Oliveri Legal Pty Ltd t/as Oliveri Lawyers v Cassegrain Tea Tree Oil Pty Ltd

Court of Appeal (NSW)|2024-02-29|Before: Gleeson JA, Mitchelmore JA, Elkaim AJ

The parties

Oliveri Legal is an incorporated legal practice. Mr Emanueli Oliveri is a director of Oliveri Legal and the managing solicitor.
CaTTO was incorporated in 1989. As at 2008, its only shareholders were Mr Cassegrain and his wife, Felicity. Mr Cassegrain was one of two directors of CaTTO and company secretary; the other director was Thomas Cassegrain, who was then living in France. It was also not in dispute on the appeal that as at 2008, Mr Cassegrain was the managing director of CaTTO: at [13]. Mr Cassegrain ceased being a director of CaTTO in May 2015, shortly before he entered into bankruptcy.
The Memorandum and Articles of Association of CaTTO were in evidence before the primary judge. Article 93 empowered the Directors to appoint one or more of their number or any other person to be managing director of the company. Article 95 relevantly provided that the Directors "may from time to time entrust to and confer upon a managing director for the time being such of the powers exercisable under these presents by the Directors as they may think fit".
Under the heading "Powers of Directors", Article 105 relevantly provided as follows: "The management of the business of the Company shall be vested in the Directors who in addition to the powers and authorities by these presents or otherwise expressly conferred upon them may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by statute expressly directed or required to be exercised or done by the Company in general meeting…"
Article 106, which was expressed to be "[w]ithout prejudice to the general powers conferred by the last preceding Article and the other powers conferred by these presents", conferred a number of specific powers on "the Directors", including: 1. "to exercise any of the borrowing powers of the Company and to secure the fulfilment of any contracts or engagements entered into by the Company by mortgage or charge of all or any of the property of the Company and its uncalled capital for the time being or in such other manner as they may think fit" (Article 106(c)); 2. "to make loans or advances or undertake obligations and liabilities … whether on behalf of the Company or otherwise", which included making loans or advances to or on behalf of any Director or shareholder, "notwithstanding that at the time of the making of such loans or advances … a fiduciary relationship exists or may exist between the Company and the person to or for whom or on whose behalf such loan or advance is made" (Article 106(k)); 3. in Article 106(l): "to enter into and execute all kinds of guarantees bonds and indemnities for securing the payment or performance of any debts or obligations whether past present or future by any person whomsoever (including any Director or shareholder or of any person dealing with the Company) whether the Company has or has not any interest in or derives or does not derive any benefit from the payment or performance of the debt or obligation in respect of which such guarantee bond or indemnity is given and whether they relate in any way to the business carried on by the company or not and notwithstanding that at the time of the entering into or execution of any such guarantee bond or indemnity a fiduciary relationship may exist between the Company and the person in respect of whose debt or obligation such guarantee bond or indemnity is given." 1. to execute, in the name of the Company "in favour of any Director or other person who may incur or be about to incur any personal liability for the benefit of the Company such mortgages of the Company's property … as they think fit" (Article 106(m)); and 2. to enter into such negotiations and contracts, and do all such acts, deeds, and things in the name of and on behalf of CaTTO "as they may consider expedient for or in relation to any of the matters aforesaid or otherwise for the purposes of the Company" (Article 106(p)).
As I noted above, Oliveri Legal tendered parts of the affidavit of Thomas Cassegrain as admissions in relation to the activities of CaTTO. In his affidavit at [46], Thomas Cassegrain stated that since he was appointed as a director of CaTTO in 2005, it had been the company's "common practice to loan money to its shareholders and their children from time to time". Thomas Cassegrain referred in [48] of his affidavit to amounts that CaTTO loaned to Mr Cassegrain which were paid from CaTTO's bank account directly to third parties, including Oliveri Legal, or transferred to the bank account of Mr Cassegrain's wife.
In oral submissions on the appeal, Senior Counsel for Oliveri Legal took the Court to a loan agreement that was in evidence between CaTTO and Mr Cassegrain, together with a series of documents that showed CaTTO paying for Mr Cassegrain's legal fees, which were debited to his loan account. Although the loan agreement and transaction documents post-dated Mr Cassegrain signing the Agreement, Senior Counsel submitted that the documents nonetheless showed a course of conduct as between CaTTO and Mr Cassegrain by which the latter borrowed funds from the former, including for the payment of legal fees. He submitted in effect that it was but a short step to conclude that the same arrangements obtained in 2008.

December 2008: Mr Cassegrain approaches Oliveri Legal

The primary judge described Mr Cassegrain as a "practised litigant" as at 2008, as he had been involved in a number of cases across assorted jurisdictions: at [14]. Although his Honour identified two Supreme Court actions in which Mr Cassegrain was involved, the evidence before his Honour as to the nature of the proceedings, or any of the other proceedings in which Mr Cassegrain was involved, was limited.
Mr Oliveri gave evidence that in late November or early December 2008, Mr Cassegrain was referred to him as a client. In cross-examination, Mr Oliveri accepted that he had no prior knowledge of the companies with which Mr Cassegrain was involved as either a director or a shareholder.
On 2 December 2008, Mr Oliveri and Mr Cassegrain had a telephone conference concerning instructions to act in one of the ongoing Supreme Court proceedings. CaTTO was not a party to the litigation: at [15]-[16]. Mr Oliveri gave evidence that during this phone call, he had the following exchange with Mr Cassegrain: "Cassegrain: I need to let you know up front that I have very little in the way of cash flow and may not be in a position to pay your fees until the end of the matter. I have shares in a number of companies and I am a director of some of those companies which are worth up to $20,000,000.00. I will pay your fees in full at the end of the matter. Me: I understand. However, it is my policy not to carry the costs of any disbursements which include counsel's fees, and these will need to be paid as we go. Also, when requested, monies for disbursement will be required to be paid up front into the firm's controlled money account that will be opened in your name. I agree to defer the issuing of tax invoices for my services until the end of the matter. Cassegrain: Please open a controlled money account in the name of Cassegrain Tea Tree Oil Pty Ltd [CaTTO] and I will provide you with funds to pay for counsel and other disbursements immediately. Me: Okay, but why in the name of Cassegrain Tea Tree Oil Pty Ltd? I will need the company details. Cassegrain: I will provide you with Cassegrain Tea Tree Oil Pty Ltd's details today. I am the managing director of Cassegrain Tea Tree Oil Pty Ltd and I want to pay legal costs by my preferred method. Don't worry, you will have additional security for your fees and disbursements to be paid and secured by me and Cassegrain Tea Tree Oil Pty Ltd. Me: Claude, these proceedings could take over a year to be finalised. In the circumstances, Oliveri Legal usually requires that the client provide a Guarantee and Indemnity to secure its costs and disbursements. It will need to come from an entity or person with assets. Cassegrain: I am a director of Cassegrain Tea Tree Oil Pty Ltd. It has assets in land. The company will provide the guarantee and indemnity. Please send it to me and I will have Patakas Lawyers look over it for Cassegrain Tea Tree Oil Pty Ltd. Me: OK, I will have the document sent to you so you can get some advice."
On 2 December 2008, Mr Cassegrain sent Oliveri Legal a letter, the subject of which was "Supreme Court proceedings 4647 of 2008 Gerard Cassegrain & Co Pty Ltd (ACN 000 342 174) - v - Claude Cassegrain". In the letter, Mr Cassegrain referred to the telephone conversation of the same date, requested Mr Oliveri to act for him in the referenced proceedings and provided some background, including a copy of the Statement of Claim: at [24]. The letter was written on the letterhead of CaTTO, and Mr Cassegrain signed the letter with the title "Managing Director".
Mr Oliveri sent Mr Cassegrain a costs agreement and costs disclosure, both of which were dated 2 December 2008. In cross-examination, Mr Oliveri agreed that he generated these documents after receiving the correspondence from Mr Cassegrain. The subject of the costs agreement was "Supreme Court proceedings 4647 of 2008 Gerard Cassegrain & Co Pty Ltd (ACN 000 342 174) - v - Claude Cassegrain". The costs disclosure provided an estimate of $33,000 including GST, which was given on the basis of the information available as at that date and was expressly subject to change. In cross-examination, Mr Oliveri stated that he could not really recall why he put $33,000; at that stage, he did not know what the proceedings were about, and Mr Cassegrain wanted him to act rather quickly (Mr Cassegrain's letter of 2 December 2008 had referred to a court date on 4 December 2008).
Mr Oliveri received a copy of the costs agreement and costs disclosure signed by Mr Cassegrain, with the date 3 December 2008: at [25]. In cross-examination, in response to questions from the primary judge Mr Oliveri gave evidence that within probably days or weeks he realised that the costs involved would be nothing like $33,000, but he did not revise the estimate.

