Exit Distraction Free Reading Mode
- Unreported Judgment
Smith v Novena Leasing Pty Ltd QCATA 33
Smith & Anor v Novena Leasing Pty Ltd (as trustee for) The Elliott Property Trust  QCATA 33
Robert Mervyn Smith and Wendy Eve Smith
Novena Leasing Pty Ltd (as trustee for The Elliott Property Trust
18 February 2015
Dr J R Forbes, Member
3 March 2015
1 The time for service of the appellants’ submissions upon the respondent is extended to 4.37 pm on 10 October 2014.
2 Leave to appeal is refused.
APPLICATION FOR LEAVE TO APPEAL – MINOR CIVIL DISPUTE – where order to serve appellant’s submissions on respondent subject to self-executing order – where service 37 minutes late – whether time for service may be extended – whether the imposition of a self-executing order requires a hearing – where lease with performance guarantee – where proceeds of guarantee applied to remedy lessor’s failure to repair – where legal costs payable under lease – whether resort to guarantees must be preceded by notice to lessee and its guarantors – whether lessor’s right to allocate proceeds of guarantees to several debts is unfettered – whether claim for failure to repair bona fide
Queensland Civil and Administrative Tribunal Act 2009 (Qld) ss 3(b), 4(c), 28(3)(d), 32, 61, 62, 142
Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175
Bachmann Pty Ltd v BHP Power New Zealand Ltd  1 VR 420;  VSCA 40
Bateman Project Engineering Pty Ltd & Ors v Resolute Ltd & Ors  WASC 283
Brakatselos v ABL Nominees Pty Ltd (2012) 36 VR 490;  VSCA 231
Cargill International SA v Bangladesh Sugar and Food Industries Corporation  1 WLR 461
Chandra v Queensland Building and Construction Commission  QCA 335
Cicek v Estate of the late Mark Solomon  NSWCA 278
Clayton’s Case (1816) 35 ER 781
Clough Engineering Limited v Oil and Natural Gas Corporation Limited (2008) 249 ALR 458;  FCAFC 136
Composite Buyers v JC Taylor Constructions  2 VR 311
FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268
FFE Minerals Australia Pty Ltd v Vanadium Australia Pty Ltd  WASC 1
Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd  Vic SC 447
Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd  3 VR 812
Freeman v Rabinov  VR 539
Grassby v The Queen (1989) 168 CLR 1
Hong v Liew  FCA 40
Hughes Bros Pty Ltd v Telede Pty Ltd (1989) 7 BCL 210
Jokai Tea Holdings Pty Ltd, Re  1 All ER 60
Jorgenson v Slater & Gordon Pty Ltd  VSCA 110
MTQ Holdings Pty Ltd v Lynch  WASC 49
Pearson Bridge (NSW) Pty Ltd v State Rail Authority of New South Wales  1 Aust Const LR 81
Pereira v Beanlands  3 All ER 528
Queensland Building Services Authority v Queensland Civil and Administrative Tribunal & Anor  QSC 167
Rintoul v State of Queensland & Ors (No 2)  QCAT 332
Secretary to the Department of Premier and Cabinet v Hulls  3 VR 331
Thiess Pty Ltd v Industrial Magistrate Elizabeth Hall & Ors  QSC 130
Walsh, Re; Ex parte Deputy Commissioner of Taxation (1982) 60 FLR 355
Wood Hall Ltd v The Pipeline Authority (1979) 141 CLR 443
APPEARANCES and REPRESENTATION (if any):
This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).
REASONS FOR DECISION
May Time in a “Guillotine” Order be Extended?
- The first question is whether compliance that is 37 minutes overdue is irretrievably caught by a self-executing order, or whether the maxim lex non curat de minimis may be applied.
- After the present application for leave was filed, standard, “on the papers” directions were made. In particular, the appellants (“the Smiths”) were ordered to file and serve on the respondent (“Novena”) all written submissions in support of their application (“the Smith submissions”) by 4.00 pm on 10 October 2014.
