendant had raised a triable issue. The new tests (which apply to both a plaintiff’s application and a defendant’s application) call for a more robust approach by the Court, consistent with the overriding purpose of the UCPR which is –
‘to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense.’
The Court should give summary judgment if (according to whether it is an application by a plaintiff or one by a defendant) the prospects of defending the claim or succeeding on it are so slim as to be fanciful.” (without footnotes)
 According to the affidavits filed on behalf of the applicant, the overdraft facility granted to HGFS on 12 February 1999 pursuant to the letter of offer of that date was for a limit of $1.6m, was subject to annual review on 31 January 2000, continued after 31 January 2000, but was reduced to $1m in July 2000 and ultimately expired on 31 March 2001. There was a holding over clause in the general terms and conditions applicable to the overdraft facility which was to the effect that if the applicant continued to make the facility available to the borrower after its expiry date and the letter of offer had not been extended, amended or replaced, then the terms of the letter of offer continued to apply to the facility, unless the applicant otherwise notified the borrower.
 The bank statements for the account to which the facility applied show that it went into credit on 25 May 2000 when a deposit of $2m was made, but reverted to being operated in debit from 7 July 2000.
 The affidavits filed on behalf of the applicant also refer to the floating of the public company Harts Australasia Limited (“HAL”) on 26 May 2000 and the transfer of the administration of the overdraft facility in the name of HGFS from the applicant’s Sydney office to the applicant’s Brisbane office in mid July 2000 at the request of HAL. That request was made in the letter dated 10 July 2000 from HAL where reference was made to the facility of HGFS of $1.6m with the applicant’s North Sydney Business Banking Centre.
 The applicant’s internal memorandum dated 18 July 2000 in respect of the HAL Group indicates that there had been discussions between officers of the applicant and officers of HAL in relation to the release of Mr Hart’s personal guarantee. This memorandum from Mr Michael Collins, a business banking manager of the applicant’s Brisbane office to another business banking manager at Bayside BBC, stated:
“Regrettably we had advised you verbally yesterday that these facilities would be cancelled and/or reduced to a nominal amount and accordingly Mr Hart’s guarantee would be released which would allow you to delete any assessed reliance on your file for Mr Hart’s personal borrowings. This was to be a temporary funding arrangement pending Harts submitting to us a formal request for their funding needs going forward.
Late yesterday afternoon we were advised by Mr Jim McCullagh of Harts that our strategy set out above would not be appropriate as they will require temporary facilities of approx $1.45 million pending a formal submission being put to the Bank.”
 The applicant sent a letter dated 19 July 2000 to the financial controller of HAL in which it was stated:
“In terms of our discussions with Jim McCullagh, it was agreed that we would then reduce the facility provided to Harts Group Financial Services Pty Ltd down from $1.6 million to $1 million, release Steve Hart’s personal guarantee and as offered by Jim McCullagh take a fresh guarantee from Harts Australasia Ltd. This will be subject to Bank approval and we will advise the fate of this request in due course.”
 According to an internal memorandum of the applicant dated 15 August 2000, the Harts Group intended putting a submission to the applicant for a new facility and the applicant extended existing facilities (including the overdraft of HGFS in the sum of $1m) until 30 September 2000, but the applicant’s senior business banking manager in Brisbane, Mr Michael Fry, noted on that internal memorandum that existing securities, including the respondent’s guarantee, were to remain until review was completed. According to another internal memorandum of the applicant dated 5 December 2000, that review had not yet taken place, because of the failure of the Harts Group to provide financial statements and the existing facilities were extended until 31 January 2001.
 The respondent relied on his affidavits filed on 12 and 25 February 2002 and foreshadowed a further amended defence (“the defence”) which was Exhibit CAB1 to the affidavit of his solicitor, Ms C A Brewer, filed by leave on 8 March 2002. The following defences were raised:
(a) that the guarantee was determined upon payment of the balance of the overdraft facility of HGFS in or about May 2000;
(b) alternatively, the applicant is estopped from relying on the respondent’s guarantee after the HGFS overdraft was paid out in or about May 2000;
(c) alternatively, the guarantee was discharged by agreement on or about October 2000;
(d) alternatively, the applicant is estopped from relying on the guarantee provided by the respondent after HAL provided security for the HGFS overdraft by way of guarantee in or about September or October 2000.
