Linddales Pty Ltd v Macri Constructions Pty Ltd
[2005] QSC 136
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- Notable Unreported Decision
- Linddales Pty Ltd v Macri Constructions Pty Ltd[2005] QSC 136
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Linddales Pty Ltd v Macri Constructions Pty Ltd[2005] QSC 136
Linddales Pty Ltd v Macri Constructions Pty Ltd[2005] QSC 136
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO: | |
Trial | |
PROCEEDING: | Civil trial |
ORIGINATING COURT: | |
DELIVERED ON: | 20 May 2005 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 12 May 2005 |
JUDGE: | Chesterman J |
ORDER: | 1.The question before this court is answered as follows: If the first defendant is liable to the plaintiff in respect of any part of the plaintiff’s claim against it, the second defendant is also liable to the plaintiff for that amount pursuant to his guarantee. 2.The second defendant should pay the plaintiff’s costs of and incidental to the action to be assessed on the standard basis. |
CATCHWORDS: | CONTRACTS – PARTICULAR PARTIES – VENDOR AND PURCHASER – GUARANTEES CONTAINED IN CONTRACTS AND COLLATERAL PROMISES – where the plaintiff claims an amount owing by the second defendant pursuant to a guarantee – where the second defendant disputes his indebtedness as guarantor up to a limited amount – the question for the court to determine was “If the first [defendant] is liable to the [plaintiff] in respect of any part of the [plaintiff’s] claim against it, is the second [defendant] also liable in respect of that amount, or any part of it (and if so, to what extend) pursuant to the guarantee referred to in paragraph 4 of the statement of claim? |
COUNSEL: | Mr R Anderson for the plaintiff Mr P Woods for the defendants |
SOLICITORS: | McCullough Robertson for the plaintiff Budd & Piper for the defendants |
[1] In this action the plaintiff claims $468,175.77 against the first defendant as a debt due under a contract between them. It claims the same amount from the second defendant pursuant to a guarantee. The action against the first defendant has not proceeded; the company is thought to be insolvent. The second defendant has disputed his indebtedness as guarantor for any amount greater than $25,000. On 23 March 2005 I ordered, pursuant to UCPR 483 that a question be determined separately from the other issues in the action. The question was:
‘If the first [defendant] is liable to the [plaintiff] in respect of any part of the [plaintiff’s] claim against it, is the second [defendant] also liable in respect of that amount, or any part of it (and if so, to what extent) pursuant to the guarantee referred to in paragraph 4 of the statement of claim?’
The parties are confident that the answer to the question will bring about a speedy resolution to the litigation either by agreement or by proof of the amount which the first defendant owes the plaintiff.
[2] The following facts are admitted on the pleadings:
1.On 28 June 2004 the plaintiff and the first defendant made an agreement by which the plaintiff was to supply labour services to the first defendant for the construction of an apartment block at Burleigh Heads. The terms of the agreement were that the plaintiff would provide labourers, hoisters, scaffolders, dogmen, riggers, safety officers and carpenters and charge its standard charge-out rates for each category of labour supplied.
2.It was a term of the agreement that the first defendant would submit an application for credit to the plaintiff and that the second defendant would provide a personal guarantee in favour of the plaintiff of the first defendant’s obligation to pay for labour supplied. (The parties disagree about the monetary limit of the guarantee.)
3.It was a further term of the agreement that labour would be supplied by the plaintiff to the first defendant between 30 June 2004 and March 2005.
4.On 16 July 2004 the first defendant submitted a written application for credit to the plaintiff.
5.On 16 July 2004 the second defendant executed a guarantee in favour of the plaintiff.
6.Between 30 June 2004 and 6 October 2004 the plaintiff supplied labour to the first defendant’s apartment block, as it required.
7.The plaintiff rendered invoices to the first defendant from time to time during the period in which it supplied labour. The invoices sought payment in accordance with the agreement.
[3] The application for credit and guarantee form part of the one document, which is three pages in length. It bears the plaintiff’s name and is headed ‘Application for Credit Facilities’. It bears a note under this heading that:
‘… if the Applicant is a Proprietary Company, then completion of the Personal Guarantee on Page 3 hereof is an essential prerequisite for consideration to be given to the granting of credit facilities to the Applicant. …’
The first two pages of the document contain four sections identified alphabetically. Section A was to be completed by all applicants. It sought basic information sufficient to identify an applicant and its ‘PROPRIETORS/ PARTNERS/DIRECTORS.’ One item of information sought was ‘ESTIMATED CREDIT REQUIRED PER MONTH … YEAR …’ In response to this, the first defendant (it appears by its director the second defendant) wrote $‘25K’ in the space appropriate for the monthly amount of credit required. Section B was to be completed if the applicant was a company. Section C was relevant to partnerships and Section D was to be completed by individuals trading on their own account.
