Amos & Anor v Bauer [2010] QCA 199

SUPREME COURT OF QUEENSLAND

CITATION: Amos & Anor v Bauer; Amos v Bauer [2010] QCA 199

PARTIES: BRETT ANTHONY AMOS (first defendant/appellant) KAREN AMOS (second defendant/appellant) v MELVIN JOHN BAUER (plaintiff/respondent) / JUSTIN CRAIG AMOS (third defendant/appellant) v MELVIN JOHN BAUER (plaintiff/respondent)

FILE NO/S: Appeal No 2232 of 2010 / Appeal No 2241 of 2010 / DC No 538 of 2006

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeals

ORIGINATING COURT: District Court at Southport

DELIVERED ON: 30 July 2010

DELIVERED AT: Brisbane

HEARING DATE: 27 July 2010

JUDGES: Chief Justice, Fraser and White JJA / Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS: In each appeal:

CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSIDERATION – WHAT AMOUNTS TO CONSIDERATION – FOREBEARANCE TO SUE – where primary judge gave judgment in favour of respondent against first defendant, as principal debtor and second and third defendants as guarantors – where respondent and Gary Amos, now deceased, were business partners – where respondent entered into an agreement with the deceased and the second defendant that allowed them to use his credit card on the basis they would meet minimum monthly repayments and provide security for the accrued debts by a mortgage over a house – where the parties reached an agreement in August 2004 for repayment to the respondent – where this agreement was not formally documented after which a loan agreement was executed in November 2005 – where the loan agreement provides that the respondent agreed to lend $70,000 and further advances to the first defendant in exchange for the first defendant agreeing to give security over the first defendant’s land – where demands made under the loan agreement, including for the possession of the land, were not met – where the primary judge concluded that the consideration for the loan agreement and the mortgage was the respondent’s forebearance, expressed in 2004, from suing for $79,000, provided that the parties entered into a written agreement on the terms expressed in the loan agreement executed in November 2005 – whether forebearance from suing amounted to consideration for the loan agreement and mortgage / Murphy v Timms [1987] 2 Qd R 550, applied / Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 214 ALR 392; [2005] HCA 13, applied / Robertson v Unique Lifestyle Investments Pty Ltd [2007] VSCA 29, applied / Wigan v Edwards (1973) 1 ALR 497, applied

COUNSEL: In Appeal No 2232 of 2010 / K R Cook (sol) for the first and second appellant / C Wilson for the respondent / In Appeal No 2241 of 2010 / No appearance for the appellant / C Wilson for the respondent

SOLICITORS: In Appeal No 2232 of 2010 / Tucker and Cowen Solicitors for the first and second appellant / McInnes Wilson Lawyers for the respondent / In Appeal No 2241 of 2010 / No appearance for the appellant / McInnes Wilson Lawyers for the respondent

CHIEF JUSTICE:

The primary judgment

1. On 4 February 2010 a learned District Court Judge gave judgment in favour of the respondent plaintiff, against the appellant first defendant Brett Amos as principal debtor, and against the appellants the second defendant Karen Amos and the third defendant Justin Amos as guarantors, in the amount of $130,930.48, and for the recovery of certain land as against Brett Amos, which he had mortgaged to the respondent to secure that debt.

The factual circumstances

2. The respondent and Gary Amos (deceased) were business partners. Karen is his widow, and Brett and Justin are Karen’s step-children.

3. The respondent entered into an agreement with the deceased and Karen, under which he allowed them to use his credit card, on the basis they would meet minimum monthly repayments, and in due course provide security for the accrued debts by a mortgage over a house. The respondent made the facilities available to all three defendants and the deceased, and they utilized it. In fact, a number of credit card accounts were used. Separate loans were made to Justin.

4. In August 2004, the respondent advised the appellants that he could not help them further, and said that he would pay out the credit card debts, and then combine those amounts with the amount due from Justin into one loan account. A total of $79,000 was then owing, but the respondent “agreed to settle for $70,000”. Interest was to be payable. “At that stage”, only monthly interest would be required. A second mortgage would be required in due course. The appellants agreed to this arrangement.