- It was further ordered that if they failed to comply with that direction the application [for leave would be] dismissed without further order.
- The Smiths’ submissions were filed in the registry on 10 October 2014; the precise time of filing is unknown. According to registry staff the material was filed “over the counter”, so that no exact time of receipt is available. However, it is the time of service, not the time of filing that is in issue.
- The Smiths’ submissions were served on Novena by means of two emails, so that precise times of delivery are readily ascertainable. Copies of the emails are in evidence; they show that the first was sent at 4.36 pm on 10 October 2014, and the second at 4.37 pm the same day.
- Accordingly Novena submits that the Smiths’ appeal has been extinguished by the self-executing order, that the defective service is irremediable, and this suffices to dispose of the appeal in its favour.
- Undoubtedly, self-executing orders serve the ideals of economical, informal and quick resolution of disputes, and reasonable availability of the Tribunal to other litigants. But by the same token one may ask whether procedural objections so precious and technical as this one must inevitably preclude the fair, just [and] informal consideration of the merits of an application, consistent with achieving justice.
- The QCAT Act does not confer an express power to extend time to comply with a self-executing order after it has taken effect. But if self-executing orders are merely matters of procedure (as authority indicates)an extension of time in this case may be within the widely-expressed discretion to vary procedural requirements, in section 61 of the Act.
- The fact that the Tribunal may exercise that power on its own initiative suggests that it is not to be interpreted narrowly. It enables the Tribunal to waive compliance with a procedural requirement imposed by or under the Act, an enabling Act, or the QCAT rules. Pre-hearing directions are made under section 62. Provided that procedural relaxation will not cause prejudice or detriment to an opponent the power may be exercised even if the time for compliance has passed. Indeed, the discretion is wide.
- It has repeatedly been held that courts have a wide discretion to set aside or vary a self-executing order if its enforcement would cause injustice. As a statutory authority, the Tribunal does not have inherent powers, but it does have implied powers that are reasonably necessary to give effect to its explicit statutory jurisdiction. In my view, a guarded discretion to relax “guillotine” orders, or their effects, may reasonably be implied in section 61, in the light of sections 3(b), 4(c) and 28(3)(d).
- This is not to suggest that such a power should be lightly used. No doubt the Tribunal has no wish to see its self-executing orders lose their potency. The authorities that support a degree of flexibility emphasise that the case for leniency must be compelling:
The court should not be astute to find excuses ... since obedience to the orders of the court is the foundation on which its authority is founded. But, if a party can clearly demonstrate that there was no intention to ignore or flout the order, and that the failure to obey was due to extraneous circumstances, such failure to obey ... does not disentitle the litigant to rights that he would otherwise have enjoyed.
- (a)the circumstances in which a self-executing order was made;
- (b)the reasons for non-compliance with it;
- (c)the prejudice to the defaulting party if relief were not granted;
- (d)the prejudice to the innocent party if relief were granted.
- In several cases where relief was refused, the supplicant had a significant history of non-compliance. This is not the case here, and there can be no serious suggestion of detriment to Novena if an extension of 37 minutes is allowed. (The mere fact that the proceedings will revive and continue if relief is granted is not a relevant detriment; if it were, relief could never be granted.) The delay in service – substantially less than one hour in a time frame of 30 days – is so miniscule as to make this case exceptional, indeed compelling. An extension of 37 minutes will enhance rather than prejudice the authority of the Tribunal.
- Therefore, in the interests of justice, and lest the Tribunal be seen as excessively legalistic, I shall extend the time for service of the Smiths’ submissions on Novena to 4.37 pm on 10 October 2014. I turn now to the merits of the application.
