Haller v Ayre & Anor [2005] QCA 224

LIMITATION OF ACTIONS - CONTRACTS, TORTS AND PERSONAL ACTIONS - WHEN TIME BEGINS TO RUN - PARTICULAR CAUSES OF ACTION - ACTION ON CONTRACT - where respondents were advanced money under two agreements entered into with the appellant in 1989 and 1990 - where under the first agreement both respondents agreed to "promise to pay in full ... upon demand but not later than five years from the date of this Note" - where under the second agreement the first respondent agreed to "promise to pay in full upon demand" - where no action was commenced for repayment until 2003 - where summary judgment given at first instance on the basis that the appellant's cause of action was out of time - whether limitation period began to run when loans were made or only once a demand for payment had been received

LIMITATION OF ACTIONS - POSTPONEMENT OF THE BAR - CONFIRMATION - ACKNOWLEDGMENTS AND PROMISES TO PAY - where respondents entered into two loan agreements with the appellant in 1989 and 1990 - where no action was commenced for repayment until 2003 - where summary judgment given at first instance on the basis that the appellant's cause of action was out of time - where conversation had taken place between the appellant and the first respondent in 1998 - where appellant had said "If I don't get the money from you, I will not hesitate to go to Court" - where first respondent had replied "We will repay the money we owe you, we just need more time" - where appellant had agreed to give first respondent more time to pay and to reduce the applicable interest rate - whether first respondent had merely promised to pay an existing debt or had agreed to the creation of new obligations - whether consideration was given for any new agreement - whether any new agreement revived a cause of action that was otherwise out of time

GUARANTEE AND INDEMNITY - THE CONTRACT OF GUARANTEE - WHAT CONSTITUTES A GUARANTEE - GENERALLY - where written agreement evidenced a loan by the appellant to the first respondent - where evidence given in an affidavit sworn by the appellant's solicitor on information from the appellant was that the written agreement was only one part of an oral contract of guarantee - where oral contract of guarantee had not been pleaded at first instance - whether primary judge had been correct not to withhold summary judgment on this ground

Limitation of Actions Act 1974 (Qld), s 10(1), s 35(3), s 36

Property Law Act 1974 (Qld), s 56(1)

Uniform Civil Procedure Rules 1999 (Qld), r 293

Alford v Ebbage [2002] QCA 194; [2003] 1 Qd R 343, applied

Brott v Grey [2000] FCA 1727; (2000) 181 ALR 617, cited

Butler v Fairclough [1917] HCA 9; (1917) 23 CLR 78, applied

CE Heath Underwriting & Insurance (Australia) Pty Ltd v Daraway Constructions Pty Ltd, unreported, Supreme Court of Victoria, No 2662 of 1987, 3 August 1995, cited

Commonwealth v Verwayen (1990) 170 CLR 394, applied

Drinkwater v Caddyrack Pty Ltd (No 3), unreported, Supreme Court of New South Wales, No 3970 of 1996, 28 November 1997, cited

Executor, Trustee & Agency Co of South Australia Ltd v Thompson [1919] HCA 51; (1919) 27 CLR 162, applied

Gleeson v Gleeson [2002] NSWSC 418; No 4116 of 2001, 29 May 2002, considered

In re Brookers (Aust) Ltd (in liq); Brooker v Pridham (1986) 41 SASR 380, considered

Mackenzie & Anor v Albany Finance Ltd [2003] WASC 100; CIV2657 of 2000, 30 May 2003, cited

Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041, followed

Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWSC 222; (2000) 18 ACLC 343, cited

VL Finance Pty Ltd v Legudi [2003] VSC 57; (2003) 54 ATR 221, applied

Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560, applied

Primrose Couper Cronin Rudkin (Southport) for respondents

[1] de JERSEY CJ: I have had the advantage of reading the reasons for judgment of Keane JA. I agree that the appeal should be dismissed, with costs, for those reasons. I will briefly state the essential steps in my own reasoning.

[2] Each of the agreements was evidenced by a document (respectively dated 25 July 1989 and 29 March 1990) which made it clear that the monies advanced were repayable on demand (in one case not later than five years into the future). Consistently with Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041, 1043 and Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560, 566, the cause of action in respect of each agreement arose at the time of the lending of the money. Consequently, the proceeding commenced on 29 May 2003 was barred because of s 10(1)(a) Limitation of Actions Act 1974 (Qld).

[3] Counsel for the appellant, Mr Sweeney, contended - by reference primarily to the document, but also with reference to the evidence of the communications between the parties (paras 6-17 affidavit J S Whittle sworn 9 November 2004) - that the document dated 25 July 1989 should be construed as giving the respondents, as borrowers, the option of not repaying the amount advanced for a period of five years from the date of the advance. That submission is unsustainable.

[4] Evidence of things allegedly said leading up to the signing of the earlier agreement, on which the appellant relied as excluding summary judgment and warranting a trial, was not inconsistent with, and could not displace, the plain, ordinary construction of the document, as evidencing an agreement that the monies were repayable on demand.

[5] The appellant relies on alleged conversations between the appellant and the first respondent in Dubai in July 1998, as evidencing a fresh agreement, activating a newly running six year limitations period. That conversation occurred after the expiration of the limitations periods in respect of each of the earlier agreements. As the learned primary Judge pointed out, the alleged promise - to allow more time and reduce the interest rate to five per cent, appeared to relate only to the monies lent under the first of the earlier agreements; and further, that although both respondents were parties to that loan, the alleged promise was made in relation to a statement put forward by the male respondent alone.

[6] Those complications aside, that alleged agreement could not avail the appellant in circumstances where the limitations period had expired. The expiration of the limitations period did not extinguish the debt, but barred recovery proceedings (Commonwealth v Verwayen (1990) 170 CLR 394, 405, 425). The reality is that in July 1998, on this evidence, the male respondent did no more than promise again to pay an existing debt, albeit one in respect of which proceedings for recovery were barred. In the words of Isaacs J in Executor, Trustee and Agency Co of South Australia v Thompson [1919] HCA 51; (1919) 27 CLR 162, 171, there was in 1998 no "new but entirely independent" agreement then reached, "the former one having ceased to exist".