 With respect to the defence that the guarantee was determined in May 2000 upon payment of the outstanding debt of HGFS, the particulars provided to support that allegation in para 8(b) of the defence are based on para 9 of the respondent’s affidavit filed on 12 February 2002:
“9Prior to the time that the float proceeds were paid into HGFS’s account to clear the overdraft, I had a conversation with Paul Anderson, a Regional Business Manager of the plaintiff and the person I was dealing with on behalf of the plaintiff at the time. This discussion arose when I told him that we intended to pay out the debts of the Harts Group and to operate on a credit basis. I assumed that my obligations pursuant to my guarantee came to an end when those debts were paid out. I told him that should there by (sic) any future borrowings by the Harts Group, I would not be personally guaranteeing any such future debt.”
That was supplemented by the respondent’s affidavit filed on 25 February 2002:
“2In relation to paragraph 9 of my previous affidavit, Paul Anderson did not indicate to me that I needed to take any further steps including giving written notice to the bank in order to determine the guarantee.
3Had I been told by Paul Anderson that I needed to give written notice to determine the guarantee, I would have given written notice at the time the payment of $2 million in May 2000 was made to HGFS’s account.”
 Clause 8 of the guarantee provided:
“8.A Guarantor may determine this Guarantee as to further liability by:-
(a)giving written notice of his desire to determine his liability under this Guarantee at each Branch of the Bank where any of the Guarantors conduct an account; and
(b)making payment in full of an amount equal to the moneys hereby secured at the time of delivery of such notice (having regard in particular to the operation of paragraphs (f) and (g) of the definition of “the moneys hereby secured”) up to the limit of the guarantee, or provision for such payment.”
 The conversation alleged by the respondent to constitute the determination of the guarantee is insufficient to do so in terms of clause 8 of the guarantee which precludes the guarantee from being revoked or withdrawn, other than in accordance with the terms of clause 8. Ms Brown of counsel on behalf of the respondent therefore submitted that it was arguable that the applicant by the conduct of Mr Anderson had waived the requirement of the written notice required under clause 8 of the guarantee. That has not been pleaded. In any case, it is not supported by the respondent’s own statements, as to what the subject matter of his conversation was with Mr Anderson about his future intentions of how the Harts Group would operate its accounts. Additionally, the material does not support the conclusion that the overdraft facility was brought to an end, when the relevant account of HGFS was conducted in credit between May and July 2000. It does not follow from the conducting of that account in credit, that the overdraft facility was determined. This defence cannot be successful.
 With respect to the defence of estoppel arising out of the same conversation between the respondent and Mr Anderson (which is pleaded in paras 15 to 19 of the defence), the applicant submits that there was no duty on Mr Anderson to speak and therefore an estoppel by silence cannot arise, relying on Williams v Frayne (1937) 58 CLR 710, 736. There is no suggestion made by the respondent that he sought advice from Mr Anderson as to what steps should be taken to have the guarantee released. The respondent made an assumption that his obligations under the guarantee came to an end when the account conducted by HGFS went into credit, but does not suggest that he articulated that assumption to Mr Anderson. In these circumstances, it could not be expected that Mr Anderson would bring to the attention of the respondent the mistake which the respondent had made in making this assumption. There was therefore no duty on Mr Anderson to speak. As a matter of law, this defence must also fail.
 With respect to the allegation that the guarantee was discharged by agreement in October 2000 which is pleaded in paras 9 to 11 of the defence, paras 10 to 12 of the respondent’s affidavit filed on 12 February 2002 are relevant:
“10At the time the further overdraft was being sought I also told Jim McCullagh, who was then the financial controller of the Harts Group and was negotiating with the Bank on behalf of Harts, that I would not be providing a personal guarantee for any Harts debts. He told me and I verily believed that he told this to the Bank. It was my understanding from what was told to me by Jim McCullagh, that the bank had agreed that my personal guarantee was released and that they would take a guarantee from HAL for any future funding that may be provided to HGFS.
11Approximately in September or October 2000, Messrs Paul Anderson and Michael Fry on behalf of the plaintiff came to my office. Michael Collins may have been with them but I am not sure. They had with them the relevant papers to sign for the new security arrangements. This included a guarantee from HAL, as security for the HFGS overdraft. I recall signing security documents on behalf of HAL at that time.
