GE Commercial Corporation (Australia) Pty Ltd v L&B Enterprises Pty Ltd

Supreme Court of NSW|2009-07-02|Before: Brereton J

CITATION : GE Commercial Corporation (Australia) Pty Ltd v L&B Enterprises Pty Ltd [2009] NSWSC 770

HEARING DATE(S) : 2 July 2009 JURISDICTION : Equity Division Duty Judge List

DECISION : Summons dismissed with costs

CASES CITED : Yuwana Nominees Pty Ltd v Ong [2008] NSWSC 156

PARTIES : GE Commercial Corporation (Australia) Pty Ltd (plaintiff) L&B Enterprises Pty Ltd (defendant)

COUNSEL : Mr A Bulley (plaintiff) Mr A Rogers (defendant)

SOLICITORS : DibbsBarker Lawyers (plaintiff) Brennan Tipple Partners (defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION DUTY LIST

3111/09 GE Commercial Corporation (Australia) Pty Ltd v L&B Enterprises Pty Ltd JUDGMENT (ex tempore) 1 HIS HONOUR: By summons filed on 5 June 2009 the plaintiff seeks the following orders: 1. A declaration that there is a valid and enforceable agreement between the Plaintiff and the Defendant pursuant to a Deed of Secured Guarantee between the Defendant and the Plaintiff whereby the Defendant as guarantor agreed to grant a legal Mortgage to the Plaintiff of any lands owned by the Defendant. 2. A Declaration that the Plaintiff is entitled to an Order for specific performance of the said Deed. 3. An Order that the Defendant specifically perform the said Deed by granting to the Plaintiff a legal Mortgage over the land contained in Folio Identifier 621/555328 and Folio Identifier 102/1122246. 4. In the alternative, damages. 5. Costs. 6. Such further or other Orders as the Court deems fit.

2 On 12 July 2009, Blue Haven Pools & Spas (Newcastle) Pty Limited, as trustee of the Blue Haven Pools & Spas (Newcastle) Family Trust, and trading as Blue Haven Pools & Spas (Newcastle), entered into a Bailment Agreement with the plaintiff GE Commercial Corporation (Australia) Pty Ltd, pursuant to which GE provided outdoor spas to Blue Haven. On the same day, the defendant L&B Enterprises Pty Ltd, executed a document entitled Secured Guarantee, naming itself as guarantor and Blue Haven as debtor, in favour of GE. This Secured Guarantee contained the following provisions: Guarantee 1. The Guarantor unconditionally and irrevocably guarantees to GE that the debtor will pay to GE all amounts payable by the debtor to GE and the due and punctual performance by the debtor of all its obligations to GE under the commercial transactions .

Indemnity 2. The liability of the guarantor is a principal liability. The guarantor unconditionally and irrevocably indemnifies GE against any liability or loss GE suffers or costs GE incurs in connection with the whole or any part of the amounts guaranteed by the guarantor not being recoverable from the debtor , or from the guarantor under clause 1, for any reason, including, because of any legal limitation, disability or incapacity affecting the debtor , or any other fact or circumstance. This indemnity applies irrespective of whether the transactions relating to the amounts guaranteed or any of them are void, voidable, avoided, released, disclaimed or whether or not any of the matters referred to in this clause 2 were or ought to have been within G E's knowledge. The guarantor as principal debtor agrees to pay GE on demand a sum equal to the liability or loss or costs described in this clause 2.