[7] The claim, based on para 19 of the appellant's solicitor's affidavit of 9 November 2004, that the later agreement (29 March 1990) amounted not to a loan by the appellant to the male respondent, but that respondent's guarantee of a loan by the appellant to the company Butestyle Pty Ltd, is contradicted by the terms of the document of 29 March 1990, which clearly evidence a loan from the appellant to the male respondent. In para 20 of that affidavit, the deponent confirms that the document was signed "to document what had occurred in relation to these payments", and asserts "it was not a sham document". Consistently, para five of the statement of claim pleads a loan, not a guarantee. Pleading an oral guarantee, the appellant would have been confronted by s 56 Property Law Act 1974 (Qld). The contention that the appellant should have been permitted to amend the statement of claim must fail, because an amendment would, in these circumstances, have been futile.

[8] Because it was abundantly plain the proceeding must fail, judgment was rightly entered summarily for the respondents.

[9] KEANE JA: The appellant brought an action to recover moneys alleged to be owing to him by the respondents. The respondents brought an application for summary judgment pursuant to r 293 of the Uniform Civil Procedure Rules 1999 (Qld) ("UCPR") on the footing that the provisions of s 10(1) of the Limitation of Actions Act 1974 (Qld) ("the Act") afforded the respondents a complete defence to the appellant's action.

[10] The learned primary judge granted the respondents' application for summary judgment on the basis that, notwithstanding the caution which must attend the exercise of the summary jurisdiction conferred by UCPR r 293,[1] the limitation defence in this case was "so strong that ... the action is one which is bound to fail".

[11] The appellant agitates three issues on appeal. In relation to the first issue, he contends that the learned primary judge erred in holding that each cause of action on which the appellant sued was time barred. The second issue involves an argument that the agreement founding one of the causes of action on which the appellant sued had been varied in July 1998 so as to enliven a new limitation period. The third issue involves an argument that the agreement which founded the appellant's other cause of action was not a loan but a guarantee of repayment by the respondents of a loan made by the appellant to another entity, so that the cause of action did not arise until there was a demand for performance. I propose to address these issues in turn.

[12] The first issue turns on the terms of two agreements, each of which is evidenced by a document described as a "promissory note" entered into by the respondents in favour of the appellant. The first is dated 25 July 1989 ("the first note"). It provides:

"We, the undersigned Mr William H Hindman Ayre and/or Mrs Fareda Ayre (Maidenname [sic] Jabour) promise to pay in full either together or as individuals upon demand but not later than five years from the date of this Note to the Lender or his Legal Representative(s) or Inheritor(s) the sum of United States Dollars 50,000.00 (Fiftythousand [sic]) plus Interest at 9 (nine) per cent per annum."

[13] The second instrument is dated 29 March 1990 ("the second note"). It provides:

"I the undersigned William Henry Ayre promise to pay in full upon demand to Falko Haller or his Legal Representative(s) or Inheritor(s) the sum of A$35,000 Australian Dollars Thirty Five Thousand, together with the sum of DM50,000 Deutsche Marks Fifty Thousand in Legal Tender, plus interest (to be determined at a later date)."

[14] No action for the payment of the debts acknowledged by these instruments was commenced until May 2003.

[15] The respondents submitted that the cause of action was barred because it had not been commenced within six years of the date upon which it accrued. The learned trial judge accepted that submission and, following the decision of Fullagar J in Ogilvie v Adams,[2] held that, when money is advanced on terms that it is to be repayable "on demand", then the cause of action for recovery accrues on the date of the advance without the need for any demand. I propose now to examine the decision in Ogilvie and its place in the law before discussing the application of the law to the facts of this case.

[16] In Ogilvie, the plaintiff, as trustee of a bankrupt's estate, sued the defendants, who were the executors and trustees of the will and estate of the bankrupt's wife, for money lent by the bankrupt to his wife in April 1957. His case was put as one where all the terms of the loan were to be found in the one written instrument, which was in the following terms:

" ... I, Doris Melba Adams hereby acknowledge to have received from you the sum of 31,600 pounds being a loan to me repayable on demand. Dated this 29th Day of April 1957. Signed D M Adams."

[17] Demands for the repayment of the loan were made in July and October of 1972. These demands were admitted to have been received by the defendants who refused to make any payment on the grounds that the alleged debt was, and had been at all material times, barred by the Limitation of Actions Act 1958 (Vic). It was also alleged that the document was a "promissory note" for the purposes of s 41 of the Stamps Act 1946 (Vic) and so, not having been stamped for duty, was inadmissible in the proceedings.

Was the instrument signed by the debtor a promissory note?

[18] Fullagar J held that the instrument signed by the bankrupt's wife was not a promissory note because it was "no more than an acknowledgement of the receipt of money upon simple loan; it is simply an acknowledgement of indebtedness in simple loan and no more".[3] His Honour concluded that he was "of [the] opinion that the acknowledgement ... does not contain any promise to pay, within the meaning of s 41 of the Stamps Act 1946".[4]

When did the cause of action for repayment of the acknowledged debt accrue?

[19] In terms of legal principle, the following passage serves best to summarize his Honour's reasoning:[5]

"The common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor's money, and this whether the creditor brought an action of debt or an action in indebitatus assumpsit. Therefore if A lends money to B, then instantly B is detaining A's money. In order to prevent a cause of action for recovery arising in A instantaneously on paying the money, the parties must expressly contract out of that situation by words clearly inconsistent with that situation. The courts have long since settled it that a mere statement or agreement that the money is repayable on demand (or request or at call) is not sufficient to contract out of that situation where all else that is known of the terms of the contract is that A has paid money to B by way of loan. The lender's cause of action still arises instanter on the receipt of the money by the borrower, so that the lender's cause of action becomes statute barred at the expiry of six years after the receipt of the money."

[20] Fullagar J cited a line of authority beginning in the 17th century in support of this approach. Of particular interest, and of most importance to his Honour, was that Dixon CJ and McTiernan and Taylor JJ had unanimously stated in Young v Queensland Trustees Ltd[6] that "A loan of money payable on request creates an immediate debt".

