Bank of Western Australia v Hoy

Supreme Court of NSW|2012-05-16|Before: Adamson J

Introduction 1The Bank of Western Australia (the Bank) seeks summary judgment against Michael Hoy in the sum of $2,883,047.61 pursuant to a guarantee Mr Hoy granted in favour of the Bank. 2The Bank relies on two affidavits of Charles James Fletcher Perry sworn 11 April 2012 and 16 May 2012. The first affidavit exhibits the relevant transactional documents, together with demands and a certificate of indebtedness. In the second affidavit, Mr Perry deposes to his belief that Mr Hoy has no defence to the Bank's claim as required by UCPR 13.1.

The facts 3Mr Hoy has been a director of Point-D Pty Ltd (the Debtor) since its incorporation in 2004. In or about May 2006 the Debtor sought a loan facility from the Bank to buy a property at Tweed Heads and build 12 luxury units. 4By letter dated 2 May 2006 the Bank offered to lend a total of $11,830,000 for the proposed development, on condition that each of the three directors of the Debtor, which included Mr Hoy, give a limited guarantees of moneys owing by the Debtor to the Bank. Mr Hoy executed a Guarantee and Indemnity dated 19 May 2006 (the Guarantee) which was limited to $3,925,000 plus interest plus costs. His signature to the Guarantee was witnessed by his solicitor and he declared on oath on 3 May 2006 to the Bank that he had received independent legal advice and freely and voluntarily signed the Guarantee. It is common ground that he executed the Guarantee. 5Subsequently, by various loan agreements, the Bank lent further moneys to the Debtor. The final loan facility, dated 26 February 2008, provided for a Commercial Advance Facility of $13,000,000 repayable on 1 January 2010 and an overdraft and Bank guarantee facility each repayable on demand. At the time of this last loan facility of 26 February 2008 a signature which resembles Mr Hoy's appears on a document acknowledging and agreeing that the Guarantee would secure the amount owing under this final loan facility and that the maximum amount under the Guarantee would increase from $3.925m to $4.395m. Mr Hoy does not admit that the signature which appears on this document is his. 6The Debtor failed to repay the Commercial Advance Facility of $13,000,000 by 1 January 2010. Demands were issued and receivers appointed. As at 12 November 2010, the Debtor owed the Bank $9,207,118.15. The Bank made a demand on Mr Hoy for the amount due under the Guarantee. The receiver subsequently realised the Debtor's assets which has reduced the amount sought from Mr Hoy.

The pleadings 7The statement of claim was filed on 26 October 2011. The defence, which was filed on 25 November 2011, comprises formal admissions, non-admissions and denials. It pleads neither a positive case nor any material facts. Contrary to UCPR 14.23(2)(c) Mr Hoy makes non-admissions of his entry into the Guarantee and the service of a demand under the Guarantee. Mr Hoy has subsequently admitted these two matters, and seeks, if summary judgment is refused, leave to amend his defence accordingly. No substantive defence is alleged in the pleadings.

The application for summary judgment 8The Bank's application for summary judgment is based on the terms of the Guarantee.

The terms of the Guarantee 9The relevant provisions of the Guarantee are set out below. "Guarantee 2.1 You guarantee the debtor's payment to us of the guaranteed money. Your guarantee continues until all guaranteed money has been paid in full or you end this guarantee and indemnity under clause 6. If the debtor does not pay the guaranteed money on time and in accordance with any arrangement under which it is expressed to be owing, then you agree to pay the guaranteed money to us on demand from us (whether or not we have made demand on the debtor)... Our costs and other expenses 5.1 You must pay us for: (a) our reasonable costs in arranging, administering (including giving and considering consents, variations, discharges and releases, producing title documents or enforcing, attempting to enforce or taking any other action in connection with our rights) and terminating this guarantee and indemnity... Our rights are protected 10.1 Rights given to us under this guarantee and indemnity and your liabilities under it are not affected by any act or omission by us or by anything else that might otherwise affect them under law or otherwise, including: (a) the fact that we vary or replace any guaranteed agreement, such as by increasing the credit limit, increasing the amount of credit agreed to be provided or extending the term. If this guarantee and indemnity is one to which a Code applies, we cannot increase your liabilities under this guarantee and indemnity by changing the terms of any guaranteed agreement except in compliance with the Code; ... (f) the fact that we release any person who guarantees any of the debtor's obligations... Your rights are suspended 11 As long as any of the guaranteed money remains unpaid, you may not, without our consent: (a) reduce your liability under this guarantee and indemnity by claiming that you or the debtor or any other person has a right of set-off or counterclaim against us except to the extent you have a right of set-off granted by law which we cannot exclude by agreement)... Payment in full 14.1 Except to the extent you have a right of set-off granted by law which we cannot exclude by agreement (such as under a Code) you must pay us the guaranteed money in full without set-off, counterclaim or deduction... Our certificates 16 We may give you a certificate about a matter or about an amount payable in connection with this guarantee and indemnity. The certificate is sufficient evidence of the matter or amount, unless it is proved to be incorrect. Meaning of words 27 costs includes charges and expenses; and costs, charges and expenses in connection with advisers (in the case of legal advisers on a full indemnity basis or solicitor and own client basis, whichever is higher)... the guaranteed agreement to which this guarantee and indemnity initially applies is described in the Details under "Guaranteed agreement" and guaranteed agreement also included any credit contract between the debtor and us that you acknowledge in writing to be a credit contract to which this guarantee and indemnity extends. Guaranteed money means all amounts payable under each guaranteed agreement. The maximum guaranteed money in connection with each guaranteed agreement is described in the Details under "Maximum amount"..."

