SOVEREIGN RESOURCES (AUSTRALIA) NL (ACN 009 113 160)

Summary judgment by third party - Application to strike out statement of claim - Turns on its own facts

Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361

1 MASTER SANDERSON: This is the third party's application for summary judgment against the defendant. The application was supported by an affidavit of Mark Christian Hansen ("Hansen"), sworn 31 May 1999. In opposition to the application, the defendant swore an affidavit on 21 June 1999. For reasons which are not presently relevant, the application which was first returned in Chambers on 9 June 1999 was heard at short notice. Nonetheless, I had the advantage of hearing detailed submissions from counsel for both parties.

2 The issue raised by the application is quite narrow. The plaintiff is a finance company which in December 1986 lent to a company styled Hawkstone Investments Ltd ("Hawkstone"), the sum of $200,000. Hawkstone, as security for this loan, mortgaged to the plaintiff 3,000,000 fully paid shares in the third party. At all material times the third party was a subsidiary of Hawkstone. As part of this transaction, both the third party and the defendant provided a joint and several guarantee to the plaintiff to secure the borrowing. That much is common ground and there is no dispute on the facts between the parties.

3 It is to be noted that this transaction took place in December 1986.

4 In July 1988 the third party and the plaintiff entered into an agreement which is referred to in the pleadings as "a Deed of Indemnity". I will refer to it as the Indemnity Agreement. The full terms of the Indemnity Agreement are pleaded in par 9 of the amended statement of claim against the third party. It is then pleaded in par 10 of the statement of claim that the Indemnity Agreement was a deed under the provisions of s 9 and s 10 of the Property Law Act. It is common ground that the effect of the Indemnity Agreement is to relieve the defendant of liability to the plaintiff under the guarantee. That liability is transferred to the third party which becomes liable for the full amount of the guarantee debt.

5 The third party says that the Indemnity Agreement is not a deed and does not fall within the provisions of s 9 and s 10 of the Property Law Act. It therefore says that, as the pleading presently appears, the claim by the defendant upon the third party must fail and summary judgment ought be entered.

6 The defendant's answer to the application is threefold. First, it says that under the Rules there is no provision for a third party to seek summary judgment against the defendant once third party proceedings have been issued. Secondly, it says that it is at least arguable that the Indemnity Agreement is a deed and leave to proceed ought therefore be granted. Finally, it says that even if the Indemnity Agreement is not a deed, there was consideration passing between the parties such as to render the Indemnity Agreement effective as a contract. Although this is not pleaded as a claim against the third party in the present statement of claim, the defendant says that all possible causes of action need be considered in determining whether or not there should be judgment entered for the third party.

7 Because this matter was brought on at short notice and the filing of submissions was dispensed with until counsel for the defendant commenced his submissions counsel for the third party had no notice of the jurisdiction question - that is to say, whether or not summary judgment was open to a third party in these circumstances. Consequently, this issue was not fully argued. However, I have come to the conclusion that summary judgment ought not be entered and therefore I should not put the third party to the expense of addressing in further submissions the jurisdiction question. All I would say is that under the provisions of the Rules there is real doubt as to whether or not summary judgment is open to a third party after orders have been made on a summons for directions.

8 The question raised by par 10 of the statement of claim is whether or not the Indemnity Agreement is, properly viewed, a deed. Section 9 and s 10 of the Property Law Act read as follows:

9. (1) Every deed, whether or not affecting property -

(a) shall be signed by the party to be bound thereby; and

(b) shall be attested by at least one witness not being a party to the deed but no particular form of words is required for the attestation.

(2) It is not necessary to seal any deed except in the case of a deed executed by a corporation under its common or official seal.

(3) Formal delivery and indenting are not necessary in any case.

(4) Every instrument expressed or purporting to be an indenture or a deed or an agreement under seal or otherwise purporting to be a document executed under seal and which is executed as required by this section has the same effect as a deed duly executed in accordance with the law in force immediately prior to the coming into operation of this Act.

Execution of instruments by or on behalf of corporations

10. (1) A deed shall be deemed to have been duly executed by a corporation aggregate in favour of a purchase, if the seal of that corporation is affixed to the deed in the presence of and attested by a person who is its clerk, secretary or other permanent officer or his deputy, and a member of its board of directors, council or other governing body.

(2) Where a seal purporting to be the seal of a corporation aggregate has been affixed to a deed, attested by a person and a member purporting to be such a person and such a member as is referred to in subsection (1), the deed shall be deemed to have been duly executed and to have taken effect accordingly.

9 The approach to be adopted in considering whether or not a document is a deed was considered by the Full Court of this Court in Dean and Westham Holdings Pty Ltd v Lloyd (1990) 3 WAR 235. In dealing with the question of what evidence might be admissible in determining whether or not a document is a deed, the headnote summarises the position as follows:

"The intention of a party when executing a document remained of primary importance. Intention could be discerned from extrinsic evidence such as the words or acts of the parties or from an examination of the words contained in the document itself."

10 This summary of the position appears to be drawn, in particular, from the judgment of Ipp J at 252. However, it would appear in the Dean and Westham Holdings' case that the only evidence before the court was the document itself and no extrinsic evidence was led either by the plaintiff or the defendant at first instance. To that extent it may be that what was said by the court was obiter. Nonetheless, reference is made to a number of authorities, including Xenos v Wickham [1886] LR 2 HL 296 at 312. It would seem to me then that it is open to a party to lead evidence as to the circumstances in which a document was signed when the court is asked to determine whether or not that document is a deed within the provisions of s 9 or s 10 of the Property Law Act.

11 The case for the third party on this application was simply that the document, on its face, was patently not a deed. Counsel submitted that the document was not expressed to be a deed and the way in which the operative provision was couched suggested mutuality of consideration. That, it was submitted, along with a number of other factors, made it plain that the argument put by the defendant was untenable. What is more, in his affidavit in opposition to the application, the defendant does not state or even imply that the Indemnity Agreement was signed as a deed.

12 Nonetheless, it seems to me that it is at least arguable that the indemnity document is a deed. Having reached that conclusion it is inappropriate that I should go into detailed reasons as to why I have reached that conclusion. It will suffice if I say that the document seems to me to be ambiguous. It was not drawn by lawyers - that much is apparent from its face. The circumstances in which it was drawn might well be relevant to deciding whether or not it is a deed. The summary judgment process is not the way in which such questions should be determined.

13 I am satisfied then that summary judgment should not be entered against the defendant on the third party's application. I am also satisfied that the statement of claim by the defendant against the third party in its present form should stand. The appropriate order is that the application be dismissed and that the costs of the application should be costs in the cause. There were, however, a number of reserved costs which I indicated to the parties might not necessarily follow the outcome of the application. I will hear the parties in that regard.