[21] Fullagar J distinguished the wording of the written instrument in the case before him from language apt to create a condition precedent to the exercise of the right to repayment:[7]

"In my opinion the acknowledgment ... cannot be construed as meaning anything other than: 'I have received from you '31,600 upon a loan of that species which is called a loan repayable on demand'. And the law says (and has said for a very long time) that that description of loan (repayable on demand or repayable on request) is used in contradistinction to loans where something must be done, or must happen, in order to constitute a cause of action in the lender for recovery of the money. In truth, a loan repayable on request (or on demand, or on call) is 'a loan simpliciter'. It is quite different if the parties choose to say 'being a loan upon terms that the money shall be repayable on three days notice' or (which is the same thing) 'upon terms that the money shall be repayable three days after demand made'. The law is settled that where a loan is said to be of that kind which is recoverable on request, or on demand, it means of that species which is continuously recoverable at all times from the moment of the creation of the relationship of debtor and creditor."

[22] Later in his judgment, Fullagar J cited the example of Murphy v Lawrence[8] where the written instrument acknowledging the existence of a debt went on to provide that, pending demand for the whole of the original sum, payments were to be made every quarter. Referring to the decision of Turner J in that case, Fullagar J explained that:[9]

"It was only the reference in the terms of the contract itself to [quarterly payments] pending demand that led his Honour to decide that this meant that, until some event happened, instalments only were to be paid, and it was this feature (entirely absent in the present case) which led him to distinguish the clear authorities and to hold that the reference to demand qualified the promise to pay."

Was extrinsic evidence admissible as to the terms of the loan?

[23] The plaintiff submitted that further evidence demonstrated that the debt acknowledged by the written instrument was not merely one payable "on demand". As to this submission, Fullagar J concluded that:[10]

"In my opinion the acknowledgment [contained in the written instrument] is the only admissible evidence of, and indeed the only tendered material (admissible or inadmissible) relating to, the terms upon which the loan was made."

[24] His Honour noted that there was admissible evidence that showed a loan had been made but that evidence was held to be insignificant because:

"... it does not take the matter as far as does [the written instrument], and certainly does not show anything which is inconsistent with [the written instrument] or which could affect in any way the construction or effect of its wording."

[25] In any event, Fullagar J could not see the need for further evidence as:

"There is in my opinion no ambiguity about the acknowledgement, and no feature of it which would render admissible extrinsic evidence as to its meaning. Of course evidence would be admissible to show, for example, that the wife never received the money and that her liability to the bankrupt was undertaken as surety for some other principal debtor to the bankrupt or was otherwise collateral to some other transaction. But the extrinsic evidence was not tendered for this purpose and could not possibly be used to prove any such thing."

[26] It is apparent from the foregoing that the ratio decidendi in Ogilvie is the proposition that, where moneys are lent on terms that the loan is repayable "on demand", the consequential debt, and the associated cause of action, arise instantaneously at common law. That proposition has been accepted in a number of different Australian jurisdictions as a correct statement of the law.

[27] In CE Heath Underwriting & Insurance (Australia) Pty Ltd v Daraway Constructions Pty Ltd[11] Batt J (who had actually been junior counsel for the defendants in Ogilvie), when considering when a premium became payable under a contract of insurance, noted that:

"When an insured has notified the insurer and given the necessary particulars under Condition 10 (later 11), the premium is immediately calculable. As it is payable 'forthwith on demand' no actual demand is necessary and it is payable from that time: Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041 and cases there cited."

[28] In Drinkwater v Caddyrack Pty Ltd (No 3),[12] Young J accepted the correctness of the decision in Ogilvie and explained that:

"The reason why that is so really comes from the ancient idea that a loan of money, which constituted a debt, was a deposit of specific coins that the borrower was obliged to restore at any time. The nearest present day example is where one borrows one's neighbour's lawn mower. The lawn mower is returnable on demand, but one should have it ready at any time for the owner who may reclaim it whenever he or she wishes. If one looks through the early cases such as those relied on in Norton v Ellam, in particular Rumball v Ball (1712) 10 Mod 39; 88 ER 616, one can see that this is the basis of the principle. So that, 'I promise to pay on demand' means 'I am ready to pay at any time'. This line of thinking extends from 1712 to the present day and I need only mention Jackson v Ogg (1859) Johns 397; 70 ER 476; Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041 and DFC New Zealand Ltd v McKenzie [1993] 2 NZLR 576."

[29] I pause to note here that Young J's reasoning, that the statement "I promise to pay on demand" is not significantly different from the statement "I am ready to pay at any time", would seem to be determinative of the limitation issue so far as the second note is concerned.

[30] Other recent cases in which the principle in Ogilvie has been accepted include Brott v Grey[13] and Switz Pty Ltd v Glowbind Pty Ltd.[14] Recently, in Mackenzie & Anor v Albany Finance Ltd[15] McLure J said:

"Where there is a simple loan of money, the debt is due and payable immediately and thus the cause of action therefore arises immediately upon the loan of the money. This position can be unchanged notwithstanding an express agreement making the loan repayable on demand, on request or on call: Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560 at 566; Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041.

If, however, the agreement between the parties is that the loan is repayable only upon the happening of a certain event or upon compliance with a condition precedent to liability, the debt is not immediately due and payable and the cause of action does not arise until the happening of the event or compliance with the condition: Atkinson v Bradford Third Equitable Benefit Building Society (1890) 25 QBD 377. An agreement may provide that the amount of the loan is not repayable until a demand is made, in the sense that the making of the demand is a condition precedent to liability to repay, and in that case the cause of action does not arise until demand has been made: Joachimson v Swiss Bank Corp (above); Re Brookers (Aust) Ltd (in liq); Brooker v Pridham (1986) 41 SASR 380 at 382.