5. The respondent trusted the appellants implicitly, and did not immediately document the August 2004 agreement. That did not occur until late 2005, after Brett disclosed to the respondent that judgment in an amount of $28,000 had been entered against him and Justin. The respondent then determined that he must proceed to protect his interests. This led to the execution of a “loan agreement” dated 21 November 2005 between the respondent as lender, Brett as borrower and Karen and Justin as guarantors, and a mortgage granted by Brett to secure the monies owing under the loan agreement.

6. The loan agreement recites that the lender has agreed to lend $70,000 and further advances to the borrower, and the borrower has agreed to give security over his land. Clause one is an acknowledgement that the principal sum was advanced on 1 August 2004. Clause two provides for interest. Clause three provides that the principal is repayable on demand (or on the occurrence of certain specified events). Clause six provides for the guarantee. Demands were made and not met, including for the possession of the land.

The trial Judge’s reasons

7. The learned Judge found that Brett was named as borrower because he was the registered proprietor of the family home, which was to be mortgaged. It was argued that the loan agreement and the mortgage were not supported by consideration. His Honour identified, as the requisite consideration, the respondent’s forbearance from suing in August 2004 for the amount of $79,000 then owing, in return for the execution by the appellants of the loan agreement and Brett’s granting the mortgage as security.

8. His Honour said:

“It was essential to the agreement that Mr Bauer was undertaking to forebear from suing for the individual sums of money then owing to him, in return for the execution of a written agreement and mortgage. Such an undertaking can constitute consideration: Murphy v Timms [1985] 2 Qd R 550 at 551 and 556. Also, I think it is reasonable to infer from all of the evidence that the defendants, by entering into the agreement, impliedly requested his forbearance. Without it they were at peril of several legal claims.”

9. Then he went on to deal with what he termed the “enmeshment” of the appellants’ financial affairs:

“The question of consideration must be answered taking into account the evidence of financial enmeshment of the Amos family and the evidence of Justin Amos that his use of his credit card was for family purposes. The family home was legally owned by Brett Amos but all seemed to consider it beneficially owned by Karen Amos. Yet Brett Amos took out a line of credit secured against the home to fund his and Justin’s entry into a company, and by the time of trial had borrowed the limit of $296,000. When it came time to document the agreement, Brett Amos, as registered owner of the property, assumed liability as debtor, the other two defendants as guarantors.

By entering the agreement, Mr Bauer was undertaking not to insist on immediate payment of the debts. Given the close financial connection of the family members, a loan to one benefited the others. Delaying repayment of a debt owed by one also benefited others.”

The grounds of appeal

10. Brett and Karen have filed a notice of appeal, and Justin has appealed separately.

11. Brett and Karen appeal on these grounds:

12. There was no evidence to support the conclusion that Brett owed any debt to the respondent.

13. Because there was no consideration for the loan agreement, it and the mortgage were not enforceable.

14. There was no evidence the defendants were “financially enmeshed”. In any case, that did not make Brett liable under the mortgage.

15. There was no evidence of debt other than in the case of Justin, and he was guarantor not principal debtor.

16. Because Brett received nothing from the respondent, any conclusion as to forbearance could relate only to Justin.

17. There was no evidence that any appellant other than Justin used the credit card.

18. Exhibit two (the respondent’s schedule of payments) should not have been admitted into evidence.

19. Justin’s grounds of appeal are substantially the same, save that he contends that no conclusion as to forbearance could be found against him (ground five above).

20. As to Exhibit 2, the respondent compiled it from bank statements which were in evidence, facilitating cross-examination, and it was in any event admitted into evidence without objection.

The appellants’ contentions

14. The appellants’ outlines of argument were in substantially the same terms. They contend that neither Brett nor Karen benefited from the loans. Justin was “the sole beneficiary of the respondent’s largesse”. Brett received no consideration for the loan, so that the loan agreement and mortgage are unenforceable. That is because Brett is put forward as the borrower. The guarantors are consequently also not liable.