The Agreement

There were two copies of the Agreement in evidence, both of which were signed by Mr Cassegrain and dated 19 December 2008. On one copy of the Agreement Mr Cassegrain's signature appears twice, once over his own name and once over the name of CaTTO. The second copy of the Agreement was signed by Mr Cassegrain once, over name of CaTTO.
The Agreement was titled "Guarantee and Indemnity Agreement" and was stated to be between Mr Cassegrain and CaTTO, defined collectively as the "Guarantors", and Oliveri Legal. It stated: "We, the guarantors, agree to jointly and severally, indemnify the legal firm of [Oliveri Legal], hereinafter referred to as "OLIVERI", for the payment of all legal costs and associated disbursements (including the counsels' fees) in accordance with the payment terms of invoices rendered for these said services."
Clause 1 of the Agreement stated: "This guarantee, and the indemnity under this Guarantee will not be affected: a) should OLIVERI grant any extension of time or other indulgence to the Guarantors or vary the terms of the retainer agreement with the Guarantors; b) by the release of any of the Guarantors or if this Guarantee is or becomes unenforceable against one or more of the Guarantors; or c) any payment by the Guarantors being later avoided by law, whether or not the Guarantors have been given notice of these matters."
Pursuant to cl 2 of the Agreement, the Guarantors agreed, inter alia, "at the request of [Oliveri Legal] to execute any documents and do all things reasonably required by [Oliveri Legal] to register a mortgage as security over any real property should such a request be made" (cl 2(a)); and "to consent unconditionally to [Oliveri Legal] lodging a caveat or caveats noting its interest in any real property, should it elect to do so" (cl 2(c)). On page 2 of the Agreement, under the heading "Acknowledgement", the Agreement stated: "By signing below as Guarantors, we certify that we understand the terms of this Guarantee. In particular, we understand and accept that this Guarantee and Indemnity are irrevocable other than by the mutual agreement of all the parties. We also certify that we understand [Oliveri Legal] may recover any amount outstanding relating to those legal matters for which [Oliveri Legal] has been retained, from the guarantors, jointly or severally. [Oliveri Legal], may, amongst other recovery rights, take a charge over any real property, or other assets, to which one or both Guarantors may have an entitlement or interest. The Guarantors certify that we have had the opportunity of taking independent legal advice in relation to the meaning and effect of this Guarantee."
The primary judge found that the Agreement was returned to Mr Oliveri, having been signed on 19 December 2008: at [27]. Notwithstanding that the Agreement provided for the signature of witnesses, no witnesses signed the document: at [28]. His Honour also found that there was "nothing to suggest that, as foreshadowed by Mr Cassegrain [in the conversation with Mr Oliveri on 2 December 2008], the document was ever looked over by Patakas Lawyers or anyone else": at [27].

Provision of funds to Oliveri Legal

His Honour went on to note that on 19 December 2008, Mr Cassegrain sent Oliveri Legal a cheque for $10,000: at [29]. The cheque was drawn on the account of CaTTO: at [29]. A Controlled Money Receipt, dated 14 January 2009, noted the funds as received from CaTTO and deposited to the controlled money account of "Oliveri Legal Pty Ltd CMA Cassegrain Tea Tree Oil P/L".

Ground 1: Did the Agreement bind CaTTO?

At trial, Oliveri Legal contended that CaTTO was bound by the Agreement because Mr Cassegrain legitimately executed the Agreement on its behalf. The primary judge summarised Oliveri Legal's argument in support of this contention as involving the following steps (at [80]): 1. Mr Cassegrain was the managing director of CaTTO. 2. As managing director, Mr Cassegrain had the authority to bind CaTTO, having regard to the articles of association, in particular articles 105, 95 and 106(l) (which I have referred to above). 3. Relying on the decision of the High Court in Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 at 79; [1975] HCA 45 ("Crabtree-Vickers"), in circumstances where, pursuant to art 95, all powers of management could be conferred on the managing director, Mr Cassegrain had ostensible authority to make the Agreement.
The primary judge noted that when Mr Oliveri spoke to Mr Cassegrain on 2 December 2008, Mr Oliveri had no independent knowledge of CaTTO, and subsequently he made no inquiries (such as doing a company search) and did not ask Mr Cassegrain for any proof of his authority to bind the company: at [81]. His Honour found that the only holding out that occurred was thus by Mr Cassegrain himself, "either orally or through letters he wrote on the company letterhead". Describing these as "self-promoting and self-serving assertions", his Honour considered that something more was required: at [86].
His Honour also observed that in so far as Oliveri Legal sought to rely on the assumption in s 129(3) of the Corporations Act 2001 (Cth), in accordance with s 128 that assumption was only available "in relation to dealings with a company". His Honour found that there were no such dealings in this case; rather, the dealings were with Mr Cassegrain "for his own purposes, namely the pursuit of his personal litigation": at [86]. His Honour disagreed in this respect with Oliveri Legal's submission that because the articles of association permitted CaTTO to enter into a guarantee it must follow that entry into the Agreement was a dealing of the company, stating (at [87]): "CaTTO is a company running a tea tree plantation; its articles of association give it powers to do many things, but that does not mean that the plaintiff was dealing with it in respect of the Agreement. The plaintiff was not dealing with the company at all, he was simply asking the company to guarantee his dealings with Mr Cassegrain."
Turning then to Oliveri Legal's reliance on ostensible authority, Oliveri Legal had referred the primary judge to the decision of Hammerschlag J in Junker v Hepburn [2010] NSWSC 88 ("Junker"). The primary judge referred to the part of his Honour's reasons in Junker in which he described ostensible authority as conferred "where a principal represents that another has authority" (at [46]) and found that there had been no representation here by CaTTO as the principal. Rather, there had "only been representations by Mr Cassegrain about himself": at [94]-[95]. Further, and by contrast with Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583, on which Oliveri Legal also relied, there was no evidence to support that Mr Cassegrain had previously entered into guarantees on behalf of CaTTO, and no evidence of CaTTO approving such conduct: at [96]. His Honour also found that giving guarantees was not part of CaTTO's normal trading activities: at [98].
Oliveri Legal relied on what Diplock LJ said in Freeman and Lockyer v Buckhurst Park Properties [1964] 2 QB 480 at 503 ("Freeman and Lockyer"): "The representation which creates 'apparent' authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal's business with other persons. By so doing the principal represents to anyone who becomes aware that the agent is so acting that the agent has authority to enter on behalf of the principal into contracts with other persons of the kind which an agent so acting in the conduct of his principal's business has usually 'actual' authority to enter into."
The primary judge considered that there were two bases on which the present case could be distinguished from that statement. First, there was "no evidence of [CaTTO] permitting [Mr Cassegrain] 'to act in some way in the conduct of the principal's business with other persons'"; and, second, Mr Cassegrain "was not 'acting in the conduct of his principal's business'": at [100]. His Honour concluded that CaTTO was not a legally bound party to the Agreement: "[101] I emphasise here that I find it difficult to conclude that any authority, of any type, existed based entirely on only Mr Cassegrain making representations (whether orally or in writing) only for his own benefit and without any independently corroborating oral or written statement. Even the cheque for $10,000, sent on 19 December 2008, is signed by Mr Cassegrain. [102] It is to be remembered that the defendant was a company with another director and another shareholder. Mr Cassegrain did not have the authority, without more, which rest[s] in a single director, single shareholder entity. Mr Oliveri dealt with Mr Cassegrain effectively as if he was dealing with a 'one man company'."
I note for completeness that in support of the inference that Mr Cassegrain had ostensible or implied actual authority, Oliveri Legal also relied upon the application of Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 in respect of CaTTO's failure to call Mr Cassegrain or Thomas Cassegrain. The primary judge held, and it is not contested on appeal, that this inference went no further than a conclusion that their evidence would not have assisted CaTTO, and did not operate to shift the onus to CaTTO to disprove authority: at [88]-[92].