However, the banker and customer relationship is regarded as an exception to the general rule relating to simple contracts. It is now regarded as settled law that, subject to any express term to the contrary, it is an implied term of a contract between a banker and its customer that moneys owed by a banker on a current account do not become due and payable until a demand is made for the money: (above), ; ; ... "

[31] An argument that the position adopted in Ogilvie should now be taken to have been relaxed was advanced recently in VL Finance Pty Ltd v Legudi.[16] It was submitted that the appropriate test was to consider whether it was reasonably open to infer that the parties would have agreed that the cause of action to recover the money loaned would not accrue until a demand had been made. Reference was made to the recent decision of Bryson J in Gleeson v Gleeson[17] as well as to the decision of the Full Court of South Australia in In re Brookers (Aust) Ltd (in liq); Brooker v Pridham.[18] Nettle J rejected the submission. His Honour undertook a comprehensive review of the authorities. I respectfully adopt his Honour's analysis:[19]

"[45] Certainly, in Gleeson v Gleeson, Bryson J criticised the reasoning in Ogilvie on the basis that Fullagar J had referred to the issue before him as turning on a question of law. As Bryson J put it:

'Fullagar J was of the view that the meaning of the words in a written document recording the terms of the loan when standing alone was a clear rule of law; with respect, it may be doubted whether the rule is a rule of law, as the need to construe the instant document according to its terms can never be escaped.'

[46] But if I may say so with respect, the criticism is misdirected. Read as a whole, Fullagar J's judgment leaves no doubt that the exercise is always one of construction. The point which Fullagar J made about the 'rule of law' is simply that, in undertaking the exercise in construction, one needs remember that the meaning of the expression 'on demand' is so much settled by rule of law that it is to be read as 'immediately due', unless there be express words or necessary implication to establish contrary intention. As Fullagar J put it:

'...the meaning of the words in such a writing [scil, a contract of loan] are settled by as rigid a 'rule of law' as that rule of the common law which establishes that, in a will... 'to my issue who shall be living at my death', the word 'issue' means 'descendants of every degree' and does not mean merely 'children'. But the contract rule, like the wills rule, is a rule of construction in the sense that other words being part of the contract may drastically alter what would otherwise have been the meaning of the words in question... Of course the speculative builder may say, in his contract or in his acknowledgment, that the money is to be repaid when the houses are sold... And those circumstances are themselves of the kind which may provide the law with criteria on which to imply if necessary into the requirement of the demand some requirement of reasonableness in the nature of notice.' (Emphasis added.)

[47] In Gleeson v Gleeson Bryson J also made the observation that:

'Generally, a simple contract of loan which does not provide for the time of repayment is understood to create an obligation to repay immediately, and reference in the contract to repayment on request or on demand does not alter this. However in more complex contracts references to a demand for payment are usually construed as meaning what they say, so that the need to [sic] a demand has substance.'

[48] But that observation hardly suggests a departure from the principles identified in Ogilvie. It is not altogether clear what Bryson J envisaged should be included in the category of 'more complex' cases. The 3 authorities referred to by Bryson J as illustrative of the 'more complex' case category are all to do with the distinction between the obligations of a principal debtor and those of a surety. They are directed to a rule of law that in a contract of suretyship (as opposed to a contract of loan) the words 'on demand' ordinarily mean that no cause of action accrues until demand is made. But insofar as they have anything to say on the meaning of the words 'on demand' in a loan contract, they are consistent with the view that the loan is immediately due.

[49] In any event, Gleeson v Gleeson is a case about the construction of a written loan contract, in which the express terms of the contract yielded a clear implication that notice must be given before the debt would be due. That is not this case. There is nothing in Gleeson v Gleeson that supports the existence of some broad principle of construction of the kind for which VL Finance Pty Ltd contends which is applicable to the facts of this case.

[50] That leaves for consideration the decision of the South Australian Full Court in Brooker v Pridham. In that case the facts were that a company which had been incorporated prior to 1947, and into which some of the members had deposited surplus capital funds, merged with another company in 1950-51 and there arose a newly incorporated merged company into which were absorbed the assets and liabilities of the merging companies including the member deposits. In 1962 another company purchased the assets of the merged company and it repaid the merged company's bank overdraft, and thereafter until the merged company went into liquidation in 1972 it did not trade but prepared annual financial statements which identified the member deposits as deferred liabilities. Upon liquidation the liquidator rejected the members' proofs of debt on the basis that the deposits were statute barred. It was held that they were not.

[51] King CJ decided the point on the basis that:

'The shareholders' deposit account creditors and the directors of the new company clearly expected that the balance of the accounts after ordinary deposits and withdrawals would be available indefinitely for use as working capital. Detail is not available, but the ordinary withdrawals must have been preceded by some form of notice, at least as much notice as involved in a withdrawal from a current account at a bank, see Joachimson v Swiss Bank Corp. All must have assumed that such a creditor could not withdraw the entire balance of his account without some notice. The relationship of the parties, the course of conduct of the parties in relation to the operation of the accounts and the common assumption that the funds would be in use as working capital, combine to compel the implication of an agreement that liability to repay would not arise until at least some notice was given. It seems to me therefore that there was no immediate liability to repay and no right of action.'

'If a loan is not to be treated as being of that species which is continuously recoverable at all times, then there must be a basis for asserting that the arrangements between the parties were contrary to such a legal situation eg because of the imposition of qualifications as to specific notice of mode of withdrawal or the requirement for some additional act or event before and action could be brought. Alternatively, some other feature of the arrangements between the parties may clearly negative the operation of the normal rule ...

In the instant case ... it is manifest that, as from the time when the deposit accounts were transferred to the company, such were the drawing limitations associated with them that in no sense could it be said that the deposits were payable instantly in full and there was simply no basis on which the principle stemming from Norton v Ellam ... could possibly operate.

... the evidence overwhelmingly suggests that there was then no right of immediate payment in full vested in the deposit holders. The only reasonable inference to be drawn was that it was mutually agreed that the deposits should stand without further interest accruals and not be payable or paid or be subject to a pro rata payment until the net financial position of the company was resolved.'

Mohr J agreed with both of the other judges.