The Substantive Application
- It is common ground that the Smiths executed guarantees and indemnities to secure performance of a lease of premises at Brendale, Brisbane, by Ronald George Elliott and Patricia Olive Elliott to the Smiths’ company, Zanwave. (The respondent Novena is trustee of the Elliott Property Trust). The guarantees are in these terms:
[The Smiths] do hereby jointly and severally unconditionally guarantee to the Lessor the payment of the rent and other moneys payable to the Lessor in terms of the said lease, and the due and punctual performance by [Zanwave] of the terms and covenants and obligations on the part of [Zanwave] under the said lease and ... this shall be a continuing guarantee ... and further [the Smiths] will indemnify and keep indemnified the Lessor against any loss or damage which the Lessor may at any time hereafter suffer or sustain arising out of any breach or default by [Zanwave] in the performance of ... the terms ... on the part of [Zanwave] under the said lease.
- Novena claims that it spent more than $44,000 in repairing Zanwave’s breaches of the covenant to repair (“the make good expenses”).
- It is common ground that, by order of the Magistrates Court, legal costs amounting to $29,993 (“the legal costs”) are or were payable by Zanwave to Novena.
- Zanwave is insolvent.
- Novena says that it lawfully applied the full amount of the guarantees in to the make-good expenses, and that the Smiths remain liable for the legal costs – the amount claimed in these proceedings.
- The Smiths deny liability on the ground that the proceeds of the guarantees are properly attributable to the legal costs, not to the cost of repairs, and that accordingly this action must fail.
- Upon trial, the Tribunal found in favour of Novena and ordered the Smiths to pay it $25,355.60, including costs.
The Guarantees: Novena’s Rights
- This case depends upon the true construction of Clause 3 of the subject lease, which, by virtue of the guarantee and indemnity noted above, applies to the Smiths as well as Zanwave:
3.1.1 The Lessee shall, on or before the commencement of the lease, deliver to the Lessor an unconditional signed and stamped banker’s undertaking ... in favour of the Lessor ... in such form as the Lessor may require (“the Bank Guarantee”).
3.2.1 The Bank Guarantee shall be retained for the benefit of the Lessor during the term on this lease (and any extension thereof) and shall be released 60 days after the Lessee vacates ... provided that the Lessee shall have observed all the terms and conditions hereof and the premises are undamaged ...
3.3.1 The Lessor shall be entitled to exercise its rights under the Bank Guarantee (subject to clause 3.1 and 3.2 above) for any moneys outstanding under the provisions of the lease and for or in respect of any breach of covenant or other failure ... provided that such action by the Lessor shall not limit ... rights the Lessor may have for such failure by the Lessee by virtue of any other provision herein contained.
- The learned Adjudicator held that notice of resort to the guarantees was not required, and that the allocation of proceeds of the guarantees was at Novena’s discretion:
[C]lause 3.3.1 is the provision in the lease which relates to the right to use the bank guarantee and there’s no restriction upon it ... [T]he lessee has signed an agreement which says that the lessor can do this. That’s what clause 3.3.1 says.
- The Smiths now seek leave to appeal. The grounds of appeal, omitting repetitions, may be summarised as follows: (a) Novena’s failure to give notice vitiates the claim (“the notice issue”); (b) the proceeds of the guarantees should properly have been allocated to pay the legal costs (“the allocation issue”); and (c) the “make good” claim is not bona fide.
- The submissions in aid of the appeal do not closely relate to the authorities appended to them. It is not always clear that they assist the appeal. None of those authorities is directly concerned with either a notice issue or an allocation issue. But several tend to support the Adjudicator’s approach to Clause 3.3.1.
The Notice Issue
- Suffice it to say that the notice issue is no longer alive. Paragraph 25 of the appellants’ submissions reads:
The Tribunal member made a finding that pursuant to the lease there was no obligation on [Novena] to notify Zanwave of a claim on the Bank Guarantee. That is correct as a matter of law in relation to merely giving notice of the making [of] the call upon the Bank Guarantee.
- That concession apart, the authorities are consistent with the Tribunal’s approach to the notice issue. Those authorities, and others, are considered below. Bateman Project Engineering Pty Ltd & Ors v Resolute Ltd & Ors does not assist us, because the agreement in that case contained an explicit notice condition.