Mr Cassegrain's ostensible authority to bind CaTTO

By its first ground of appeal, Oliveri Legal took issue with the primary judge's conclusion that Mr Cassegrain did not have ostensible authority to bind CaTTO. By its second ground of appeal, Oliveri Legal challenged the primary judge's conclusion regarding the availability of the assumption in s 129(3) of the Corporations Act. Senior Counsel for Oliveri Legal accepted that if it succeeded on ground 1, it did not need to have recourse to ground 2 and the statutory assumptions.
As Diplock LJ described it in Freeman and Lockyer at 503, ostensible authority is "a legal relationship between the principal and the contractor created by a representation, made by a principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the 'apparent' authority". As the High Court noted in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 ("Pacific Carriers") at [36], Diplock LJ's statement of the general principles in Freeman and Lockyer was approved in Crabtree-Vickers and in Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; [1990] HCA 32.
The issue in Pacific Carriers was whether BNP Paribas (BNP) was bound to indemnify Pacific Carriers Ltd (Pacific), a cargo carrier, for loss suffered in connection with the loss of cargo by reason of a letter of indemnity that an officer of BNP had signed and stamped. The officer was authorised to verify customers' signatures on such letters but was not authorised to bind BNP as an indemnifying party. The Court observed that BNP had submitted to the Court of Appeal, and that Court had accepted, that the necessary representation had to be one that BNP made, and not merely a representation made by the employee who signed the indemnity about herself: at [37].
In allowing the appeal, the High Court stated that where an officer of a company is dealing with a third party, and "is held out by a company as having authority", the company is bound by its representation of authority if there is nothing in the constitution to the contrary and the third party relies on that apparent authority: at [36]. The Court went on to describe the nature and content of the requisite representation: "Whether the representation is general, or related specifically to the particular transaction, it must come from the principal, the company. That does not mean that the conduct of the officer is irrelevant to the representation, but the company's conduct must be the source of the representation. In many cases the representational conduct commonly takes the form of the setting up of an organisational structure consistent with the company's constitution. That structure presents to outsiders a complex of appearances as to authority. The assurance with which outsiders deal with a company is more often than not based, not upon inquiry, or positive statement, but upon an assumption that company officers have the authority that people in their respective positions would ordinarily be expected to have. In the ordinary case, however, it is necessary, in order to decide whether there has been a holding out by a principal, to consider the principal's conduct as a whole." (footnotes omitted)
A kind of representation that often arises in business dealings is one which flows from equipping an officer of a company with a certain status, title and facilities: Pacific Carriers at [38]. In Crabtree-Vickers, Gibbs, Mason and Jacobs JJ stated at 78: "There are circumstances where the actual representation of authority may be made by the agent but in such cases it will be found that the relevant representation is made by the principal (or by the person to whom the principal has given actual authority) either by a previous course of dealing or by putting the agent in a position or by allowing him to act in a position from which it can be inferred that his actual representation of authority in himself is in fact correct."
Referring to Crabtree-Vickers in Pacific Carriers, the Court stated at [38]: "The reference to corporate administrative procedures under which an officer is armed with a document to which he or she can, by signature, impart an appearance of authenticity is a reminder of the wider principle of estoppel which may be relevant to a question of ostensible authority. The holding out might result from permitting a person to act in a certain manner without taking proper safeguards against misrepresentation."
The letters of indemnity in Pacific Carriers had been sought from, and provided by, an officer whom BNP described as the Manager of its Documentary Credit Department: at [41]. Pacific's reliance on the letters of indemnity was based on "their form and contents, the signature of a person who appeared to be (and was) an officer of the bank, the stamp or 'chop', and the fact that Pacific was sent copies of the documents, directly or indirectly, by BNP": at [42]. At that time, the organisational structure of BNP was such that the officer who signed the letters was the person to whom Pacific's request would be, and was, communicated; and she was the person who dealt with the request and communicated BNP's response to Pacific. As the Court stated at [42], that response, "involving her signature of the letters of indemnity and fixing the bank's stamp to them, would signify to a reasonable third party, and signified to Pacific, agreement to what was requested". In circumstances where BNP placed the employee in a position to sign and stamp documents and send them to Pacific, without any internal check on their final form (including as to the capacity in which BNP was participating in the transaction) the Court concluded at [44]: "The assumption made by Pacific, found by the trial judge to have been reasonable, upon which Pacific acted to its detriment, was induced and assisted by the conduct of BNP in placing Ms Dhiri in a position which equipped her to deal with the letters of indemnity as requested by Pacific. It would be unjust to permit BNP to depart from the assumption."
In the present case, in concluding that Mr Cassegrain did not have ostensible authority, the primary judge relied on the holding out regarding Mr Cassegrain's authority having been made by Mr Cassegrain, as opposed to being made by CaTTO. As the High Court observed of the similar submission in Pacific Carriers, that might be true but it is also an over-simplification. It is necessary to consider the position in which CaTTO put Mr Cassegrain, and whether that position was one from which it could be inferred that the representation he made as to his authority to sign the Agreement involved a holding out on behalf of CaTTO.
Mr Cassegrain was one of two directors of CaTTO, the other being his son, who was overseas at the time; and Mr Cassegrain and his wife were the only shareholders. In their telephone conversation on 2 December 2008, Mr Cassegrain told Mr Oliveri that he was the managing director of CaTTO, as was the case; and he instructed Mr Oliveri to open a controlled money account in the name of the company. In a letter of the same date, on CaTTO letterhead, Mr Cassegrain, who signed as CaTTO's managing director, confirmed his instructions to Oliveri Legal to act in the referenced proceedings. The controlled money account was ultimately opened, and on the same day as Mr Cassegrain signed the Agreement over the name of CaTTO he signed a cheque for $10,000, on CaTTO's account, which he provided to Oliveri Legal to be deposited into the controlled money account. That Mr Cassegrain had authority to sign cheques on behalf of CaTTO was not the subject of dispute before the primary judge; nor was it suggested in the hearing that he could not send correspondence on CaTTO letterhead and sign on behalf of CaTTO.
In describing the above actions of Mr Cassegrain as no more than self-serving, and concluding that CaTTO had never held Mr Cassegrain out as an officer or agent of the company and that there was no evidence that CaTTO permitted Mr Cassegrain to "act in some way in the conduct of the principal's business with other persons" (at [86(1)], [95] and [100(1)]), the primary judge misconceived the nature of the dealings as between Mr Cassegrain and Oliveri Legal. The communications between Mr Cassegrain and Oliveri Legal in the telephone conversation on 2 December 2008 and the subsequent correspondence, including the signing and return of the Agreement, constituted dealings between Oliveri Legal and CaTTO by which Mr Cassegrain was held out as having authority to bind the company.
That characterisation is consistent with the reasoning of Gleeson CJ in Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 and subsequent cases which addressed the question of "dealings" in the statutory assumptions in the Corporations Act by reference to the general law ("Story"). The appellant, a director of Fleetwood Star Pty Ltd, challenged the respondent bank's reliance on s 68A of the Companies (New South Wales) Code (the statutory predecessor to ss 128 and 129 of the Corporations Act) in respect of a third party mortgage executed under company seal which her husband had signed in his capacity as a director and on which he had also forged her signature. One of the issues that the appellant raised against the bank was that the bank had dealt only with her husband and not the company. All that had relevantly occurred, in her submission, was that the bank had received a forged instrument which purported to be a mortgage executed by the company (at 732). In rejecting that argument, Gleeson CJ (Cripps JA agreeing) stated (at 732-733): "The answer to the submission that the Bank did not have any dealings with Fleetwood Star Pty Ltd is to be found in the principles concerning agency enunciated by Diplock LJ [in Freeman and Lockyer] and referred to above, and in the facts concerning the way in which Mr and Mrs Story conducted the affairs of the company. Mr and Mrs Story were the only directors, and the only shareholders of the company. The evidence showed Mr Story was the managing director, and that Mrs Story permitted Mr Story de facto control of the conduct of the company's business. The company was the registered proprietor of the land at 27 Moruben Road, Mosman, and the Bank's willingness to lend money was conditional upon obtaining a mortgage over that land. Part of the loan moneys were applied for purposes of the company. I do not suggest that all of those facts are necessary to the conclusion that the Bank, when it took the mortgage, was having dealings with the company but in combination they are certainly sufficient."
In Soyfer v Earlmaze Pty Ltd [2000] NSWSC 1068 at [82], after referring to the last extracted paragraph from Story, Hodgson J relevantly observed in this respect that: "…it is not necessary that the person representing the company have authority from the company to commit the company to the relevant transactions or execute the relevant documents; but in my opinion, it is necessary that the person have authority to undertake some negotiation or other steps, so that the dealings, in relation to which the document is executed, are properly considered to be dealings with the company." See also Australia and New Zealand Banking Group Ltd v Frenmast Pty Ltd [2013] NSWCA 459 at [26]-[31] (Meagher JA, Macfarlan and Barrett JJA agreeing).
CaTTO emphasised that it ran a tea tree oil business and held property for that purpose. It submitted that there was no evidence that CaTTO had represented that Mr Cassegrain had authority to commit it, and its assets, to guarantee payment of legal fees for an endless period of time in relation to various pieces of litigation that were the subject of the statement of claim. It relied in this respect on two Western Australian decisions, one of Edelman J in Hightime Investments Pty Ltd v Adamus Resources Ltd [2012] WASC 295 ("Hightime"), and one of Master Sanderson in Lopez v Pawski [2017] WASC 338 ("Lopez"). Oliveri Legal, on the other hand, challenged the primary judge's findings that the giving of guarantees was not part of CaTTO's "normal trading activities" (at [98]) and that in giving a guarantee Mr Cassegrain was not "acting in the conduct of his principal's business" (at [100(2)]).
The primary judge's findings about the nature of CaTTO's business and whether Mr Cassegrain was acting in the conduct of that business were unduly narrow. As to the company's normal trading activities, the evidence disclosed that CaTTO regularly loaned funds to its shareholders, including for the purpose of conducting litigation. Thomas Cassegrain gave evidence to that effect in his affidavit. Article 106(l) expressly authorised the directors entering into and executing, relevantly, guarantees to secure the payment or performance of any debts or obligations, past, present or future, "by any person whomsoever", whether CaTTO had any interest or derived any benefit and notwithstanding that a fiduciary relationship may exist between CaTTO and the person in respect of whose debt or obligation such guarantee was given.
CaTTO relied on the fact that the powers in art 106 were vested in "the Directors", the implication being that the powers in art 106 need to be exercised by the directors "as a polity". That limitation is not relevant, however, for the purposes of ostensible authority. What is relevant is that art 95 empowered the directors to delegate the power in art 106, including art 106(l) to the managing director.
The decisions of Edelman J and Master Sanderson do not relevantly assist CaTTO. Central to the plaintiff's case in Hightime was an alleged conversation between the plaintiff's sole director and shareholder and the executive director of the defendant in May 2003, which was critical to the alleged agreement. Edelman J found that the alleged conversation did not occur, which finding was, as his Honour stated, sufficient to dispose of the plaintiff's claim. However, his Honour also found that even if the conversation had occurred as alleged, the agreement did not fall within the authority of the defendant's executive director: at [127]. It was this aspect of his Honour's reasons on which CaTTO relied.
The argument that the plaintiff advanced in Hightime was that the defendant's executive director had implied actual authority or ostensible authority to bind the defendant to the agreement allegedly struck in the May 2003 conversation. Edelman J first addressed implied actual authority and observed that in circumstances where the articles of association permitted the directors of the defendant to confer on a managing director or executive director any of the powers exercisable by them, in order to have actual authority unilaterally to bind the defendant to the terms of the alleged oral contract "the other directors must have expressly or impliedly authorised him to do so": at [147]. His Honour found that the evidence did not support the submission that the executive director was the de facto managing director (at [148]); and even if that had been the case, there was still no express authority conferred on the executive director to enter into a contract of the nature of the alleged oral contract: at [149].
In this context his Honour noted that the alleged oral contract "was far from a normal trading activity for [the defendant]", for two main reasons (at [151]) (his Honour also rejected other factual matters that the plaintiff relied on at [155]-[169]): 1. The contract related to an acquisition of a significant new mining tenement in Ghana, which his Honour described as "an infrequent, strategic decision which was of critical importance to the business of [the defendant]", noting that previous acquisitions "had been subject to extensive analysis and consideration": at [152]. 2. More specifically, in late 2002, the entire market capitalisation of the defendant was $4 million or $5 million, and if the alleged promise had been accepted it would have committed the defendant "to a payment which could potentially even have comprised a large part, possibly even the majority, of the then market capitalisation" of the defendant (at [153]): "The commitment would be for a future financial liability, based upon a highly speculative valuation, in a different currency, which valuation would be conducted potentially years in the future, for payment of an amount of money at that time (years in the future), representing the full market value of a licence over the Ground."
When Edelman J came to address ostensible authority, his Honour found that the same reasons he had identified with respect to implied actual authority precluded a finding that the executive director had ostensible authority. In so concluding, his Honour referred to the reasons of Newnes JA in Auxil Pty Ltd v Terranova [2009] WASCA 163 at [176] as to the nature of representations that create apparent authority, specifically that by permitting an agent to act in the management or conduct of the business, the principal represents to anyone dealing with the agent that he or she has authority to do "those acts on behalf of the company which an agent authorised to do acts of the kind which he or she is in fact permitted to do normally does in the ordinary course of such business": at [174]. Entry into a transaction of the type alleged was not one that the executive director normally did in the ordinary course of the defendant's business: at [175]. Additionally, the sole director of the plaintiff was aware that the executive director of the defendant could not bind the defendant to an agreement of the nature alleged; and that the defendant required board approval for such a deal: at [176]-[177].
Lopez involved a General Security and Loan Facility Agreement that WealthSure Pty Ltd (WealthSure) entered into with the first defendants, which was executed by one of the two directors of the company. It was agreed that the board had not conferred on the director the power unilaterally to enter the Loan Facility Agreement: at [18]. The Master observed that by cl 1 of that Agreement, the security for the loans advanced was all of the present and after acquired property of WealthSure. This agreement was thus of "great significance", essentially pledging all assets of the company in return for the loans: [20]. Referring to Hightime, Sanderson M observed that it was not customary for a managing director to have authority to enter into such an agreement without board approval: at [22]. Further, Mr Pawski, who was the former sole director of WealthSure and also the agent of the first defendants, was well aware that pursuant to an enforceable undertaking he entered into with ASIC, any companies associated with WealthSure required two directors: at [23].
The transaction the subject of the Agreement involved pledging the assets of CaTTO to Oliveri Legal in a manner that did not bear any real resemblance to the terms of the agreements in issue in Lopez and Hightime. Mr Cassegrain's entry into the Agreement on behalf of CaTTO was to secure the payment of legal fees, in circumstances where CaTTO frequently loaned moneys to its shareholders for that very purpose. The nature of the Agreement was not outside of the normal course of CaTTO's activities, having regard to the evidence of Thomas Cassegrain. Rather, the giving of a guarantee, as Oliveri Legal submitted, was an authorised activity incidental to that part of the business associated with the provision of loans to shareholders under arts 106(k) and 106(p).
It follows that I would uphold ground 1 of the notice of appeal. Consistently with what Senior Counsel for Oliveri Legal submitted, in light of my conclusion on this ground it is unnecessary to address ground 2 and ss 128 and 129 of the Corporations Act.

