PROSILIS v DOUBLE BAY NEWSPAPERS PTY LTD

COUNSEL : Appellant: S Habib Respondent: M J Neil QC/R Bell SOLICITORS : Appellant: Photios Vouroudis & Co Respondent: David R Purvis & Co CATCHWORDS : Contract - loan agreement - guarantee - provision for two guarantees - express or implied conditions - objective intention - D DECISION : Appeal dismissed with costs

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40407/98 DC 5780/95

MASON P PRIESTLEY JA BEAZLEY JA Thursday 9 March 2000 OVID PROSILIS v DOUBLE BAY NEWSPAPERS PTY LTD & ORS

The respondents sued upon a written loan agreement ("the Agreement") whereby the appellant personally guaranteed the due payment of any amount owing by the principal debtor (the appellant's company) to the respondents. In a section of the Agreement marked "Application for Credit Account", the personal guarantee of each director was required in the case of a registered company. The appellant and his wife were both directors but only one of the guarantees was completed. The guarantee named the appellant and was executed by him with his signature being witnessed by his wife before they faxed it back to the respondents. The principal debtor went into liquidation.

The Trial Judge found that the appellant knew he was signing a guarantee. He also found that the appellant's cross-claim under the Contracts Review Act 1980 had no application in that there was nothing unjust in the circumstances giving rise to the contract. The Trial Judge held that it was not an express or implied condition precedent of any liability that each director of the appellant's company execute a guarantee. He distinguished Bleyer v Neville Jeffress Advertising Pty Ltd unreported, Court of Appeal, 15 December 1987 on the basis that the appellant's subjective intention was to give a guarantee in the way he indicated and he did not intend that his fellow director should sign a guarantee.

HELD (by Mason P, Priestley JA and Beazley JA), dismissing the appeal with costs:

The Trial Judge was entitled to find that the appellant as an experienced man of business understood he was signing a guarantee. While his Honour erred in finding that the Contracts Review Act 1980 should have no application as regards the appellant, no error affected the finding that there was nothing unjust in the circumstances giving rise to the contract. It was sufficient to justify the dismissal of the cross-claim.

Ring Tread Systems (Australia) Pty Ltd (Receiver and Manager Appointed) v Tubb, unreported, Court of Appeal, 30 October 1998 (referred)

The appellant's intention (objectively determined) was to give a single guarantee in the way he indicated. The framework of facts within which the contract came into existence show that the parties contracted on the basis that a single guarantee would suffice.

The term requiring all directors to sign guarantees never became part of the contract because the creditor accepted a proffered counter-offer from the principal debtor. That counter-offer was represented by the application form which was accompanied by a single guarantee in circumstances inviting acceptance on that basis.

Air Great Lakes Pty Ltd v KS Easter Pty Ltd (1985) 2 NSWLR 309 (distinguished); Bleyer v Neville Jeffress Advertising Pty Ltd unreported, Court of Appeal, 15 December 1987 (distinguished); Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (followed); Marston v Charles Griffith & Co Pty Ltd (1985) 3 NSWLR 294 (distinguished); Prenn v Simmonds [1971] 1 WLR 1381 (referred).

Discussion of objective theory of contract.

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40407/98 DC 5780/95

MASON P PRIESTLEY JA BEAZLEY JA

OVID PROSILIS v DOUBLE BAY NEWSPAPERS PTY LTD & ORS

JUDGMENT 1 MASON P: The respondents are four companies trading as Champion Communications that sued Australian Catalogue Corporation Pty Ltd as principal debtor and the appellant as guarantor. Judge Herron QC entered judgment for $280,334 against each defendant. The guarantor appeals. 2 The principal debtor was a company now in liquidation. Its equal shareholders and two directors were the appellant and his wife Erika. 3 The respondents pleaded a written agreement dated 14 September 1994 whereby the appellant personally guaranteed the due payment of any amount due or owing by the principal debtor to the respondents. Printing work was done by the respondents for the principal debtor between January and July 1995. The invoiced value of the work represents the principal sum. Various defences were pleaded by the appellant who also raised a cross-claim for relief under the Contracts Review Act 1980. 4 The appellant discussed an application for credit with the managing director of Champion Communications. There was no mention of personal guarantees. On 14 September 1994 the principal debtor received by facsimile the two pages of a document called an Application for Credit Account. In the original they would have been the front and back of a single printed document. 5 In a box called "Credit Terms" immediately under the heading "Application for Credit Account" appeared the following: 1. Payment of account is to be made within 30 days from invoice date. 2. Credit facilities may be withdrawn on overdue accounts at the company's direction without notice. 3. The personal guarantee of each director is required in the case of a registered company, the paid up capital of which is a nominal amount only. Two guarantees are printed on the back of this form. Additional copies may be obtained from our Credit Department, if required.