- The Adjudicator’s decision on the notice issue is correct.
The Allocation Issue
- As noted above, none of the appellants’ authorities involves an allocation issue.
- The appellants refer to common law presumptions that apply in the absence of agreement to the contrary, but Novena contends, and the Tribunal found, that the subject agreement overrides them.
- Several cases cited deal with the bona fide issue in particular. They also throw light on the interpretation of unconditional guarantees and covenants such as Clause 3.3.1, that is pertinent to the notice and allocation issues.
- The appellants bear the onus of proving that Novena’s allocation of proceeds of the guarantees is conditioned by some provision in the contract. [T]he court will interfere only where [a] contractual fetter is clearly shown. The High Court’s decision in Wood Hall Ltd v The Pipeline Authority is described as a seminal case; there Stephen J declared that unconditional guarantees are not by any process of implication or construction, to be deprived of the unqualified operation which [their] express words dictate.
- The Victorian Court of Appeal, in Bachmann Pty Ltd v BHP Power New Zealand Ltd, approves American authority that speaks of an unconditional guarantee as an unfettered immediate remedy upon occurrence of the triggering event. The same court endorses the textwriter Hudson’s view that such sureties give the beneficiary a right to an unqualified transfer ... provided only that there is a bona fide dispute or claim. Bachmann, as well as Wood Hall, supports a liberal interpretation by appealing to commercial realities: Once a document of this character ceases to be ... instantly and unconditionally convertible to cash, it necessarily loses acceptability.
- The same view enlivens the full Federal Court’s judgment in Clough Engineering Limited v Oil and Natural Gas Corporation Limited, where the Hudson opinion relied on in Bachmann is again endorsed: It follows that clear words will be required to support a construction that inhibits a beneficiary from calling on a performance guarantee where a breach is alleged in good faith.
- The agreement in Clough gave the beneficiary an unqualified right to invoke the ... guarantee ... in the event of the contractor failing to honour any of [its] commitments. The banker’s undertaking in Clough promised to pay [the beneficiary] without any demur, reservation, contest or protest, and without any reference to the [guarantor] ... notwithstanding any dispute pending. In the present case the banker unconditionally undertakes to pay on demand ... by ... [Novena] without reference to the customer and regardless of any notice from the customer to the bank not to pay.
- The present case, with respect to limitations to Novena’s use of the guarantees, is indistinguishable from the decisions in Bachmann, Wood Hall and Clough, and the commercial realism they espouse. In my respectful view the Adjudicator correctly held that the subject agreement does not require notice to Zanwave or to the guarantors before Novena resorts to its security, nor does it prevent Novena from applying the proceeds to the “make good” expenses, leaving the legal costs unpaid.
The Good Faith Issue
- Finally, the Smiths contend that Novena’s “make good” claim is not made in good faith, or, not to put too fine a point on it, it is fraudulent. (They do not argue that there can be no resort to the guarantees without a conclusive judgment, arbitration or agreement – a view that is rejected in Bachmann, Wood Hall, and Clough.)
- An allegation of bad faith requires particulars and cogent proofs, which are not forthcoming here. On this issue, the appellants’ case depends on Robert Smith’s bald assertion that Zanwave left the premises substantially in a better state of repair than the commencement of lease [sic].
- Contrary to the appellant’s submission that this is the only real evidence on this issue, there is substantial documentary evidence, including numerous invoices, of repairs made to the premises after Zanwave’s departure. That material is more than sufficient to show, prima facie at least, that the “make good” claim is not specious fraudulent or fanciful. As the Adjudicator pointed out, it is for the Smiths to establish the opposite, if they can, in other proceedings. They have not attempted to do so.
- There is no substance in this ground of appeal.