Ground 3: construction of the Agreement

The next issue concerns whether the Agreement should be construed as creating obligations of guarantee and indemnity, as contended for by Oliveri Legal, or merely an indemnity, as contended for by CaTTO. The primary judge accepted CaTTO's construction. This was the subject of ground 3 of the notice of appeal.

The decision of the primary judge

Before the primary judge, Oliveri Legal submitted that on a proper construction of the Agreement, the indemnity appeared on the first five lines on page 1 and the guarantee appeared in the first six lines on page 2: at [107]. Describing this allotment as having "the appearance of a retrospective justification of what is a very poorly drafted agreement" (at [108]), the primary judge did not accept that the second page provided an undertaking that was separate from the first page. The Agreement purported to provide for an indemnity and a guarantee, but there were "inbuilt inconsistencies" which meant it could only exist as an indemnity. His Honour emphasised in this respect that on the terms of the Agreement, Mr Cassegrain was providing a guarantee of his own obligations: at [112].

Construction of the Agreement

Oliveri Legal submitted that the primary judge erred in concluding that the Agreement only existed as an indemnity. It submitted that his Honour failed to construe the Agreement on the basis that the draftsman intended to produce a "commercial result" by seeking to cover all aspects of potential recovery. In adopting the approach he did, the primary judge had made "commercial nonsense" of the Agreement, by concluding that a guarantee was absurd because of Mr Cassegrain's and CaTTO's joint and several liability. Citing Cirrus Real Time Processing Systems Pty Ltd v Jet Aviation Australia Pty Ltd [2023] NSWCA 280 at [89], Oliveri Legal submitted that the test of absurdity was "not easily satisfied" and that the primary judge did not apply the correct test. Further, and in any event, any perceived problem with the guarantee by Mr Cassegrain should have, consistently with a "belts and braces" approach to the drafting of the Agreement, resulted in that component of the guarantee being read down. It should not have resulted in the guarantee by CaTTO being considered non-existent.
Although I consider there is force in the submissions that Oliveri Legal advanced in impugning the reasoning of the primary judge, his Honour was correct to conclude that the Agreement cannot properly be construed as a guarantee. In Canty v PaperlinX Australia Pty Ltd [2014] NSWCA 309, Gleeson JA (Barrett and Emmett JJA agreeing) summarised the key distinctions between a guarantee and an indemnity in the following terms: "[37] … The general nature of a contract of guarantee was described by Jordan CJ in Jowitt v Callaghan (1938) 38 SR (NSW) 512 at 516 in the following terms: 'The contract of guarantee or suretyship is a contract between two persons which is intended by them to secure the performance of the obligation of a third person to one of them.' [38] Simply stated a guarantee is a binding promise of one person to be answerable for the debt or obligation of another if that other defaults: Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; 166 CLR 245 at [3]-[10]. The distinctive feature of a contract of guarantee is the secondary nature of the obligation which is assumed by the guarantor. There must be another person who is primarily liable: Turner Manufacturing Co Pty Ltd v Senes [1964] NSWR 692. See also Phillips and O'Donovan, The Modern Contract of Guarantee (loose-leaf, Thomson Reuters) at [1.1100]. [39] In contrast, under an indemnity, a person assumes a primary liability. A contract of indemnity is 'a contract by one party to keep the other harmless against loss' and is not dependent on the continuing liability of the principal debtor: Yeoman Credit Ltd v Latter [1961] 1 WLR 828 at 830-831; Total Oil Products (Australia) Pty Ltd v Robinson [1970] 1 NSWR 701 (Total Oil Products) at 703. An indemnity is an independent obligation to make good a loss: Sutton v Grey [1894] 1 QB 285 at 288-289 (Lord Esher MR). As Davey LJ said in Guild & Co v Conrad [1894] 2 QB 885 at 896: '... there is a plain distinction between a promise to pay the creditor if the principal debtor makes default in payment, and a promise to keep a person who has entered, or is about to enter, into a contract of liability indemnified against that liability independently of the question whether a third person makes default or not.'"
Citing these paragraphs in Lee v ATL (Australia) Pty Ltd [2023] NSWCA 327 at [80], Gleeson JA observed that whether a document is a guarantee or indemnity will always depend upon the "true construction of the actual words used in which the promise is expressed": at [82] (quoting Lord Diplock in Moschi v Lep Air Services Ltd [1973] AC 331 at 349). The use of the words "guarantee" or "indemnity" may indicate the parties' intentions but is not decisive: at [83].
I have set out the key promise on the first page of the Agreement at [33] above. As Oliveri Legal implicitly acknowledged in the argument it advanced below, in describing page 1 as containing an indemnity (see [68] above), the language does not involve CaTTO making a promise to Oliveri Legal to be answerable for the debt or obligation of Mr Cassegrain in the event of Mr Cassegrain's default. Rather, the promise is made by Mr Cassegrain and CaTTO, jointly and severally, to hold Oliveri Legal harmless in relation to the subject matter of the Agreement, being the payment of Oliveri Legal's fees and disbursements. CaTTO does not, by the promise, assume a secondary obligation. Rather, the nature of its obligation is a primary one that arises independently of any default by Mr Cassegrain.
There is some material on the first page of the Agreement that suggests an intention on the part of the drafter to have imposed a guarantee, in particular numbered clause 1 which commences with the words "[t]his guarantee" and seeks, for example, to preserve the obligation given in the event of any extension of time or release of any of the so-called "Guarantors". However, that clause does not contain the language of obligation of a secondary nature; and it cannot operate to convert the nature and effect of the obligation from one of indemnity to one of guarantee.
I agree with the primary judge that the second page of the Agreement cannot be read independently of the first page. Read in accordance with its terms, the content of that page does not create any obligations, let alone an obligation that could be characterised as conforming with a guarantee. Rather, consistently with the heading "Acknowledgment', the "guarantors" confirmed their collective "understanding": (i) that the agreement was irrevocable other than by mutual agreement, and (ii) that Oliveri Legal could recover from the "guarantors" any amount outstanding relating to the matters in which it has been retained.
In oral argument, Senior Counsel for Oliveri Legal emphasised the use of the language of guarantee throughout the Agreement, with Mr Cassegrain and CaTTO defined as "Guarantors", the reference to "guarantee" in numbered clause 1, and the descriptions of the document as a guarantee on page 2. However, as I have noted above, the use of the words "guarantee" and "indemnity" is not decisive. As CaTTO submitted, notwithstanding the use of those words, the obligation of the so-called guarantors was only ever to indemnify, it was never to guarantee.
Senior Counsel for Oliveri Legal submitted that construing the Agreement as anything other than a guarantee would be productive of uncommercial consequences. In that context, the observations of Edelman J in H Lundbeck A/S v Sandoz Pty Ltd; CNS Pharma Pty Ltd v Sandoz Pty Ltd [2022] HCA 4; 399 ALR 184 at [104] are apposite: "Whilst it will always be an important matter of context for the interpretation of a commercial agreement if an interpretation would be 'commercial nonsense', it will rarely assist for the interpretation of an agreement that the court considers that, from the perspective of one party, one or more clauses are not commercially wise or convenient. As Neuberger LJ said in Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd [[2006] EWCA Civ 1732 at [22]]: '[T]he court must be careful before departing from the natural meaning of the provision in the contract merely because it may conflict with its notions of commercial common sense of what the parties may must or should have thought or intended. Judges are not always the most commercially-minded, let alone the most commercially experienced, of people, and should, I think, avoid arrogating to themselves overconfidently the role of arbiter of commercial reasonableness or likelihood.'" (footnotes omitted)
In circumstances where the operative part of the Agreement does not involve CaTTO undertaking a secondary obligation to Oliveri Legal for Mr Cassegrain's obligation to pay its legal costs and disbursements, recourse to uncommercial consequences does not assist. The difficulty that Oliveri Legal faces with respect to construing the Agreement is one of its own making, as the entity that drafted it. I reject ground 3 of the notice of appeal.

