Global Television v Sportsvision Australia

INTRODUCTION - THE CENTRAL ISSUES 1 In both Australia and the United Kingdom, it is again resolved that guarantees, absent wording expressly to the contrary, survive the liquidator's disclaimer of the contract guaranteed. That follows from the statutory effect of disclaimer as stated in s568D(1) of the Corporations Law and its predecessor and as settled in recent appellate decisions. These were decisions both in Australia (Sandtara Pty Limited v Abigroup Pty Limited (1996) 14 ACLC 888) and in the United Kingdom (Hindcastle Ltd v Barbara Attenborough Associates Ltd [1997] AC 70), which restored the reasoning that had been adopted in a series of 19th century cases. Those decisions corrected that seductive diversion into error perpetrated by the Court of Appeal in Stacey v Hill [1901] 1 QB 660. They returned the law to its 19th century orthodoxy, though by an analysis more discerning than a simple reversion to Victorian notions of sanctity of contract. 2 That orthodoxy was declared in a series of cases. They start with Manning v Flight (1832) 3 B & Ad 211, 110 ER 29, and then, on the predecessor s23 of the Bankruptcy Act 1869 (Imp) Smith v North (1872) LR 7 Exch 242 and Ex parte Walton in re Levy (1881) 17 ChD 746 at 754 and 756-7, Arthur Hill v East & West India Dock Co (1884) 9 App Cas 448 at 454-5 and 458. 3 The end result is that to-day it can no longer be argued that because the obligation guaranteed had been terminated, the guarantee has nothing left to work upon, so necessarily ceasing of effect. Statute allows the guarantee continued effect, unless its actual terms preclude that efficacy. 4 That much indeed was common ground. What the present case does, is pose precisely that question of interpretation of the guarantee. This is on the assumption that any challenge to the present disclaimer fails, a matter to which I return. 5 Here the guarantor is the Third Defendant Optus Vision. It gives both a guarantee and indemnity for the performance of a contract ("the OB Agreement") to pay money and take services from its subsidiary, the First Defendant, now in liquidation. The contract is to pay money to the Plaintiff for outside broadcasting services provided by the Plaintiff, whether or not those services are taken. 6 I start with the question of the continuing effect of the Third Defendant's guarantee and indemnity, assuming an effective disclaimer. The answer to that question affects the answer to the next, namely whether the disclaimer is effective. The challenge to its effectiveness is that leave of the Court should have been obtained to disclaim, was never obtained and cannot now be obtained retroactively. This is on the basis that the contract guaranteed was not an "unprofitable contract" within s568(1A) of the Corporations Law. Only if it were, is Court leave not required to disclaim. The Liquidator contends that the contract was unprofitable obviating need for leave. But in any event, if leave were required, it is sought by the liquidator retrospectively, nunc pro tunc. Finally, the Plaintiff seeks to have the disclaimer if effective set aside as giving rise to grossly disproportionate prejudice; see s568B(3) of the Corporations Law. But that is only if the effect of the disclaimer, working on the terms of the guarantee, renders it ineffective. 7 These issues can therefore be broken out into a series of questions to be answered in the following order.