Smiths’ Supplementary Submissions
- In answer to Novena’s submission that the appeal is extinguished by the self-executing order, the Smiths filed supplementary submissions on 18 December 2014. Relying on Chandra v Queensland Building and Construction Commission they submit that a self-executing order made without first hearing the subject party is void for want of natural justice. The analogy is doubtful. First, the Chandra order was of a different type; second, it involved an issue of credit; and third, the tribunal below failed to consider a significant part of the appellant’s case. However, in view of my earlier decision on the “guillotine” issue, it is not necessary to pursue this point.
The Substantive Application – Decision
- The ultimate question is whether leave to appeal should be granted. This is not a case in which there is an appeal as of right. The legislative purpose of a leave-to-appeal provision is to ensure that the primary decision will normally be final. Before an appeal will be entertained, the appellant must demonstrate an arguable case of error, which, if left uncorrected, will result in substantial injustice. “Error” means an error of law, or a finding of fact that is not merely debateable, but rationally indefensible (which is also an error of law). Exceptionally, leave may be granted to examine a question of public importance, but few minor civil disputes answer that description. In the view of the above authorities, and the light they cast on the subject lease, I am not persuaded that leave to appeal should be granted.
1 The time for service of the appellants’ submissions upon the respondent is extended to 4.37 pm on 10 October 2014.
2 Leave to appeal is refused.
 The law does not worry about trifles.
 On 10 September 2014.
 Order 3.
 Order 5, a “self-executing” order.
 Given in favour of Novena on 11 August 2014.
 According to the QCAT file, and the uncontradicted statement in paragraph 1.3 of Novena’s submissions filed 6 November 2014 (“Novena’s submissions”).
 Annexures “A” and “B” to the affidavit of Marc Andrew Paul Maskell filed 6 November 2014.
 QCAT Act ss 3(b), 4(c); Rintoul v State of Queensland & Ors (No 2)  QCAT 332 at .
Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 at 217; Rintoul, above, at .
 QCAT Act ss 3(b), 4(c), 28(3)(d).
 Ibid s 4(c). A point made in Cicek v Estate of the late Mark Solomon  NSWCA 278 at .
 Queensland Building Services Authority v Queensland Civil and Administrative Tribunal & Anor  QSC 167. But nothing in this case favours narrow constraint of the Tribunal’s procedural powers.
 Jorgenson v Slater & Gordon Pty Ltd  VSCA 110 at ; FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 at 283-284; Cicek v Estate of the late Mark Solomon  NSWCA 278 at , . Cognate cases classified as “practice and procedure” are Composite Buyers v JC Taylor Constructions  2 VR 311 (FC); MTQ Holdings Pty Ltd v Lynch  WASC 49; Freeman v Rabinov  VR 539; Hong v Liew  FCA 40.
 QCAT Act s 61(4).
 Ibid s 61(1)(c).
 Ibid s 61(3).
 Ibid s 61(2).
 Brakatselos v ABL Nominees Pty Ltd (2012) 36 VR 490;  VSCA 231 at ; MTQ Holdings Pty Ltd v Lynch  WASC 49 at ; Jorgenson v Slater & Gordon Pty Ltd  VSCA 110 at ; Re Jokai Tea Holdings Pty Ltd  1 All ER 60 at 637; Pereira v Beanlands  3 All ER 528 at 536; Zuckerman “How Seriously Should Unless Orders be Taken?” (2008) 27 Civil Justice Qtly 1.
 Queensland Building Services Authority v Queensland Civil and Administrative Tribunal & Anor  QSC 167.
 Grassby v The Queen (1989) 168 CLR 1 at 17; Thiess Pty Ltd v Industrial Magistrate Elizabeth Hall & Ors  QSC 130 at .
 Re Jokai Tea Holdings Limited  1 All ER 630 at 637 per Browne-Wilkinson VC; MTQ Holdings Pty Ltd v Lynch  WASC 49 at .
 In MTQ Holdings Pty Ltd v Lynch  WASC 49 at  per Newnes J.
 (2012) 36 VR 490;  VSCA 231 at .