6 Below this were a series of boxes designed for details of the company or business seeking the credit account. All of the details were intended to be completed by the applicant. These included name, registration number, address, the names and home addresses of the proprietors or directors, an indication of the approximate monthly credit required, banking details and references. Near the bottom of page 1 is a box for the applicant to sign and undertake adherence to "the above terms". 7 Beneath this portion of page 1 is a box headed "Office Use Only", designed for the insertion of information as to approval and nomination of the account number. 8 As indicated in par 3 of the Credit Terms, the second or back page contains two identical forms headed "Guarantee". Each stipulates that, in consideration of Arklow Pty Ltd, trading as Champion Communications, granting credit to the named Customer, the named guarantor will guarantee and bind himself or herself jointly and severally with the Customer for the payment of money owing or which may become owing. The Guarantee contains six standard stipulations as to its continuing nature, the (non) effect of indulgences, variations, releases, etc and other matters designed for the creditor's benefit to meet various common law principles protecting sureties. Each guarantee form then provides for execution before a witness, dating etc. 9 The appellant's wife looked after the accounts of the principal debtor. When the fax arrived, she telephoned the appellant and told him that an application for credit had arrived. She inserted in her handwriting most of the information required and then presented the document to her husband. He told her the names of three trade references, which she inserted. The first or front page of the Application was completed by including details of the principal debtor, nominating Mr and Mrs Prosilis as the proprietors or directors, seeking $30,000 per month credit and providing the other information required. The undertaking on page 1 was signed by Mrs Prosilis and dated 14 September 1994. 10 Only one of the Guarantees was completed. It named the appellant and was executed by him with his signature being witnessed by his wife and dated 14 September 1994. 11 The two pages of the document, thus completed, were faxed back to Champion Communications later that day.

Miscellaneous defences 12 The appellant's evidence that he did not realise that he was signing a guarantee was disbelieved by the learned trial judge. Notwithstanding the challenge to this finding, I am satisfied that his Honour was entitled to reach this conclusion. The appellant was an experienced man of business. He had been National Marketing Manager for Woolworths Ltd. He was quite familiar with guarantees. In any event, it was sufficient in the particular case that he executed a document the clear purport of which was a personal guarantee. It was no defence that he did not read the document in full. 13 It is also convenient at this stage to dispose of the appellant's challenge based upon the rejection of his cross-claim seeking relief under the Contracts Review Act 1980. The learned trial judge held that the Act had no application. This was an error as regards the appellant (see Ring Tread Systems (Australia) Pty Ltd (Receiver and Manager Appointed) v Tubb unreported, Court of Appeal, 30 October 1998). However, his Honour also held that there was nothing unjust in the circumstances giving rise to the contract upon which the appellant was sued. This finding was open and betrays no error. It was sufficient to justify dismissal of the cross-claim. 14 There is in my view no merit in the appellant's submission that the trial miscarried because of the trial judge's early indication during the trial that the Contracts Review Act did not apply. Nor was there error in his refusal to grant an adjournment.

The principal issue 15 I now turn to the principal issue in the appeal. One of the defences pleaded by the appellant (further amended grounds of defence, par 12) was denial of liability pursuant to the guarantee on the basis that it was an express or implied condition precedent of any liability that each director of the first defendant execute a guarantee, which condition precedent was not satisfied. Clause 3 of the "Credit Terms" in the box near the top of page 1 of the Application was relied upon. 16 Herron DCJ rejected this defence. His Honour referred to Marston v Charles Griffith & Co Pty Ltd (1985) 3 NSWLR 294 and Bleyer v Neville Jeffress Advertising Pty Ltd unreported, Court of Appeal, 15 December 1987. 17 The nub of his Honour's reasons appears in the following passages: I leave aside the evidence given by the defendant that he really did not read condition 3 or term 3 and that that only became apparent to him at a later date and if that is the case of course it might be said that he was in no way influenced by that particular term and that that particular term was not important in this case as it was in the case of Bleyer. But here I think that the intention of the defendant was obviously to give a guarantee to the company in the way in which I have indicated and he did not intend that the other director, namely, his wife should sign the guarantee and quite frankly I reject his suggestion that it was the plaintiff's duty to seek out the signature of his wife. This is ridiculous having regard to the circumstances in which he himself signed the guarantee where it was handed to him by his wife, having in effect been filled out by her and it being obvious to him that she had not completed the second form which is on the same paper which he in fact had signed. I draw the inference that it was his intention not only to give a guarantee to the plaintiffs but to exclude his then wife from any liability in relation to a guarantee which she might have given to the company and I do not think in this case that term 3 assumed the importance as it did in Bleyer's Case . I think the simple situation was that despite term 3 the defendant himself decided that he only would give a guarantee and that was accepted when he sent the guarantee back to the plaintiffs. That is a question which is not in dispute and it was on the strength of his guarantee given in the way in which I have indicated that credit undoubtedly was extended to the company thereafter. …. I have not spelt out already, I find that the defendant well knew that the document which he signed was a guarantee and a personal guarantee to the plaintiffs in respect of any relevant indebtedness of his company. For those reasons I find a verdict for the plaintiff and I find a verdict for the plaintiff on the defendant's cross claim.