[4] The third page of the document contained a declaration and a ‘PERSONAL GUARANTEE (TO BE COMPLETED IF THE APPLICANT IS A PROPRIETARY COMPANY)’. The declaration contained the statement:
‘I/We understand that the terms of payment to (the plaintiff) are strictly net 14 days. This means that payment for goods and services is due within 14 days from invoice date.’
The second defendant signed the declaration on behalf of the first defendant.
[5] The guarantee was in these terms:
‘In consideration of [the plaintiff] granting such credit as it might from time to time think fit to [the first defendant]… I/We [the second defendant] … hereby jointly and severally agree with [the plaintiff] to make payments to [the plaintiff] of all monies which may now or hereafter be owing to [the plaintiff] by the [first defendant] together with all interest, costs, charges and expenses which [the plaintiff] from time to time charge to the account of the [first defendant] and all charges, expenses and costs (including legal costs) which [the plaintiff] may incur in endeavouring to obtain payment of all or any part of the monies owing to it by the [first defendant] and that the monies hereby guaranteed shall remain due and payable by the [second defendant] until [the plaintiff] shall have received payment in full of all monies owed by the [first defendant] to [the plaintiff].’
[6] The second defendant submits that on its proper construction, the guarantee limits his liability to a sum not exceeding $25,000. The submission relies upon the insertion of that amount in the application as the estimated monthly credit required and the term in the declaration that the first defendant should pay the plaintiff’s invoices within 14 days of their date. The argument is that the due performance of the contract between the plaintiff and the first defendant would result in the first defendant paying all invoices within a fortnight of their issue. No debt, arising from such invoice, should have been outstanding for more than two weeks. The fact that the estimated credit limit was to be $25,000 per month meant that the first defendant would never have been indebted to the plaintiff for as much as $25,000, had the contract been performed according to its terms.
[7] The argument proceeds that the guarantee was to secure the first defendant’s performance of the contract formed by the credit application, and the second defendant is liable as guarantor only for the amount which the first defendant would have been liable had it duly performed the contract.
The argument is impossible to accept. It involves reading the first defendant’s estimate of its credit requirement as being a contractual term that the plaintiff would not supply labour services ‘on credit’ to a value of more than $25,000 in any one month. The contract does not say that. The figure of $25,000 is given as an estimate only of what the first defendant might require by way of labour services supplied but not pay for in advance or on delivery. There is nothing in the document to limit the value of labour services supplied from time to time. The argument involves reading the first defendant’s estimate of its credit requirements as a promise by the plaintiff to it, and the second defendant, not to supply labour on credit to a value of more than $25,000 at any one time. The language of the application is not capable of being read in such a way.
[8] Another reason for rejecting the submission appears from the words of the guarantee itself. The expressly stated consideration for the guarantee is that the plaintiff would grant to the first defendant ‘such credit as it might from time to time think fit…’ This is an express contradiction of the term advanced by the second defendant. It is impossible to reconcile the statement that the plaintiff might extend such credit as it thought fit with the proposition that it promised not to extend credit in any amount greater than $25,000 at any one time.
[9] The promise contained in the guarantee itself is likewise irreconcilable with the second defendant’s contention. The promise was to pay, as guarantor, ‘… all monies which may now or hereafter be owing…’ by the first defendant to the plaintiff. The commitment is limited only by the amount of the debt owed by the first defendant. To read any limitation of that amount into the guarantee is to do violence to the language chosen by the parties to record their bargain.
[10] It is no doubt true that guarantees should be construed strictly and that ambiguity should be resolved in favour of the surety. Before those principles have any application there must be some ambiguity, or at least some scope for differing constructions of the obligations imposed on the surety by his guarantee. The second defendant’s guarantee affords no room for doubt as to its meaning.
[11] Accordingly, I answer the question before this court as follows:
If the first defendant is liable to the plaintiff in respect of any part of the plaintiff’s claim against it, the second defendant is also liable to the plaintiff for that amount pursuant to his guarantee.
[12] The second defendant should pay the plaintiff’s costs of and incidental to the action to be assessed on the standard basis.