 Compare and contrast Rintoul v State of Queensland & Ors (No 2)  QCAT 332, where there was non-compliance with an earlier order. The self-executing order was made “in extreme circumstances ... where it seems no other order would move the party in default into action”: ibid at . On the due date for filing and service of the particulars in question neither event occurred, and the following day an informal, ex parte request for extension of time was made.
 Transcript of hearing 11 August 2014 (“Transcript”) page 13 lines 6-9.
 Lease clause 22.
 Ibid clause 6.8.
 Ibid clause 4.8.
 Lessee’s obligation to repair. For particulars of this claim see the statement of Thomas Elliott filed 8 August 2014 paragraph 2.8, and relevant invoices in evidence.
 Transcript page 11 lines 1-6; page 13 lines 6-9; page 35 lines 29-30.
 Emphases in clauses 3.2.1 and 3.3.1 added.
 There were two guarantees: Transcript page 33 lines 3-4.
 Transcript page 13 lines 10-15, 24-25, 39; Smiths’ submissions dated 10 October 2014 (“Smith submissions”) paragraphs 29, 40, 48(b), 49(a), 53, 59.
 Notice of appeal paragraphs 36-44, 47-52.
 Transcript of hearing 11 August 2014 (“Transcript”) Notice: page 25 lines 5-33; page 36 lines 15-32; Allocation: page 29 lines 37-40; page 38 lines 1-2.
 Transcript page 25 lines 11-12, 24-25.
 Application filed 3 September 2014. Appeals from minor civil claims decisions are by leave only: QCAT Act s 142(3)(a)(i).
  WASC 283. A similar case is FFE Minerals Australia Pty Ltd v Vanadium Australia Pty Ltd  WASC 1, where the right to call upon the security depended upon the existence of a certificate of completion.
 Clayton’s Case (1816) 35 ER 781; Re Walsh; Ex parte Deputy Commissioner of Taxation (1982) 60 FLR 355.
 Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd  Vic SC 447 at page 14.
 Ibid at page 13 per Byrne J, citing several Australian authorities.
 (1979) 141 CLR 443.
 Clough Engineering Limited v Oil and Natural Gas Corporation Limited (2008) 249 ALR 458;  FCAFC 136 at .
 (1979) 141 CLR 443 at . A similar view was expressed by Barwick CJ at .
  1 VR 420;  VSCA 40.
 Ibid at .
 Ibid at  emphasis added.
 (1979) 141 CLR 443 at  per Stephen J.
 (2008) 249 ALR 458;  FCAFC 136 at .
 Ibid at  per curiam.
 Ibid at .
 Westpac undertaking 29 April 2011.
 See e.g. Pearson Bridge (NSW) Pty Ltd v State Rail Authority of New South Wales  1 Aust Const LR 81.
 Statement of R M Smith 3 July 2014 paragraph 11(a).
 The Smiths’ submissions 10 October 2014 paragraph 41(d).
 Statement of Thomas Elliott filed 8 August 2014 paragraph 2.16; annexure to Novena’s reply dated 11 June 2014; sundry invoices in evidence.
 Hughes Bros Pty Ltd v Telede Pty Ltd (1989) 7 BCL 210 per Cole J; Fletcher Construction Australia Ltd v Varnsdorf Pty Ltd  3 VR 812 at 825 per Charles JA; Bateman Project Engineering Pty Ltd & Ors v Resolute Ltd & Ors  WASC 284 at .
 Transcript page 37 lines 42-47; Cargill International SA v Bangladesh Sugar and Food Industries Corporation  1 WLR 461 at 468-469.
  QCA 335.
 Secretary to the Department of Premier and Cabinet v Hulls  3 VR 331 at .
- Published Case Name:
Robert Mervyn Smith and Wendy Eve Smith v Novena Leasing Pty Ltd (as trustee for) The Elliott Property Trust
- Shortened Case Name:
Smith v Novena Leasing Pty Ltd
 QCATA 33
03 Mar 2015