Grounds 4 and 5 - the estoppel argument

It is necessary to provide some background to the content of Oliveri Legal's estoppel claim, which as I have noted above (at [13]-[14]) was invoked both in respect of the guarantee (should the Agreement constitute one) and the indemnity. In the course of an application to amend its statement of claim, Oliveri Legal made a concession that Parker J noted when granting leave on 3 June 2022: "1. Note that: 1.1 It is the plaintiff's [Oliveri Legal's] contention that the [Agreement] on its true construction created an obligation on the Guarantors to indemnify the plaintiff for the payment of all legal costs and associated disbursements including counsel's fees in accordance with the payment terms for those services, and an obligation on the Guarantors to guarantee the payment of such legal costs and associated disbursements arising only when they fell due for payment by the principal debtor. 1.2 The plaintiff relies only on the indemnity obligation for payment of the invoice dated 22 February 2016. 1.3 Consequently should the plaintiff fail to establish the existence of the separate guarantee obligation referred to in 1.1 its claims will fail except to the extent that they are based on that invoice."
The invoice dated 22 February 2016 related to amounts owing under the Retainer. The primary judge referred to the notation that Parker J made in granting leave, stating at [118]: "The plaintiff conceded that if the Agreement is valid only as an indemnity, then its terms extend only to the recovery of any amount owing under the Retainer (the claim for $850,000) and not for the balance of the claim as described above at [11]."
Paragraph 118 is the subject of ground 5 of the notice of appeal, which Oliveri Legal accepted could be addressed together with its contentions on the estoppel claim in ground 4. Oliveri Legal accepted that [118] of the primary judge's reasons was correct in the sense it reflected the position as at the date the matter was before Parker J. However, Oliveri Legal submitted that by the time of the hearing, its position had evolved. Specifically, on 4 August 2023, Henry J granted Oliveri Legal leave to file an amended reply, in which Oliveri Legal raised the estoppel claim by way of response to the whole of CaTTO's defence.
In the amended reply at [25] (as further amended during the hearing), Oliveri Legal alleged that it provided legal services to Mr Cassegrain pursuant to: 1. Three conversations between Mr Oliveri and Mr Cassegrain, the details of which I have set out below by reference to Mr Oliveri's evidence: 1. On about 27 February 2009, there was a telephone conversation in the context of Mr Cassegrain signing the Retainer. Mr Cassegrain referred to having signed the Retainer on the basis that Oliveri Legal would defer sending invoices in respect of it, as it had done with respect to Mr Oliveri's professional costs. When Mr Oliveri said, "As the [Agreement] has been signed, I will invoice you for my services and for the [Retainer] at the end of your proceedings", Mr Cassegrain replied, "I will pay either from my funds or from [CaTTO's] account at the completion of the proceedings" (emphasis added). 2. In around June 2011, Mr Cassegrain told Mr Oliveri that he was having some problems getting the funds to pay the full invoices issued for Mr Wicken and proposed an arrangement whereby he would make part payment of those invoices and make a note on each invoice so that "when funds come to hand, I will pay the difference". Mr Oliveri responded that he had been keeping track of the outstanding amounts. He referred to the Agreement and said, "so the amounts will be owed by you and [CaTTO] along with the retainer fees and the professional fees for my own services". Mr Cassegrain again replied, "Thanks again for your understanding I will pay all differences in [Mr Wicken's] tax invoices as soon as I can, and all your fees including the amount of the retainer" (emphasis added). 3. On 1 September 2011, in relation to an invoice that Mr Wicken had issued for August 2011, Mr Cassegrain said to Mr Oliveri that he would only be able to pay half of the amount invoiced. Mr Oliveri expressed concern that the shortfalls were starting to add up, not only for Mr Wicken's fees but also the unpaid Retainer fees and the services he (Mr Oliveri) had provided, for which he had not yet invoiced and which "would exceed the amounts you [Mr Cassegrain] have paid so far for [Mr Wicken]". When Mr Cassegrain replied that he had not forgotten the Retainer or Mr Oliveri's fees but that "I simply cannot get the fees together to pay for all this right now", Mr Oliveri asked for a letter from Mr Cassegrain explaining how cheques he sent were to be attributed and that while he was not prepared to reduce the amount of the invoices, he was "willing to carry over the shortfall as we have the [Agreement]" and indicated that he would also charge interest on any unpaid amounts, pursuant to the costs agreement. Mr Cassegrain replied: "That is fine. I will put in writing how I want you to attribute the cheques. I will make sure I keep noting on each invoice how much I am paying. I know there is interest running on the unpaid invoices, so we will also need to keep track of that. I will send you a note with any cheque I give you to pay the interest." 1. A "mutual assumption" by Oliveri Legal and CaTTO that Oliveri Legal "was entitled to rely upon the Agreement".
Oliveri Legal alleged that it had provided the legal services to Mr Cassegrain in reliance on the three representations and the mutual assumption being "true and binding", and CaTTO knew and intended that Oliveri Legal would so rely (amended reply [26]). In circumstances where Oliveri Legal would suffer loss if CaTTO was permitted to depart from the mutual assumption, it would be unconscionable to permit CaTTO to do so and CaTTO was thereby estopped "by virtue of a promissory estoppel and/or an estoppel by convention from denying that the Plaintiff is entitled to rely upon the Agreement" (amended reply [27]-[29]).
In oral closing submissions before the primary judge, Senior Counsel explained the estoppel case as involving "a convention by which a guarantee and indemnity was understood going forward, that it wouldn't only relate to one set of proceeding and $33,000" (that amount being the estimate in the costs disclosure to which I referred at [30] above) (Tcpt, 31 August 2023, p 171(34)-172(1)).
A separate submission was advanced in relation to the estoppel operating to expand the indemnity in respect of the Retainer, with Senior Counsel submitting the following (Tcpt, 31 August 2023, p 174(26)): "WILSON: …One of the issues on the agreed statement of issues was 'If an indemnity only what part of the payer's claim under the retainer agreement remains claimable taking into account the effect of the Limitations Act?' HIS HONOUR: Yes. WILSON: The plaintiff's case is that the retainer fees did not become payable until the rendering of the invoice on 22 February 20[1]6, by virtue of the operation of the estoppel and the discussions between the parties. So, even though, your Honour, some of the work invoiced in the 22 February 2016 bill referred to part of 2009, 10, 11, 12, 13, 14, and part of 15, which was prior to six years before the commencement of the proceedings on 13 May 2021, because of the operation of the estoppel and the understanding between the parties that cause of action didn't accrue until when the invoice was rendered. So, that's the argument in relation to that."
The 22 February 2016 invoice in relation to the Retainer was the subject of the concession made to Parker J. As noted above, Oliveri Legal did not challenge the primary judge's conclusions regarding recovery of amounts pursuant to the Retainer.
In his oral submissions on the appeal, Senior Counsel for Oliveri Legal explained the estoppel claim as directed to the possibility of the Court construing the Agreement as containing a guarantee and/or indemnity, but one that was limited to invoices that had been rendered, in accordance with the words, on the first page of the Agreement, "payment of all legal costs and associated disbursements … in accordance with the payment terms of invoices rendered for these said services" (emphasis added). Senior Counsel submitted that if the Court construed the Agreement in that way, the conversations on which it relied in the reply gave rise to an estoppel that the Agreement also extended to costs incurred but not the subject of invoices. That claim would encompass, Senior Counsel submitted, the costs that were the subject of the costs assessment. CaTTO submitted that the estoppel argument run on appeal should not be permitted as it was contrary to the concession that was made before Parker J.
I consider that the estoppel argument as put on the appeal was run below, in response to CaTTO's contention that any guarantee or indemnity under the Agreement was limited to the original costs agreement and the estimate Mr Oliveri provided. However, it does not follow that the primary judge erred in [118] of the reasons in so far as he referred to the concession made before Parker J. What the primary judge was there dealing with was Oliveri Legal's position on the terms of the Agreement (which referred to payment pursuant to invoices rendered), as opposed to the terms of the estoppel. His Honour did not address the estoppel argument in his reasons.
In light of the conclusion that I have reached that, properly construed, the Agreement did not constitute a guarantee, the estoppel argument necessarily fails in so far as it sought to expand the guarantee in the Agreement.
In so far as Oliveri Legal relied on an estoppel to both expand the scope of the indemnity and defer the obligation to indemnify, in Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) NSW ConvR 56-172 Brereton J summarised the elements of promissory estoppel and estoppel by convention as follows at [32]: "In Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066, 65 NSWLR 300, I compared the elements of these two related estoppels - both are included in the rubric of estoppel in pais [Legione v Hateley, 430 (Mason and Deane JJ)] - so as to reveal their analogies and distinctions in the following terms. In equitable promissory estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of a legal relationship with the defendant; (2) that the defendant has induced or acquiesced in the plaintiff's adoption of that assumption; (3) that the plaintiff has acted in reliance on its assumption; (4) that the defendant knew or intended that the plaintiff so act; and (5) that it will occasion detriment to the plaintiff if the assumption is not fulfilled [Waltons v Maher, 428-429 (Brennan J)]. In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff [Waterman v Gerling, [83], [96]]." This statement of the matters necessary to establish conventional estoppel has been approved by this Court in several cases, including Ryledar Pty Ltd t/as Volume Plus v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 at [200]-[201] and Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407 at [573].
His Honour continued at [33]: "The similarities between the two doctrines should not be allowed to mask their differences, which reflect the disparate origins of promissory estoppel and conventional estoppel. Promissory estoppel, a creature of equity, is, typically, focussed on the conscience of the defendant: it operates when the defendant has induced or acquiesced in the adoption by the plaintiff of an assumption that the defendant will not assert its strict legal rights, so to prevent unconscionable (or unconscientious) insistence by the defendant on its strict legal rights. On the other hand, conventional estoppel, a creature of the common law, is focussed on the consensual basis of the parties' relationship: it operates when both parties have adopted the same assumption as the basis of their relationship, often without appreciating that any departure from the strict legal position is involved, so as to hold both parties to their common understanding."
From the manner in which Oliveri Legal put the argument below, it appears to have given priority to estoppel by convention over promissory estoppel. For both estoppels, the difficulty Oliveri Legal faced was in establishing that there was a mutual assumption as between Oliveri Legal and, relevantly, CaTTO, that it would indemnify Oliveri Legal under the Agreement in respect of any deferred fees, including fees that were never the subject of invoices. The content of the three conversations between Mr Oliveri and Mr Cassegrain as recorded in Mr Oliveri's affidavit, on which Oliveri Legal relied to establish the estoppels, do not, in my view, establish that there was such a mutual assumption. In the first conversation, Mr Cassegrain said that he would pay; and he made a representation in similar terms in the second conversation. That leaves the third conversation, the terms of which are not, in my view, sufficiently clear to give rise to a mutual assumption as between Oliveri Legal and CaTTO that the Agreement would be expanded in the manner Oliveri Legal alleged. It follows that I would dismiss grounds 4 and 5 of the notice of appeal.