12At this meeting the topic of my personal guarantee was brought up. Paul Anderson confirmed to me that my personal guarantee was not required. He told me words to the effect that they did not need a personal guarantee from me because HAL was a listed company. Given the previous negotiations that had taken place with the Bank, I understood that this guarantee was the security for the HGFS overdraft in place of any personal guarantee previously given by me.”
 The reference in para 10 of the respondent’s affidavit to “the time the further overdraft was being sought” appears to be referring to the July 2000 negotiations.
 The applicant relies on the lack of consideration for any such alleged agreement on the basis that by clause 7 of the guarantee, whilst any moneys were owing or outstanding to the applicant which were caught by the guarantee, the respondent waived in favour of the applicant any rights which he had against the creditor. Mr Perkins of counsel on behalf of the applicant therefore submitted that there was no consideration moving from the respondent to obtain the applicant’s promise to release the guarantee. See J Phillips & J O’Donovan The Modern Contract of Guarantee (3rd ed) at p 429.
 The respondent seeks to meet the claim of no consideration by arguing that if the agreement was between HAL and the applicant, the respondent is able to rely on s 55 of the Property Law Act 1974, in order to enforce the alleged promise made by the applicant to HAL to release the guarantee of the respondent. The difficulty with that submission is that the requirement of s 55(1) that the promise to do an act be for the benefit of the beneficiary (which in this case would mean the promise alleged to have been made to HAL by the applicant to release the guarantee being for the benefit of the respondent) cannot be met. The definition of “promise” in s 55(6) requires that it is a promise which creates or appears to be intended to create a duty enforceable by the beneficiary. As was stated by Brennan CJ in Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313, 329:
“The phrase ‘for the benefit of a beneficiary’ is descriptive of the promised act.”
 The agreement alleged by the respondent is in terms that the applicant agreed with HAL that HAL would provide security for the HGFS overdraft facility. HGFS was a subsidiary of HAL. The benefit of any promise by HAL to provide a guarantee in respect of the facility granted by the applicant to HGFS could have been only for the benefit of HGFS. It follows that the respondent cannot show that the promise alleged against the applicant in favour of HAL was of a type which satisfied s 55(1) of the Property Law Act 1974.
 Without resort to reliance on s 55 of the Property Law Act 1974, the respondent cannot show that consideration passed from him to the applicant for the agreement alleged by him against the applicant that it would release the guarantee. As a matter of law, this defence must also fail.
 Although it is not necessary in evaluating this defence to consider the submissions made on behalf of the applicant in respect of the factual issues raised by this defence, it is appropriate to note some of those submissions, as they may be relevant to the exercise of the discretion conferred by r 292 of the UCPR.
 The letter from the applicant to HAL dated 19 July 2000 is inconsistent with the agreement alleged by the respondent against the applicant and the applicant’s internal memoranda do not support the alleged agreement. As HAL and HGFS were placed in liquidation in October 2001, the respondent has been unable to locate a copy of the guarantee which he alleges he signed on behalf of HAL in September or October 2000 in pursuance of the alleged agreement. A notice of non party disclosure issued at the request of the respondent against the liquidators of the Harts Group of companies and served on 22 February 2002 seeking all documents in relation to any security provided to the applicant dated between March and December 2000 and all correspondence between the applicant and HAL, HGFS or the Harts Group between May 2000 and May 2001 had not resulted in any documents being produced at the time of the hearing of this application.
 Mr P R Hewett, the officer of the applicant who has the responsibility of managing the recovery of amounts owed by the respondent and his related entities to the applicant, swore an affidavit on 5 March 2002 in which he stated that no guarantee had been provided by HAL to the applicant in relation to HGFS and that the only security provided by HAL to the applicant was a debenture executed on 30 March 2000 and a guarantee and indemnity by the respondent executed on the same date in respect of another overdraft facility in the sum of $400,000 provided by the applicant to HAL. Mr Hewett stated in para 8 of his affidavit:
“8I have searched the Bank’s books and records and state that there is no guarantee and indemnity held by the Bank executed by the first defendant or Harts Australasia in September or October 2000 in relation to the debts of HGFS.”