[53] It was submitted on behalf of VL Finance Pty Ltd that the words used by King CJ and Olsson J in the passages set out above represent a departure from the view expressed by Fullagar J in Ogilvie v Adams (that the something which justifies departure from the normal rule is not to be found in some purpose or motive, real or supposed, by reason of which the loan was made and with respect to which the contract is silent). But, read in context, the passages referred to permit of no such notion. The conclusion drawn by King CJ and Olsson J was simply that it had to be a term of the contract that the member loans would not be repayable without notice (because, in the absence of such a term, the contract would fly in the face of all that the parties had done). As an exercise in the construction of a contract constituted of conduct, that approach accords with established principle. There is nothing in either judgment that sanctions the implication of contractual terms not necessary for business efficacy. Properly understood, Brooker v Pridham represents an application of orthodox principles of contractual construction to the facts of that case. I see nothing in it to support a relaxation of the approach which was adopted in Ogilvie v Adams."

[32] This review of the recent case law by Nettle J confirms that the principle in Ogilvie, in its full rigour, remains securely established in our commercial law.

[33] The appellant argues that the principle in Ogilvie has no application to this case because it is limited to agreements exclusively in writing, where no time is stipulated for payment and where the loan is said to be payable on demand simpliciter. The foregoing discussion is sufficient to demonstrate that these arguments are without substance.

[34] The true position is that when a written instrument contains no more than a bare promise to pay upon demand, that evidences or constitutes a loan simpliciter. The limitation period in respect of such a loan, whether it is evidenced in writing or not, is taken to run from the date of the advance.

[35] Accordingly, the first issue, insofar as it relates to the second note, must be resolved against the appellant.

[36] The first note is in a slightly different position. It contains the phrase "upon demand but not later than five years from the date of this Note".

[37] In my opinion, the better view of the meaning of the language used by the parties in the first note is that the reference to "not later than five years" should be taken to mean that the loan is payable in full "on demand at any time, but in any event at the end of five years". If the principle in Ogilvie applies, the cause of action on the debt was barred in July 1995. If the principle in Ogilvie does not apply because the loan was not a simple loan payable on demand, and the appellant was entitled to pursue a claim for the recovery of the debt after July 1994, then that cause of action was statute barred in July 2000.

[38] Counsel for the appellant sought to propound a very sophisticated argument in relation to the first note whereby demand for repayment was necessary to entitle the appellant to sue for recovery of the debt after the expiration of five years from the execution of the note. This argument was advanced in an attempt to avoid Ogilvie on the footing that, when the five years expired, the principle in Ogilvie had no application because the loan was not originally payable on demand. It was part of this argument that the respondents were entitled to choose not to repay the loan until the expiration of five years if no demand was made earlier. But, even if this aspect of the appellant's argument be accepted, the problem for the appellant remains that on no possible view of the agreement between the parties was demand by the appellant necessary to entitle the appellant to sue to recover the debt after July 1994.

[39] It follows, in my opinion, that so far as the terms of the agreements are concerned, any action for recovery of the debt is out of time.

[40] The appellant argues that extrinsic evidence may affect the resolution of this issue in relation to the first agreement and that the learned trial judge erred in failing to appreciate that this meant that the case was not one in which summary judgment was appropriate. But the extrinsic evidence upon which the appellant seeks to rely does not afford any reason to understand the terms of the agreements in some way different from the ordinary meaning of the words actually used in the notes. That was the view which commended itself to the learned primary judge and, in my respectful opinion, that conclusion was inevitable.

[41] In this regard, the first loan was made after discussions in which the appellant had agreed to lend the first respondent US$50,000 in order to contribute to the capital of a company, Butestyle Pty Ltd, in which the appellant and the first respondent were to be shareholders. The appellant's evidence was that on 25 July 1989 there were discussions in which the first respondent said that he came from a rather wealthy family, as did his wife, and it was just a matter of time until he and his wife could collect the US$50,000 together and pay the appellant back. The appellant suggested making a deadline for payment of five years, saying words to the effect "we should put some kind of time horizon on there for the date by which you should repay the money". This was in reference to the note signed that day. This evidence could not displace the principle in Ogilvie because it would simply confirm that construction of the terms of the note referred to in [37] above.

[42] In relation to this issue, the appellant argues that, in discussions between the appellant and the first respondent on 31 July 1998 at Dubai, the respondents orally agreed to repay the US$50,000 loan. It is the appellant's contention that this agreement, pleaded as a variation to the original loan, took the claim in respect of the first loan out of the operation of the statute. It may be noted that the respondent denies the appellant's version of events but, for present purposes, it is necessary to proceed on the footing that the appellant's evidence is to be accepted.

[43] The appellant's evidence was that he demanded that the US$50,000 be repaid and said:

"If I don't get the money from you, I will not hesitate to go to Court".

"We will repay the money we owe you, we just need more time".

"I will allow you more time to pay. Interest rates have gone down since the moneys were loaned to you. I will reduce the interest rate on the loan to 5%."

[44] According to the appellant's evidence, following the conversation in Dubai, he made demand in September 1998 for payment of the US$50,000 by 30 October 1998.

[45] On the basis of this evidence, the appellant submits that it is arguable that a new loan obligation arose from what is said to be the respondent's acceptance of this new arrangement. The appellant submits that this agreement was supported by the appellant's forbearance from immediately taking proceedings for recovery of the debt, and his agreement to reduce the applicable interest rate.

[46] I turn now to a consideration of the legal principles pertinent to the resolution of this argument.