The respondent’s contention

15. Mr C Wilson, who appeared for the respondent, submitted that his Honour correctly concluded that the consideration for the loan agreement and the mortgage was the respondent’s forbearance, expressed in August 2004, from suing for the $79,000 then owing, provided the parties entered into a written agreement to pay the lesser sum of $70,000, with interest, on demand, and to secure the payment by the granting of a mortgage.

Analysis

16. The learned Judge found, on evidence he reasonably accepted, that, in consideration of the respondent’s not pursuing the $79,000 then owing, the three appellants agreed, in August 2004, to enter into a written agreement to repay the lesser sum of $70,000 and interest, with Brett granting the mortgage to secure the repayment. Because Brett was mortgagor, he was styled the borrower and Karen and Justin the guarantors, but that characterization has no further significance: they were all debtors or prospective debtors.

17. The consideration for their agreement was the respondent’s agreement not to proceed against them then and there for the sum of $79,000 as he was entitled to do, but to give them more time and in addition, forego payment of $9,000 of that sum.

18. Forbearance by a creditor to sue or otherwise press for payment of an amount then due will be good consideration for a subsequent agreement, albeit an agreement for repayment of an amount previously advanced. The forbearance must be at the debtor’s express or implicit request. See Murphy v Timms [1987] 2 Qd R 550, 551, 556, and though less directly, Wigan v Edwards (1973) 1 ALR 497, 512. See also Robertson v Unique Lifestyle Investments Pty Ltd [2007] VSCA 29 para 55.

19. The learned Judge found there was an implicit request. That finding was open. The respondent had come to the appellants in August 2004 saying that he could not help them further, and offering a way forward. Their accepting his proposal involved an implicit request that he proceed that way, where one alternate was a court proceeding for the recovery of the debt.

20. Whether or not Brett received monies through the use of the credit card facilities, as part of the debt which led to the August 2004 agreement, is not critical to the validity of the loan agreement and mortgage. For whatever reason, Brett agreed to repay the debt, and to secure that repayment against his property, in consideration of the respondent’s forgoing his right to immediate recovery of the debt owed, for argument’s sake, by other members of Brett’s family. That Brett may not himself have originally owed money does not exclude his undertaking this liability as he has. That is because of the principle that consideration must move from the promisee (here the respondent), but need not move to the promisor (Brett). See Pico Holdings Inc v Wave Vistas Pty Ltd [2005] HCA 13, para 66.

21. But his Honour has apparently found, on the respondent’s evidence, that the debt which led to the August 2004 agreement was in fact owed by all appellants, including Brett. That emerges from this paragraph of his reasons for judgment:

“The defendants continued to use the credit card until August 2004. It was at that time that Mr Bauer approached the Amos family, speaking first to Justin and then to all three defendants. He told them he could not help them further, and proposed that he pay out the debts on the AMP and the Westpac credit cards and combine those debts with the debt owed by Justin into one loan agreement. The total owing to him by the family was about $79,000 but he ‘agreed to settle for $70,000’.”

22. The appellants took exception to his Honour’s reference to the “enmeshment” of their financial affairs. His Honour was, in the passage extracted earlier in these reasons (para 9), simply explaining why one appellant would have been prepared to undertake these liabilities without a precise setting down of the financial benefits which had accrued to the respective appellants, their approach being that the benefit ultimately accrued to the family unit. As the Judge observed, “[g]iven the close financial connection of the family members, a loan to one benefited the others”.

23. The appeals should be dismissed.

Orders

24. I would order, in each appeal, that the appeal be dismissed with costs to be assessed, as necessary, on the standard basis.

[25] FRASER JA: I agree with the reasons for judgment of the Chief Justice and the orders proposed by his Honour.

[26] WHITE JA: I have read the reasons for judgment of the Chief Justice and agree with those reasons and the orders he proposes.