Undertakings 7.1 The guarantor: [sic] any person specified in the Particulars as guarantor; and (b) shall grant to GE a legal mortgage in registrable form (containing such terms and conditions as GE may require) of any land held by the guarantor now or in the future, which mortgage must contain a covenant to the effect of clause 7.1(a) and which secures the amounts referred to in clause 7.1(a); (c) as beneficial owner, charges in favour of G E, by way of fixed charge, all property at any time held by the guarantor (in the case of a body corporate, such property is land, and in any other case, any property other than personal chattels within the meaning of the Bills of Sale Act 1898 (NSW)), with the payment of the amounts referred to in clause 7.1(a); (d) agrees that upon default by the guarantor, the amounts referred to in clause 7.1(a) will at G E's option become immediately due and payable; (e) shall not transfer or create any estate or interest in any property charged by the guarantor under this clause 7; (f) agrees that any power of sale will extend to execution in the name of and on behalf of the guarantor of any memorandum of transfer, Crown lands transfer or other assignment; (g) shall pay GE for its costs in connection with this guarantee or a mortgage required by this document to be granted by the guarantor on a full indemnity basis. 7.2 Any precondition to the exercise of any power of sale, except for default, is excluded. 7.3 For the purposes of determining whether GE can exercise any power to insure, only insurance in G E's name will be taken into account. 7.4 Subject to this clause 7, the provisions of the Conveyancing Act 1919 (NSW) and the Real Property Act 1900 (NSW) apply to this document as if it were a mortgage by deed.

3 GE subsequently, on 21 July 2006, lodged a caveat over property of L&B at Avoca Beach and, on 2 September 2008, over property of L&B at Wadalba. Mr John Robert Holland appears to be the principal both of Blue Haven and of L&B Enterprises. 4 Blue Haven has been in default under the Bailment Agreement, including by failing to pay, when due, amounts owing under that Agreement. On 20 April 2009, solicitors acting for GE wrote to L&B, demanding payment of the sum of $414,016 pursuant to the Guarantee, and execution and delivery of legal mortgages over the Avoca property and the Wadalba property, details of which, including extensive memoranda, were provided. L&B has not provided any such mortgage nor paid the money demanded. 5 The obligation of the guarantor L&B to provide the mortgages in question is said to be imposed by clause 7.1 of the Secured Guarantee. It is plain that part of clause 7.1(a) has been omitted. While clause 7.1(b) clearly enough contemplates that L&B is required to give a registrable legal mortgage containing such terms and conditions as GE may require, that obligation is subject to two important qualifications: first, that the mortgage must contain a covenant to the effect of clause 7.1(a) and, secondly, that the mortgage secures (and I venture to think secures only) the amounts in clause 7.1(a). Similarly, the charge imposed by clause 7.1(c) is limited to the amounts referred to in 7.1(a). 6 In the absence of any meaningful clause 7.1(a), it is impossible to know whether any mortgage would contain a covenant to the effect of that clause, nor whether it would secure the amounts referred to in that clause. 7 Mr Bulley has helpfully drawn my attention to Rein J's judgment in Yuwana Nominees v Ong [2008] NSWSC 156, particularly at [8] where his Honour summarised the principles of construction applicable to commercial contracts, emphasising that the Court should not take a narrow and pedantic view, but should strive to give some meaning and effect to provisions which the parties intended to have some meaning and effect. However, there are a number of difficulties in applying that approach in the present case. The first is that when the Court spoke in that context of commercial agreements, it is unlikely that it had in contemplation what are often called "contracts of adhesion" such as the present finance agreement and Secured Guarantee. Secondly, in the present case, the question is not really one of construction to resolve ambiguity. This is not a case of difficulty in deciding what meaning clause 7.1 should bear, but in giving any meaning at all to it. It is a case of absence of meaning, rather than ambiguity of meaning. Thirdly, even if it were a question of construction, two rules of construction would point in the opposite direction; namely, the contra proferentem rule, and the rule that a guarantee is construed strictly in favour of the guarantor and against the party receiving the benefit of the guarantee. 8 To my mind, it is just impossible specifically to enforce clause 7.1(b), containing as it does a mandatory provision for a covenant to the effect of clause 7.1(a), and a requirement that such mortgage secure the amounts and only the amounts referred to in clause 7.1(a), when the terms of the covenant contemplated by clause 7.1(a) and the amounts referred to in it can in no way be ascertained. 9 Clause 7.1 is therefore void for uncertainty. I am not prepared to grant a decree of specific performance in respect of it. 10 As the plaintiff does not seek a monetary judgment on the guarantee, it follows that the plaintiff's claim fails, and must be dismissed. 11 I order the Summons be dismissed with costs.

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Bills of Sale Act 1898(NSW)

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