Conclusion

Although the primary judge erred in concluding that CaTTO was not bound by the Agreement, on the proper construction of the Agreement that error was of no consequence in terms of the outcome of the appeal, and I have rejected the estoppel argument. Accordingly, I propose the following order: The appeal is dismissed with costs.
BASTEN AJA: I agree that the appeal in this matter must be dismissed with costs. Subject to what follows, I also agree with the reasons given by Mitchelmore JA and the additional observations of Gleeson JA, particularly in relation to the legal principles to be applied in considering the third issue identified by Mitchelmore JA. However, to the extent that these reasons differ from those set out above, they are a minority view and do not affect the outcome: they may therefore be stated succinctly. Two issues are addressed.
In short, as to the first issue, I would accept that the respondent (CaTTO) was bound by the agreement, but not on the basis of Mr Cassegrain's ostensible authority, but rather because, as the alter ego of the company, he had actual authority.
In relation to the second issue, I would read the agreement as both a guarantee and an indemnity. While there is an understandable reluctance to construe beneficially to the party seeking the benefit of a guarantee a document which it, being a firm of solicitors, incompetently drew, in my view it is effective as a guarantee of the obligations under the 2008 retainer agreement. However, for the reasons given by Mitchelmore JA, the extension of the guarantee and indemnity based on an alleged estoppel must be rejected.

Company bound by acts of director

To determine whether a corporation has validly entered into a contract, it is necessary to ask, first, whether the corporation has the capacity to do so and, secondly, whether the person who carried out the negotiation and execution had actual authority to do so. Only if there is no actual authority is it necessary to consider apparent or ostensible authority.
As to the first question, it was not suggested that the agreement was ultra vires or exceeded the contractual capacity of the corporation. Article 106 of the Articles of Association of CaTTO vested extensive powers in "the Directors", including: "(l) to enter into and execute all kinds of guarantees bonds and indemnities for securing the payment or performance of any debts or obligations whether past present or future by any person whomsoever (including any Director or shareholder…) whether the Company has or has not any interest in or derives or does not derive any benefit from the payment or performance of the debt or obligation in respect of which such guarantee bond or indemnity is given and whether they relate in any way to the business carried on by the company or not… ."
As to the second question, Diplock LJ explained in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd: [1] "It is necessary at the outset to distinguish between an 'actual' authority of an agent on the one hand, and an 'apparent' or 'ostensible' authority on the other. Actual authority and apparent authority are quite independent of one another. Generally they co-exist and coincide, but either may exist without the other and their respective scopes may be different. … An 'actual' authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties. To this agreement the contractor is a stranger; he may be totally ignorant of the existence of any authority on the part of the agent. Nevertheless, if the agent does enter into a contract pursuant to the 'actual' authority, it does create contractual rights and liabilities between the principal and the contractor."
The reference to "the Directors" in art 106 should be understood as the directors acting as a board holding meetings to make decisions, as required by art 96. However, the directors were empowered to appoint one of their number as a managing director and confer upon the managing director such powers as they thought fit: arts 93, 95. In addition, art 106(q) empowered the board to delegate to any director any of the powers of the board.
ASIC records indicated that Mr Claude Cassegrain (Mr Cassegrain) was, in December 2008, both a director and the secretary of CaTTO. There was one other director, his son Thomas Cassegrain. Mr Cassegrain signed the letter to Oliveri Lawyers (Oliveri) dated 2 December 2008, on CaTTO letterhead, as "managing director"; according to Mr Oliveri, he also described himself in an initial conversation on the same date as managing director of CaTTO. The other director, Thomas Cassegrain, was overseas at the material time.
So far as the evidence revealed, it is probable that CaTTO operated, like many family companies, with a degree of informality. There was no evidence of a resolution appointing Mr Cassegrain as managing director, nor of delegating to him the functions of the board. Nevertheless, as a practical matter, he had the day to day running of the company's affairs. There was, for example, no finding, or submission in this Court, that he had not been given powers as managing director or by way of delegation, nor denying that he had actual authority to execute the guarantee and indemnity on behalf of CaTTO. While it is true that Oliveri bore the onus of proving that CaTTO was bound by the agreement, on the central question of Mr Cassegrain's authority to bind the company, CaTTO called no evidence. Thomas Cassegrain was still a director at the time of the trial, but was not called by CaTTO, although it had served an affidavit from him, which was not read. It should be inferred that his evidence would not have assisted CaTTO in this regard.
Another way to look at the matter is to infer that Mr Cassegrain was "the directing mind and will of the corporation, the very ego and centre of the personality of the corporation", to adopt the language of Viscount Haldane LC in Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd. [2] In that circumstance, assuming that the company had the capacity to enter into the transaction, which was not in dispute, the acts of Mr Cassegrain, when purporting to act on behalf of the company, should be viewed as the acts of the company. In such a case it would not be necessary to apply the indoor management rule as in identifying the effect of an act of an agent: in Northside Developments Pty Ltd v Registrar-General [3] Mason CJ observed: "The affixing of the seal to an instrument makes the instrument that of the company itself; the affixing of the seal is in that sense a corporate act, having effect similar to a signature by an individual …. Thus, it may be said that a contract executed under the common seal evidences the assent of the corporation itself and such a contract is to be distinguished from one made by a director or officer on behalf of the company, that being a contract made by an agent on behalf of the company as principal."
Discussions of the operation of the indoor management rule sometimes refer to it applying in cases of ostensible or actual authority. However, unless the latter is invoked in a situation where the agent has actual authority but has failed to comply with some condition of its exercise, which is not this case, actual authority is sufficient and is properly addressed first. [4] Such authority may be implied from the circumstances. [5] In the present case, it should be accepted that in December 2008 Mr Cassegrain acted as the managing director, whose acts were the acts of the corporation. If he acted on behalf of the company, there is no reason to suppose that those acts were not those of the corporation.