 It was submitted on behalf of the respondent that little reliance should be placed on the statement made by Mr Hewett as to his search of the applicant’s records in relation to a guarantee executed by HAL in respect of the security for the HGFS overdraft. The submission was made on the basis that it was the respondent’s case that the applicant’s officers, Mr Paul Anderson, Mr Michael Fry and, possibly, Mr Michael Collins attended on the respondent in September or October 2000 in order to obtain the execution of security documents on behalf of HAL and that those officers have not provided affidavits dealing with what the respondent alleged occurred when he signed a guarantee in September or October 2000. In view of the failure of a search of the applicant’s records to disclose any such guarantee and the fact that no documentary evidence relating to such guarantee has been able to be identified by the respondent, the fact that the applicant has not obtained affidavits from its officers referred to by the respondent in his affidavit does not detract from Mr Hewett’s evidence that his search of the applicant’s records has failed to locate that guarantee.
 With respect to the defence of estoppel raised against the applicant on the basis of the allegation that HAL provided a guarantee for the HGFS overdraft in or about September or October 2000 (which is pleaded in paras 20 to 25 of the defence), the applicant submits that the respondent cannot draw out of Mr Anderson’s alleged statement the representation which is pleaded as the basis for the estoppel. The applicant submits that the statement of Mr Anderson deposed to by the respondent in para 12 of his affidavit filed on 12 February 2002 is a reference to the fact that the respondent did not then have to give a personal guarantee in the context of where he was signing one on behalf of HAL and that the statement alleged against Mr Anderson does not go so far as to say that the respondent’s existing personal guarantee would be released. The applicant therefore relies on the conduct alleged against the applicant not being in “clear and unambiguous terms” to give rise to an estoppel, relying on Low v Bouverie  3 Ch 82, 106.
 This alternative defence is premised on the fact that the guarantee remained in existence at the time of the meeting in September or October 2000. The respondent has obviously been careful in setting out in para 12 of his affidavit filed on 12 February 2002 the exact terms of what he recalled was stated to him by Mr Anderson. The respondent does not specifically identify any discussion relating to the guarantee. The opening words of para 12, “At this meeting the topic of my personal guarantee was brought up” are equivocal. It is not clear whether it was a discussion about the guarantee or any personal guarantee from the respondent. The respondent does not disclose what question he asked of Mr Anderson which resulted in the confirmation to the respondent that his personal guarantee was not required. The effective words attributed by the respondent to Mr Anderson are more consistent with reference being made to no additional requirement of a personal guarantee from the respondent rather than a reference to the guarantee. Again, the respondent deposes to an assumption which he states he made about what guarantee was being referred to by Mr Anderson, but does not state that he articulated that assumption to Mr Anderson.
 Against the background of the guarantee’s continuing in existence, there is substance in the submission of the applicant that the statement alleged to have been made by Mr Anderson that a personal guarantee from the respondent was not required because HAL was a listed company when the respondent alleges he was signing a guarantee on behalf of HAL does not logically found a representation that the respondent’s existing guarantee had been released or would not be relied on by the applicant.
 The evidence of the respondent as to what statement was made to him orally by Mr Anderson is critical to the establishment of the representation alleged to have been relied on by the respondent. Paragraph 12 of the respondent’s affidavit filed on 12 February 2002 does not disclose a clear and unequivocal representation which could found an estoppel. The expression “fanciful” is appropriate to this defence. It does not give the respondent a real prospect of defending the applicant’s claim.
 Apart from these defences of alleged agreements or estoppels, the respondent also relies on defects which he alleges relate to the demand given by the applicant for payment of the amount claimed under the guarantee. The notice of demand was dated 24 May 2001 and was addressed to the respondent at an address which is that which appears in his affidavits filed on 12 and 25 February 2002 and which is not disputed to be an appropriate address for service pursuant to clause 13 of the guarantee. Demand was made for the sum of $1,004,850.57 comprising principal of $998,051.35 and interest of $6,799.22. The notice of demand which was on the applicant’s letterhead was shown as being signed on behalf of the applicant by the corporate lawyer in the applicant’s legal services section. The demand required immediate payment of the sum of $1,004,850.57.