[47] The appellant had previously argued that the debt had been "revived" in 1995 by letters said to amount to an acknowledgement of debt for the purposes of s 35(3) of the Act. That argument was not pressed in this Court. The appellant has, instead, sought to argue that the debt was revived by the oral agreement in Dubai. It is possible for an oral agreement for valuable consideration to revive a debt, the recovery of which would otherwise be barred by statute. This was recognised in Executor, Trustee & Agency Co of South Australia Ltd v Thompson.[20] In that case the respondent sued the appellant, which was the executor of the estate of Edward Saint deceased, for debt due, either as the balance of money due for goods sold and delivered by the respondent to the deceased and for interest, or for money found to be due upon a balance of account and upon an account stated. Proceedings were commenced by the respondent in the Local Court in November 1918. The appellant pleaded the Limitation of Suits and Actions Act 1866 (SA) and contended on the evidence that, because time had begun to run more than six years before, the statute barred the claim. The respondent's evidence was that, in June 1912, he and the Saint examined the account for the amount due for goods sold and delivered. The respondent said to Saint: "Are you agreeable to pay what is there and with bank interest every year?" Saint said: "All right, that will do me". The respondent then said: "I will wait until 1st January, 1913". At the close of the respondent's case the Local Court nonsuited him on the ground that the action was time-barred. The respondent appealed successfully to the Supreme Court, which set aside the nonsuit and ordered a new trial. The appellant appealed to the High Court. In dismissing the appeal, Barton J said:[21]

"I agree completely with the Supreme Court in the deduction which they have drawn from the cases of Jones v Ryder [1838] EngR 149; (4 M & W 32) and Hopkins v Logan [1839] EngR 120; (5 M & W 241), 'that the plaintiff may rely on an agreement which is not in writing to take the debt out of the provisions of the Statute if he can show that it was made upon a fresh consideration ... The Statute applies independently to that agreement, and time begins to run from the breach' of it ... "

[48] In the same case, Rich J said that:[22]

"I agree that on the facts before us it is competent for the Local Court to hold, if they think fit - as to which I express no opinion, - that by a new agreement for valuable consideration a new obligation was substituted for the old debt, the new obligation being to pay on 1st January 1913 the agreed amount for goods and interest to date."

[49] Isaacs J emphasized the importance of an intention to place the obligations of the parties on a new footing going beyond a "mere promise to pay an existing debt". The existing debt is, of course, one in respect of which the defendant has a good defence under the statute. It is apparent that the law does not readily conclude that a party is to be taken to have bargained away a good defence under the statute. The statute permits the old debt to be revived by acknowledgement only if the acknowledgement is in writing.[23] An oral acknowledgement of a debt, even if supported by consideration, is not sufficient to make the debt enforceable against the debtor. In Thompson, Isaacs J said the following regarding the claim upon account stated in that case:[24]

"To use the language of Rolfe B in Ashby v James, [1843] EngR 652; (11 M & W 542 at 544) 'it is a transaction between the parties, out of which a new consideration arises for a promise to pay the balance'. And it is not what Alderson B, in the same case, calls 'a mere parol statement of, and promise to pay, an existing debt' which, as he observes, would not take the case out of the Statute 'because to hold otherwise would be to repeal the Statute'. Now, if that be the principle, it has to be seen whether the interview of June 1912 was merely - even though for valuable consideration - an arrangement to admit an existing debt, coupled with a binding agreement to give time to pay it until January 1913, or was a bargain for valuable consideration to place everything on a new footing, to supersede the old debt entirely and to create a new obligation, namely, to pay the price of goods already delivered taken as at the entered amounts, and interest as claimed, the period of payment of this new debt being fixed at January 1913. In that case it would resemble in principle the case of Helps v Winterbottom [1831] EngR 101; (2 B & Ad 431). In the first alternative, the plaintiff fails because the evidence is inadmissible or insufficient in law; in the second the plaintiff succeeds, so far as the Statute is concerned, because the bargain, though oral, is not offered as evidence of the original cause of action to which alone the Statute applied, but to a cause of action not only new but entirely independent, the former one having ceased to exist. Which of these two alternatives should prevail it is, of course, beyond my province to say or even suggest. I can only say that on the evidence before us it is not legally impossible to find either: whichever on the new evidence to be given appears the more probable and more reasonable will be for the tribunal of fact to determine for itself. Our duty is simply to say that it is on present materials open to adopt either, and therefore the nonsuit was wrong and the appeal should be dismissed."

[50] It is apparent from this passage that it is not enough that an oral statement by a debtor simply recognises a continuing obligation to pay a debt; that would not even be a sufficient acknowledgment of the existing debt, much less the foundation of a new agreement. Further, it is also clear that a promise to pay on the part of the debtor will not be sufficient if it is qualified, for example, by words which show an intention to pay only that which is "truly owing" or legally recoverable under the previous arrangement.[25]

[51] Following the approach in Thompson, I consider that, on the evidence adduced by the appellant, the parties cannot be said to have agreed in July 1998 to put their dealings on "a new footing" independent of the previous agreement. The appellant's evidence is, unlike the evidence in Thompson, unequivocal in this regard. According to the appellant's evidence, the first respondent agreed to "repay the money we owe you" to which the appellant said "I will allow you more time to pay that money". The first respondent was agreeing to pay the debt which remained payable on demand.

[52] The appellant's agreement to forbear from suing on the loan may be said to suggest that the parties should be taken to have put their relationship on a new footing. A difficulty for the appellant here is that the period of his forbearance was not specified. It could be said that the unspecified forbearance was to be a "reasonable period" but, in the context of the parties' dealings, the notion of reasonable time is conceptually uncertain. Does it mean "forthwith"? Does it mean "sufficient time to arrange a transfer of funds"? Does it mean "sufficient time to raise funds"? An indefinite forbearance may be good consideration to bind a promisor but here we are not concerned with consideration, as Isaacs J explained in Thompson in the passage cited above, but with the proposition that a new agreement was concluded. The uncertainty of the duration of the appellant's forbearance is symptomatic of a more fundamental problem for the appellant.

[53] In my opinion, the fundamental problem for the appellant is that the promise on the part of the respondents which the appellant sets up is not one which "supersedes the old debt entirely". Rather, it operates as a promise to pay what is owing under the original loan, a promise which can operate only by reference to the debt owing in respect of the loan. And that debt is payable on demand.