Whether agreement operated as a guarantee

On 2 December 2008 Mr Claude Cassegrain, as managing director of CaTTO, wrote to Oliveri Lawyers instructing them to act in proceedings in the Supreme Court in which he was the defendant. Upon agreeing to act, Oliveri provided Mr Cassegrain with a costs agreement which he signed on 3 December 2008. On 19 December, Mr Cassegrain and CaTTO entered into a separate agreement with Oliveri, titled "GUARANTEE AND INDEMNITY AGREEMENT". The "guarantors" identified in the agreement were Mr Cassegrain and CaTTO. The chapeau, in the form of a recital, stated: "We the guarantors agree to jointly and severally, indemnify the legal firm of [Oliveri] for the payment of all legal costs and associated disbursements (including the counsels' fees) in accordance with the payment terms of invoices rendered for these said services." Clause 1 of the agreement provided: "1 This guarantee, and the indemnity under this Guarantee will not be affected: a) should OLIVERI grant any extension of time or other indulgence to the Guarantors or vary the terms of the retainer agreement with the Guarantors; b) by the release of any of the Guarantors or if this Guarantee is or becomes unenforceable against one or more of the Guarantors; or c) any payment by the Guarantors being later avoided by law, whether or not the Guarantors have been given notice of these matters."
There are two observations which may be made in respect of the chapeau and cl 1, being the primary operative clause. First, the services to be provided by Oliveri are identified by reference to "the terms of the retainer agreement with the Guarantors", referred to in clause 1 a). Mr Cassegrain, but not CaTTO, was the party contracting with Oliveri under the 2008 retainer agreement. There were no legal services to be supplied to CaTTO, which was not a party to the litigation the subject of the 2008 retainer agreement. It follows that, to treat Mr Cassegrain and CaTTO as if they were the beneficiaries of the provision of legal services was misguided. Similarly, it was misguided to refer to Mr Cassegrain as a guarantor of his own liability under the retainer.
Secondly, although the chapeau stated that the guarantors "agree to … indemnify" Oliveri, neither the chapeau nor the operative cl 1 stated in terms that they were "to guarantee" payment of legal costs by Mr Cassegrain. While it was incoherent to create a secondary liability (by way of guarantee) in Mr Cassegrain in respect of his own primary liability under the 2008 retainer agreement, with respect to CaTTO both a guarantee of Mr Cassegrain's obligations and a primary liability to indemnify Oliveri against loss were available. Clause 1, however, assumed that the document was effective as a guarantee, describing it as a guarantee and referring to "the indemnity under this guarantee". What followed in cl 1 were standard provisions of a guarantee.
Despite the lack of a relevant verb in the operative clause, it is clearly intended to provide both a guarantee and an indemnity. If it is not the one, it is not the other either: "guarantee" and "indemnity" are used only as nouns. The infinitive "to indemnify" used in the chapeau is by way of a recital, namely that the guarantors agreed to do something; it does not indicate that that is all they agreed to do. Nor is it the doing of the act.
Two further matters should be taken into account. First, the phrase "this guarantee, and the indemnity under this Guarantee" is clearly intended to identify the effect of the Guarantee referring to the agreement.
Secondly, although the second page of the document, headed "CERTIFICATE OF GUARANTEE EXECUTED AS A DEED - ACKNOWLEDGEMENT" cannot, standing by itself, effect a guarantee, nevertheless, read with the first page and the operative cl 1, it assumed that there was both a guarantee and an indemnity which "are" irrevocable. The use of the plural "are" indicated that the phrase "Guarantee and Indemnity" referred to the two aspects of the agreement, and not to the document itself. The acknowledgment continued: "We also certify that we understand OLIVERI may recover any amount outstanding relating to those legal matters for which OLIVERI has been retained, from the guarantors, jointly or severally."
The term "amount outstanding" is apt in the context to refer to an unpaid liability under the 2008 retainer agreement. That might not in itself be sufficient to create a secondary liability in CaTTO for Mr Cassegrain's debts, but when read with cl 1, it is difficult to give the combined effect of the whole document any other operation.
Accordingly, as neither party contended that the agreement had no operation at all, it should be understood to operate as both a guarantee by CaTTO of the primary obligations of Mr Cassegrain under the 2008 retainer agreement, and as an indemnity against potential loss to Oliveri arising from his default.
Nevertheless, and putting to one side the operation of cl 2 which extended the agreement to the provision of a security and which was entirely incidental to cl 1, the effect of the guarantee is limited to Mr Cassegrain's obligations under the 2008 retainer agreement. Accordingly, this reasoning will not affect the outcome of the case.

Endnotes

[1964] 2 QB 480 at 502-503.
(1915) AC 705, 713; see also Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170 (Lord Reid) and Hamilton v Whitehead (1988) 166 CLR 121 at 127 (Mason CJ, Wilson and Toohey JJ); [1988] HCA 65.
(1990) 170 CLR 146, 160; [1990] HCA 32.
See, eg, Hightime Investments Pty Ltd v Adamus Resources Ltd [2012] WASC 295 at [143]ff (Edelman J).
Hightime Investments at [144], citing Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 132 (Clarke and Cripps JJA). 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: 09 April 2024

Solicitors: Oliveri Lawyers (Appellant) Madison Marcus (Respondent) File Number(s): 2023/00309899 Publication restriction: Nil Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Citation: Oliveri Legal Pty Ltd v Cassegrain Tea Tree Oil Pty Ltd (No 2) [2023] NSWSC 1082 Date of Decision: 7 September 2023 Before: Elkaim AJ File Number(s): 2021/00134642