Mr Hoy's opposition to summary judgment 10Mr Hoy relied on his affidavit sworn 14 May 2012 in which he deposed to the following: (1)His state of health; (2)His belief that he had not signed acknowledgements of further indebtedness by the Debtor to the Bank and that he did not recall receiving independent legal advice concerning variations to the facilities extended to the Debtor; and (3)The grounds for his belief that he had not signed the document by which he purported to acknowledge the increase in the Debtor's indebtedness to the Bank and the increase in the limit in his Guarantee from $3.925m to $4.395m. 11Mr Hoy submitted that because he had not signed documents subsequent to the guarantee, including the document which had the effect of increasing the amount of his Guarantee and setting out the increase in the amount advanced by the Bank to the Debtor by $1.22m to $13m, the Bank was not entitled to summary judgment. Further, he submitted that he had not received independent legal advice in respect of these subsequent documents. 12He also submitted that the quantum of any amount due under the Guarantee could not be determined unless and until the arrangements made by the Bank with the other directors was established.

Reasons 13Mr Hoy's defence does not impugn the Guarantee itself, but only the increase in the maximum amount from $3.925m to $4.395m. The amount claimed by the Bank is less than the original maximum amount in the Guarantee. Accordingly the Bank's entitlement to summary judgment does not depend on establishing that Mr Hoy executed the subsequent document authorising the increase in the maximum amount. 14Nor can it provide Mr Hoy with a defence to the Bank's claim if he did not sign the document acknowledging an increase in the facility to the Debtor. Clause 10.1(a) of the Guarantee specifically provides that the fact that the Bank increases the credit limit or increases the amount of credit to be provided does not affect the Bank's right to enforce the Guarantee. 15The arrangements made by the Bank with the other directors of the Debtor are not relevant to Mr Hoy's liability under the Guarantee, by reason of cl 10.1(f) of the Guarantee. Accordingly, the lack of evidence of these arrangements is no impediment to summary judgment. Although the amount recovered by the Bank from the other directors is germane to the quantum of its claim, the Bank is entitled to prove the amount owing under the Guarantee by a certificate, having regard to cl 16 of the Guarantee set out above. 16By executing the Guarantee, Mr Hoy has effectively bargained away any right to dispute his indebtedness under the Guarantee or to raise any offsetting claim until his indebtedness has been paid. The provisions set out above have the effect that Mr Hoy's obligation to pay under the Guarantee is unconditional and irrevocable. 17Such clauses in guarantees have been upheld on numerous occasions in this Court and are not contrary to public policy: see for example, GE Capital Finance Australia v Davis [2002] NSWSC 1146; 11 BPR 20,529, per Bryson J and Bank of Western Australia v O'Brien [2012] NSWSC 546, per McDougall J. 18The Bank has established the amount owing in a so-called Dobbs certificate (after Dobbs v National Bank of Australasia Ltd [1935] HCA 49; 53 CLR 643). 19Accordingly, the Bank is entitled to summary judgment in the sum of $2,883,047.61. 20I make the following orders: (1)Summary judgment pursuant to UCPR 13.1 in favour of the plaintiff against the defendant in the amount of $2,883,047.61. (2)Order pursuant to s 101 of the Civil Procedure Act 2005 that interest be payable on any judgment obtained by the plaintiff against the defendant at the rate or rates applicable under the Loan and Guarantee. (3)Order that the defendant pay the plaintiff's costs on an indemnity basis.

Amendments 28 May 2012 - Paragraph 10, beginning with the heading "Guarantee..." mistakenly numbered. Number "10" deleted. Subsequent paragraph numbers 11 to 21, renumbered to read 10 to 20 respectively. Amended paragraphs: 10 to 21 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 May 2012

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