[54] At this point, I digress to consider whether consideration sufficient to support the agreement as varied appears from the appellant's evidence. It is well established that forbearing to sue can constitute good consideration. As Williams JA said in Alford v Ebbage:[26]

"Any disputed cause of action and any asserted right disputed by an opposing party can be the subject of a compromise. So much is clear since Callisher v Bischofsheim (1870) LR 5 QB 449; especially per Cockburn CJ at 452. The decision in Miles v New Zealand Alford Estate Co (1886) 32 Ch D 266 is also instructive. Bowen LJ at 291 noted that it is not necessary to use 'language of any particular form, or writing of any particular character' in order to establish a forbearance. After saying that: 'Of course forbearance of a non-existing claim would not be forbearance at all.' he went on:

'It seems to me that if an intending litigant bona fide forbears a right to litigate a question of law or fact which is not vexatious or frivolous to litigate, he does give up something of value. It is a mistake to suppose it is not an advantage, which a suitor is capable of appreciating, to be able to litigate his claim, even if he turns out to be wrong. It seems to me it is equally a mistake to suppose that it is not sometimes a disadvantage to a man to have to defend an action even if in the end he succeeds in his defence; and I think therefore that the reality of the claim which is given up must be measured, not by the state of the law as it is ultimately discovered to be, but by the state of the knowledge of the person who at the time has to judge and make the concession.'"

[55] It would appear that Bowen LJ was speaking of promising not to sue at all. That is different from promising only to forbear temporarily. As Isaacs J pointed out in Butler v Fairclough:[27]

"It must not be assumed - as the appellant's argument undoubtedly assumed - that a promise to abstain from issuing a writ is always a valuable consideration. The position may, I think, be classified thus:-

(1) A promise not to sue for a limited period, definite or indefinite, is a valuable consideration where the substantive claim is one for which the other party is liable (Longridge v Dorville (5 B & Ald 117); Fullerton v Provincial Bank of Ireland ((1903) AC 309)).

(2) A promise not to sue at all, that is, an abandonment of a substantive claim, is a valuable consideration, if there be either liability or a bonâ fide belief of liability (Longridge v Dorville (5 B & Ald 117); Miles v New Zealand Alford Estate Co (32 Ch D 266 at 290 - 291)).

(3) A promise to abandon a suit in whole or part already commenced is a valuable consideration where there is a bonâ fide claim (ibid).

(4) Mere temporary forbearance to sue where there is no liability is no consideration (Jones v Ashburnham [1804] EngR 95; (4 East 455 at 464); In re Pilet ((1915) 3 KB 519 at 526); Longridge v Dorville (5 B & Ald 117); Graham v Johnson (LR 8 Eq 36 at 44)), even if the claim be disputed ( ;

[56] If the appellant's promise to refrain from suing is seen to fall into the fourth category outlined by Isaacs J, then the appellant gave no consideration to support the fresh agreement. Accordingly, this issue as to consideration might be resolved in favour of the respondents only if the debt was discharged by reason of the expiration of the limitation period; but a limitation defence does not mean that no action may be brought on the cause of action or that the debt has been discharged. A limitation defence of the kind contained in the Act serves only to bar the remedy on the cause of action.[28]

[57] In any event, any technical difficulty for the appellant in relation to consideration is removed by his agreement to reduce the interest rate.

[58] I return now to what I consider to be the substantial difficulty for the appellant on this point, which is that the parties did not make a new bargain independent of the old. Rather, they agreed that the respondents would pay what was owing on the loan, with the debt remaining payable on demand. In my view, it cannot be said that a new agreement was struck between the parties in terms of the law stated in Thompson, where Isaacs J said:[29]

" There are two causes of action sued upon: the first is the price of goods sold and delivered with interest, and the second for the amount of an account stated with interest. The only defence with which this appeal is concerned is the Limitation of Suits and Actions Act 1866 (30 Vict No. 14), sec. 43 of which is almost the same as the enacting part of sec. 1 of Lord Tenterden's Act (9 Geo IV c 14). The two enactments are not absolutely identical, but for the present purpose may be regarded as identical.

The question we have to consider turns, as I think, upon whether there was evidence before the Local Court upon which that tribunal could reasonably find (1) that in June 1912 Thompson and Saint came to an agreement for valuable consideration in respect of the goods delivered and interest, and (2) that that agreement superseded their previously existing obligations in respect of those matters. If those questions are answered in the negative, then the nonsuit was right, and should be restored.

I agree with Mr. Cleland's argument that the mere fact that there was a new contract for valuable consideration whereby Thompson bound himself not to sue until January 1913, would not entitle the respondent to succeed. In East India Co v Oditchurn Paul [1849] EngR 1151; (7 Moo PCC 85 at 112) the Privy Council say: "There might be an agreement that in consideration of an inquiry into the merits of a disputed claim, advantage should not be taken of the Statute of Limitations in respect of the time employed in the inquiry, and an action might be brought for breach of such an agreement; but if to an action for the original cause of action the Statute of Limitations is pleaded, upon which issue is joined - proof being given that the action did clearly accrue more than six years before the commencement of the suit - the defendant, notwithstanding any agreement to inquire, is entitled to the verdict." On the other hand, if the double proposition stated be answered in the affirmative, then, in my opinion, the appeal should be dismissed, and the case go for rehearing as directed in order that the Local Court should come to its own conclusion on the matter. Mr. argument went so far as to contend that no oral agreement of any nature could prevent the operation of the Statute. That argument went too far.

[59] In this case, the appellant's evidence obviously does not support a cause of action for an account stated. The appellant's cause of action is for recovery of the debt outstanding as a result of the non-payment of the loan. The appellant's claim under the varied agreement seems to me to be squarely within the observations of Isaacs J in Thompson. The so-called new claim is, at best for the appellant, only "a new agreement that the old claim is well-founded". There was not, in the words of Rich J in Thompson, "a new obligation substituted for the old debt".[30] Rather, there was a promise to pay what might "on inquiry" be found to be truly owing in respect of the loan. The appellant's evidence of the Dubai agreement does not reveal an intention to bargain away a good defence to the appellant's claim in respect of the debt.

[60] In my opinion the appellant fails on the second issue in the appeal.

[61] The appellant's statement of claim pleaded that the second note evidenced, as on its face it appears to do, a loan by the appellant to the first respondent. The appellant argues that the learned primary judge should have held that the true agreement was an oral guarantee of repayment of a loan by the appellant to Butestyle Pty Ltd.