HEADNOTE [This headnote is not to be read as part of the judgment] As of 2008, Claude Cassegrain (Mr Cassegrain) was one of two directors of the respondent, Cassegrain Tea Tree Oil Pty Ltd (CaTTO); he was also CaTTO's managing director and company secretary. Mr Cassegrain's son, who was living overseas, was the other director. The only shareholders of CaTTO were Mr Cassegrain and his wife. CaTTO's Memorandum and Articles of Association provided that the Directors could appoint a managing director and confer upon them such powers exercisable by the Directors as thought fit. The powers of the Directors included making loans or advances to or on behalf of any Director or shareholder; executing guarantees and indemnities to secure the payment or performance of any debt or obligation, whether or not CaTTO had an interest in its payment or performance; and entering into such negotiations and contracts on behalf of CaTTO as they may consider expedient in relation to those matters or otherwise for the purposes of CaTTO. It was the evidence of Mr Cassegrain's son that it had been CaTTO's "common practice to loan money to its shareholders and their children from time to time". In December 2008, Mr Cassegrain instructed the appellant, Oliveri Legal Pty Ltd (Oliveri Legal) to act for him in Supreme Court proceedings. CaTTO was not a party to the litigation. In an initial telephone call with Emanueli Oliveri, the principal solicitor of Oliveri Legal, Mr Cassegrain stated that he was CaTTO's managing director and requested a controlled money account to be set up in the name of CaTTO. He sent Oliveri Legal a confirmatory letter on CaTTO's letterhead, which he signed as "Managing Director". Oliveri Legal provided Mr Cassegrain with a costs agreement which he signed on 3 December 2008 (the Costs Agreement). Oliveri Legal also required Mr Cassegrain to execute a document titled "Guarantee and Indemnity" (the Agreement), which was signed by Mr Cassegrain on his own behalf and on behalf of CaTTO on 19 December 2008. On 27 February 2009, Mr Cassegrain entered a retainer agreement with Oliveri Legal (the Retainer). During a telephone conversation with Mr Cassegrain, Mr Oliveri said, "As the [Agreement] has been signed, I will invoice you for my services and for the [Retainer] at the end of your proceedings". In around June 2011, Mr Cassegrain called Mr Oliveri explaining that he was having difficulty paying invoices issued for Marcus Wicken, an employed solicitor of Oliveri Legal. Mr Oliveri referred to the Agreement and said that Mr Cassegrain and CaTTO would owe the amounts, along with the retainer fees and professional fees for Mr Oliveri's services. On 1 September 2011, Mr Cassegrain called Mr Oliveri stating that he could not pay Mr Wicken's full invoice. Mr Oliveri said he was "willing to carry over the shortfall as we have the [Agreement]". On 13 May 2021, Oliveri Legal commenced proceedings in the Supreme Court seeking, amongst other things, a declaration that the Agreement bound CaTTO, that Oliveri Legal held an equitable charge over CaTTO's interest in certain land, and that CaTTO was indebted to Oliveri Legal in the amount of $1,838,758.76 plus interest up to judgment. The primary judge concluded that CaTTO was not bound by the Agreement and dismissed the proceedings. His Honour also found that the Agreement was not a guarantee and indemnity but only an indemnity; and that it only secured amounts that Mr Cassegrain owed under the Retainer, recovery pursuant to which was time-barred and contrary to public policy. On appeal, Oliveri Legal did not challenge the primary judge's conclusions regarding the Retainer. The notice of appeal sought a reduced sum of $627,083 plus interest up to judgment, comprising unbilled work that Mr Oliveri carried out for Mr Cassegrain and payment for the services of two employed solicitors of Oliveri Legal. The issues for determination on appeal were: (1) whether the Agreement bound CaTTO, either by reason of Mr Cassegrain's ostensible authority or the statutory assumption in s 129(3) of the Corporations Act 2001 (Cth); (2) whether, on its proper construction, the Agreement constituted a guarantee and indemnity, rather than only an indemnity, and if so, whether the guarantee extended to all amounts outstanding relating to the legal matters in which Oliveri Legal was retained; (3) whether, if the guarantee and/or indemnity was construed as limited to invoices that had been rendered, the conversations between Mr Cassegrain and Mr Oliveri in February 2009, June 2011 and September 2011 gave rise to an estoppel that the Agreement extended to costs incurred but not the subject of invoices and payment of which was deferred until the conclusion of proceedings. The Court held, dismissing the appeal: As to issue (1) Per Mitchelmore JA (Gleeson JA agreeing): (1) The Agreement bound CaTTO by reason of Mr Cassegrain's ostensible authority: [15], [66]. The communications between Mr Cassegrain and Oliveri Legal in the telephone conversation on 2 December 2008 and subsequent correspondence, including the signing and returning of the Agreement, constituted dealings between Oliveri Legal and CaTTO by which Mr Cassegrain was held out as having authority to bind the company: [52], [54]. The signing of the Agreement was an authorised activity incidental to that part of CaTTO's business associated with the provision of loans to shareholders, including for the purposes of litigation: [65]. Freeman and Lockyer v Buckhurst Park Properties [1964] 2 QB 480; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 applied; Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722; Soyfer v Earlmaze Pty Ltd [2000] NSWSC 1068 considered; Hightime Investments Pty Ltd v Adamus Resources Ltd [2012] WASC 295; Lopez v Pawski [2017] WASC 338 distinguished. Per Basten AJA: (2) The Agreement bound CaTTO not on the basis of Mr Cassegrain's ostensible authority, but rather because, as the alter ego of the company, he had actual authority: [94], [103]. Freeman and Lockyer v Buckhurst Park Properties [1964] 2 QB 480; Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd (1915) AC 705; Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146; [1990] HCA 32 considered. As to issue (2) Per Mitchelmore JA (Gleeson JA agreeing): (3) On its proper construction, the Agreement constituted an indemnity but not a guarantee: [15], [70]. The distinctive feature of a contract of guarantee is the secondary nature of the obligation which is assumed by the guarantor: [70]. The Agreement does not involve CaTTO undertaking a secondary obligation to Oliveri Legal for Mr Cassegrain's obligation to pay its legal costs and disbursements: [72], [77]. Rather, the nature of the obligation is a primary one to hold Oliveri Legal harmless in relation to the payment of Oliveri Legal's fees and disbursements, which arises independently of any default by Mr Cassegrain: [72]. Canty v Paperlin X Australia Pty Ltd [2014] NSWCA 309; Lee v ATL (Australia) Pty Ltd [2023] NSWCA 327 applied; H Lundbeck A/S v Sandoz Pty Ltd; CNS Pharma Pty Ltd v Sandoz Pty Ltd [2022] HCA 4; 399 ALR 184 considered. Per Gleeson JA: (4) Oliveri Legal did not submit that the reference to "indemnify" in the operative clause on page 1 of the Agreement was erroneous and could be corrected: (a) as a matter of construction as a reference to "guarantee and indemnify"; (b) by an estoppel (promissory or conventional); or (c) by rectification in equity: [3], [4], [7]. (5) It is well-established that, if an error is clear, and it is also clear what a reasonable person would have understood the parties to have meant, then the mistake may be corrected as a matter of construction: [4]. Two conditions are necessary to correct contractual language in this manner: (a) that the literal meaning of the contractual words is an absurdity, and (b) that it is self-evident what the objective intention is to be taken to have been: [5]. Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11; Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633; [2014] NSWCA 184 considered. (6) The test of absurdity is not easily satisfied. In this case, whilst something may arguably have gone wrong in the drafting of the operative clause on page 1 of the Agreement, it does not follow that, as a matter of construction, the Agreement could be construed so that CaTTO's obligation was both a guarantee and indemnity, rather than only an indemnity: [6]. Per Basten AJA: (7) The Agreement should be understood to operate as both a guarantee by CaTTO of the primary obligation of Mr Cassegrain under the Costs Agreement, and as an indemnity against potential loss to Oliveri Legal arising from his default: [111]. As to issue (3) Per Mitchelmore JA (Gleeson JA agreeing): (8) In light of the conclusion that the Agreement did not constitute a guarantee, the estoppel argument necessarily fails in so far as it sought to expand the guarantee in the Agreement: [88]. (9) In so far as Oliveri Legal relied on an estoppel to expand the scope of the indemnity and defer the obligation to indemnify, the conversations in February 2009, June 2011 and September 2011 did not establish a mutual assumption as between Oliveri Legal and CaTTO that it would indemnify Oliveri Legal under the Agreement in respect of any deferred fees, including fees that were never the subject of invoices: [91]. Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) NSW ConvR 56-172 applied. Per Basten AJA: (10) The guarantee is limited to Mr Cassegrain's obligations under the Costs Agreement: [112]. The extension of the operation of the Agreement on the basis of an estoppel must be rejected: [95].

JUDGMENT

GLEESON JA: I agree with the orders proposed by Mitchelmore JA for the reasons her Honour gives. I add one comment in relation to ground 3 concerning the construction of the Agreement titled "Guarantee and Indemnity Agreement". The appellant (Oliveri Legal) says that, in addition to an indemnity, the Agreement ought, as a matter of construction, to be read as containing a guarantee given by Cassegrain Tea Tree Oil Pty Ltd (CaTTO) of Mr Claude Cassegrain's obligation to pay specified legal costs and disbursements to Oliveri Legal.
As Mitchelmore JA observes at [73], the operative clause on page 1 of the Agreement (which is set out at [33] of the judgment) does not include any language of obligation of a secondary nature, that is, in the nature of a guarantee; it only contains an indemnity. So much was accepted by Oliveri Legal at trial; the case it advanced was that CaTTO gave both a guarantee and indemnity to Oliveri Legal because (i) the indemnity appears in the first five lines on page 1, and (ii) the guarantee appears in the first six lines on page 2 of the document. As Mitchelmore JA explains at [74]-[76], the second page of the Agreement cannot be read independently of the first page, and does not contain a guarantee by CaTTO of Mr Cassegrain's specified obligations to pay legal costs and disbursements to Oliveri Legal.
In this Court whilst Oliveri Legal did not resile from its position at trial that the operative clause on page 1 of the Agreement only contained an indemnity, it characterised the several references in the Agreement to "Guarantee", "This guarantee" and "this Guarantee", as having the effect that the Agreement "clearly operates by its terms as a guarantee by CaTTO of the obligations of Mr Cassegrain to pay legal fees and disbursements due to Mr Oliveri, it being a secondary obligation". Why this construction is said to be "clear" was not further explained. The submission seems to be that it is implicit that the Agreement contains a guarantee (in addition to an indemnity) given by CaTTO to Oliveri Legal given the several references in the Agreement to the word "guarantee". However, such a submission does not squarely confront the omission of any obligation of a secondary nature in the Agreement.
It was not submitted by Oliveri Legal that the operative clause on page 1 of the Agreement is plainly a drafting error or "obvious mistake" which can be resolved as a matter of construction as a reference to "guarantee and indemnify" (emphasis added): Fitzgerald v Masters (1956) 95 CLR 420 at 426-428; [1956] HCA 53; Westpac Banking Corporation v Tanzone Pty Ltd [2000] NSWCA 25; (2000) 9 BPR 17,521 at [34]-[37]. In this regard, it is well-established that, if the error is clear, and it is also clear what a reasonable person would have understood the parties to have meant, then the mistake may be corrected as a matter of construction: Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317, 322; [2019] NSWCA 11 at [6]-[10].

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