 Clause 13 of the guarantee provided:
“13.Any notice or certificate given to or demand to be made upon a Guarantor or any appointment to be made by or on behalf of the Bank hereunder shall be deemed to be duly given or made if the same be in writing and be signed by any person purporting to be any class of Manager or Accountant for the time being of the Bank and if the same be left at or sent through the post in a prepaid letter addressed to a Guarantor at the usual place of abode or business of the Guarantor in the said State or elsewhere last known as such to the person signing such notice, certificate or demand or delivered personally to a Guarantor and any such mode of service shall in all respects be valid and effectual notwithstanding that at the date of such service a Guarantor may be lunatic, dead, bankrupt or have assigned his estate or be absent from the said State, or being a company it should be in receivership or liquidation, whether voluntary or compulsory, and notwithstanding any other matter or event whatsoever. Any such notice, certificate or demand if sent through the post as aforesaid shall be deemed to have been received by a Guarantor at the time when the letter containing such notice, certificate or demand would in the ordinary course of post have been delivered.”
 The respondent submits that the demand did not provide a reasonable time within which the respondent could comply with the demand, does not appear to have correctly stated the basis upon which the moneys were owing at the time, nor was the amount said to be owing in accordance with the demand of the applicant and was not signed by an accountant or manager of the applicant.
 The respondent relies on Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491 to support his first attack on the demand. The Court stated at 502 – 503:
“However, it is now a well established principle of law that a debtor required to pay a debt payable on demand must be allowed a reasonable time to meet the demand. … This does not mean that the notice calling up the debt is invalid unless it requires payment ‘within a reasonable time’. It means no more than that the debtor must be allowed a reasonable opportunity to pay before it can be said that he has failed to comply with the demand. A notice requiring payment forthwith will be regarded as allowing the debtor a reasonable time within which to comply. Until a reasonable time in the sense discussed has elapsed the creditor cannot enforce his security.”
 The demand was despatched on 24 May 2001. It does not appear that the applicant sought to enforce the claim for immediate payment until the issue of this proceeding on 18 October 2001. In those circumstances the respondent has had more than a reasonable time within which to comply with the demand. This is on the basis that clause 13 of the guarantee deemed the demand which was served by pre-paid post to have been served, when it would have been delivered in the ordinary course of the post. The respondent does depose to not having received the demand. Mr Hewett has deposed to there being no record of the demand being returned to the applicant as undelivered or unopened. There is no basis for not giving effect to the deeming provision in clause 13 of the guarantee as to when the demand was served on the respondent.
 The demand sufficiently identified the basis of the claim made against the respondent by the applicant and identified the guarantee and that the demand related to the debts of HGFS which were secured by the guarantee.
 Under clause 13 of the guarantee the demand has to be signed by a manager or accountant of the applicant for the purpose of obtaining the benefit of the deeming provision that the demand has been duly given or made. The signing of the demand by a manager or accountant of the applicant is not made a condition of the validity of the demand. There can be no serious challenge to the authority of the corporate lawyer of the applicant to sign the demand which was despatched on the applicant’s letterhead and shown as being signed on behalf of the applicant.
 There is no substance in any of the arguments addressed by the respondent to the form of the notice of demand.
 Each of the defences raised by the respondent in opposing this application for summary judgment has no real prospect of success and does not warrant a trial of the proceeding with the attendant expense and delay for both parties. It is still a matter of discretion as to whether or not judgment should be entered for the applicant against the respondent. The applicant’s claim based on the guarantee is straightforward. The overall impression left by the respondent’s affidavits is that the respondent has no real defence to the applicant’s claim, but seeks to have the benefit of further time and opportunity in relation to defending the claim. When the substantive defences relied on by the respondent are eliminated, there is nothing in the respondent’s material which supports exercising the discretion against entering judgment. It is therefore appropriate that judgment be given for the applicant against the respondent for all of the applicant’s claim.
 Mr Hewett in his affidavit filed by leave on 8 March 2002 certified that the amount owing by the respondent to the applicant as at 8 March 2002 pursuant to the guarantee was $1,073,453.82. I will therefore give judgment for that amount and give leave for the applicant to seek an additional amount for interest between 8 March and 13 March 2002.
 In the application for summary judgment, the applicant sought payment of its costs on an indemnity basis. Subject to hearing submissions from the parties, the order for costs which I would be disposed to make is that the respondent pay the applicant’s costs of the application and this proceeding to be assessed.
 The order which I will make at this stage is that judgment be given for the applicant against the respondent in the sum of $1,073,453.82.
- Published Case Name:
National Australia Bank Ltd v Hart & Ors
- Shortened Case Name:
National Australia Bank Ltd v Hart
 QSC 51
13 Mar 2002
No Litigation History