[62] In this regard, the appellant complains that the learned primary judge did not address this argument. That "omission" is explicable by reason of the circumstance that this new case is not only unsupported by any evidence, it is inconsistent with the appellant's sworn evidence and the terms of the note itself. His Honour's failure to mention this argument should probably be understood as an act of forbearance on his Honour's part in conformity with the maxim de mortius, nil nisi bonum.

[63] The only evidence which was relied upon to support this argument was contained in an affidavit sworn by the appellant's solicitor on 9 November 2004 on information from the appellant. It was to the effect that in 1989 or 1990 the appellant lent Butestyle $25,000, $10,000 and DM50,000 in order to enable Butestyle to obtain merchandise. Butestyle lacked the liquidity to make the payments. The appellant told the first respondent that he was not willing to make the payments. The first respondent said words to the effect that if the appellant would make those payments he (the first respondent) would personally guarantee those amounts. The appellant then agreed to make the payments on that basis, and the appellant then made the payments. The 29 March 1990 promissory note was not signed at the same time as the money was transferred. When the appellant had a tax audit in 1990 it became necessary for him to document what had occurred in relation to these payments. He contacted the first respondent to discuss the need to document the "guarantee arrangement". They agreed on the second promissory note for that purpose. The appellant's solicitor's evidence on this point concludes with the assertion, sworn on information from the appellant, that the second promissory note "was not a sham document".

[64] It is impossible to understand this assertion as anything other than an explicit confirmation that the second note was intended by both parties as the true record of the terms of their arrangement - whatever might have previously been the terms of that arrangement.

[65] Further, although it is not necessary to say so, this new case could be advanced only upon amendment of the statement of claim. There can be no doubt that, if the appellant sought to plead the new case of an oral guarantee, the respondents would resist the making of the amendment by raising the defence afforded by s 56(1) of the Property Law Act 1974 (Qld), which renders unenforceable guarantees which are not in writing and signed by the party to be charged thereon. Whether the appellant could answer such a defence seems to me to be, at best, speculative. The learned primary judge was correct not to withhold summary judgment on this ground.

[67] I would order that the appeal be dismissed and that the appellant pay the respondents' costs of the proceedings.

[68] MULLINS J: I agree with the respective reasons for judgment of the Chief Justice and Keane JA and the orders proposed.

[1] Cf Gray v Morris [2004] QCA 5 at [7], [23] and [46]; [2004] QCA 5; [2004] 2 Qd R 118 at 124, 127 and 133.

[2] [1981] VicRp 92; [1981] VR 1041.

[3] Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041 at 1059.

[4] Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041 at 1060.

[5] Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041 at 1043.

[6] [1956] HCA 51; (1956) 99 CLR 560 at 566.

[7] Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041 at 1051 - 1052. His Honour recognized, of course, that if the terms of the loan provide that demand for repayment is a condition precedent to the right to recover payment, a demand is a necessary element of the right of action, and time will not start to run until demand is made. See Lakshmijit s/o Bhai Suchit v Faiz Mohammed Khan Sherani [1974] AC 605 at 616 - 617.

[8] [1960] NZLR 772.

[9] Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041 at 1058.

[10] Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041 at 1047.

[11] Unreported, Supreme Court of Victoria, No 2662 of 1987, 3 August 1995 at [103].

[12] Unreported, Supreme Court of New South Wales, No 3970 of 1996, 28 November 1997 at [9].

[13] [2000] FCA 1727 at [46] - [48]; [2000] FCA 1727; (2000) 181 ALR 617 at 626 - 627.

[14] [2000] NSWSC 222 at [25]; [2000] NSWSC 222; (2000) 18 ACLC 343 at 346.

[15] [2003] WASC 100; CIV2657 of 2000, 30 May 2003 at [243] - [245]. An appeal against this decision was allowed but on other grounds: Mackenzie v Albany Finance Ltd [2004] WASCA 301; FUL117 of 2003, 16 December 2004.

[16] [2003] VSC 57; (2003) 54 ATR 221.

[17] [2002] NSWSC 418; No 4116 of 2001, 29 May 2002.

[18] (1986) 41 SASR 380.

[19] [2003] VSC 57 at [45] - [53]; [2003] VSC 57; (2003) 54 ATR 221 at 229 - 231 (citations omitted).

[20] [1919] HCA 51; (1919) 27 CLR 162 at 167.

[21] Executor, Trustee & Agency Co of South Australia Ltd v Thompson [1919] HCA 51; (1919) 27 CLR 162 at 167 (citations in original).

[22] Executor, Trustee & Agency Co of South Australia Ltd v Thompson [1919] HCA 51; (1919) 27 CLR 162 at 171.

[23] See Limitation of Actions Act 1974 (Qld), s 35(3) and s 36.

[24] Executor, Trustee & Agency Co of South Australia Ltd v Thompson [1919] HCA 51; (1919) 27 CLR 162 at 170 - 171 (citations in original).

[25] See also Bucknell v Commercial Banking Co of Sydney Ltd [1937] HCA 35; (1937) 58 CLR 155 at 164; York Air Conditioning and Refrigeration (A/sia) Pty Ltd v The Commonwealth [1949] HCA 23; (1949) 80 CLR 11 at 22, 33.

[26] [2002] QCA 194 at [31]; [2002] QCA 194; [2003] 1 Qd R 343 at 353.

[27] [1917] HCA 9; (1917) 23 CLR 78 at 95 - 96 (citations footnoted in original).

[28] Curwen v Milburn (1889) 42 Ch D 424 at 434; Commonwealth v Verwayen (1990) 170 CLR 394 at 405, 425; Pullen & Anor v Gutteridge Haskins and Davey Pty Ltd [1993] VicRp 4; [1993] 1 VR 27 at 72 - 73. Cf the effect of s 63(1) of the Limitations Act 1969 (NSW).

[29] Executor, Trustee & Agency Co of South Australia Ltd v Thompson [1919] HCA 51; (1919) 27 CLR 162 at 168 - 170 (emphasis and citations in original).

[30] Executor, Trustee & Agency Co of South Australia Ltd v Thompson [1919] HCA 51; (1919) 27 CLR 162 at 171.