The contract sued upon 18 It is pertinent that the respondents sued the appellant upon the written guarantee. They were entitled to do so upon the basis that the appellant signed this document, whether or not he had read it carefully (L'Estrange v F Graucob Ltd [1934] 2 KB 394). 19 The "office use only" section of page 1 of the Application bears a signature indicating approval by some officer of the respondents and the assignment of an account number to Australian Catalogue Corporation Pty Ltd. There is no evidence as to when this occurred. The document was simply tendered into evidence in its final form, a form which includes indications that it was faxed to the appellant's home at 13:11 on 14 September 1994 and faxed back completed at 15:50 that same day. Obviously it was approved by the respondents' representative some time later. 20 The appellant's guarantee was not under seal. According to its terms, the consideration for the promise was the granting of credit to the principal debtor. It is unnecessary to decide whether the contract first became binding when the application for the credit account was approved or when it was acted upon. 21 Where a guarantee contains an express or implied term that more than one guarantor shall execute it, then a single guarantor will be discharged from liability if the intended co-guarantor fails to execute or to execute validly. The case law is summarised in O'Donovan and Phillips, The Modern Contract of Guarantee 3rd ed (1996) pp88-90. The basic proposition is established by cases such as Hansard v Lethbridge (1892) 8 TLR 346, Williams v Frayne (1937) 58 CLR 710 at 738, Hancock v Williams (1942) 42 SR 252 at 255, Marston at 300, Stramit Industries Ltd v Reinhardt [1985] 1 Qd R 562, James Graham & Co (Timber) Ltd v Southgate-Sands [1986] 1 QB 80, Macedone v Collins (1996) 7 BPR [15,127] at 15,138-9. 22 The critical issue is whether this principle applies to the case at hand. In particular, the question is whether clause 3 of the "Credit Terms", which purported to be an express term of the credit arrangement between the respondents and the principal debtor as applicant for credit, became an express or implied term of the accompanying guarantee which the appellant executed and the respondents accepted. 23 The appellant's submission is that the written contract is to be construed according to its terms and without reference to unilateral or unexpressed intentions or reservations. It is submitted that clause 3 of the Credit Terms was more than a purported reservation by the creditor of the right to refuse to consider or grant the application in the absence of guarantees from all proprietors or directors. Rather, it was and became a term of the guarantee itself.

Bleyer v Neville Jeffress Advertising Pty Ltd 24 Bleyer is very similar to the present case in some of its facts. 25 The principal debtor (Origen Natural Skin Care (Australia) Pty Ltd ("Origen")) was a company with a paid up capital of $2. It was seeking to acquire one quarter of a million dollars worth of television advertising. The company had three directors, one of whom (Mr Bleyer) was negotiating through an agency whose principal was a Mr Hutchings. Bleyer was handed an Application for Credit Account which was identical to the form of the application in the present case. In particular it contained the three "Credit Terms" on page 1 and the two forms of Guarantee (each with six identical clauses) on the back. Bleyer signed the Application on behalf of Origen and completed and signed what turned out to be the only Guarantee offered to the creditor and accepted by it. Services were thereafter provided. When Origen defaulted, the sole guarantor was sued. 26 Thus far, Bleyer is indistinguishable from the present case. However, there were some significant differences. The intermediary Hutchings forwarded the completed Application to the creditor. The creditor wrote back to him confirming that it would do Origen's business on a particular basis. The letter acknowledged that one condition was that "your client completes our account application form and we accept him subject to our credit checks. (This has been done.)" After setting out other stipulations, the letter asked Mr Hutchings to provide confirmation of acceptance of the arrangements. It does not appear that any such formal confirmation was given, but the television advertising was provided and accepted without demur. 27 There was undisputed evidence that when Bleyer completed the credit form he told Hutchings that he was signing it on the condition that the other directors also sign. Hutchings went further and told him that the other directors had to sign the Application form. It is clear that Bleyer was led to believe by Hutchings that the other directors would sign identical Guarantees and that Hutchings' representation was treated as having been made on behalf of the creditor. Hutchings and his company were intermediaries between the creditor and Origen, but he was not Bleyer's agent in the negotiations. 28 A court comprising Kirby P, Hope JA and Mahoney JA upheld Bleyer's appeal and entered judgment in his favour. 29 Each member of the Court expressed himself differently. It is convenient to look first to the judgment of Mahoney JA, who based his reasons almost entirely upon the written terms of the document. His Honour considered the nature of the third of the Credit Terms. He thought that it was either a representation by the plaintiff that the offer made by Origen to it would not be accepted unless the personal guarantee of each director was given; or that it gave rise to a term of the contract between the plaintiff and Origen that the plaintiff would not be bound to perform its obligations under the contract unless and until such guarantees were given. Mahoney JA favoured the second of the alternatives, but found it unnecessary to choose between them because it was the effect of the application upon the agreement to guarantee which was directly relevant. His Honour held that the third term, whatever its nature, was not open to be waived unilaterally by the plaintiff. Whether as a representation to Bleyer or a term of the contract between the plaintiff and Origen, it went beyond giving the plaintiff an option to require the relevant guarantees. 30 Mahoney JA held that the Guarantee signed by Bleyer was not, as such, a term of the offer made by Origen to the plaintiff, although it was inter-connected with that offer. The Guarantee itself was an offer to the plaintiff to the effect that, if the plaintiff accepted the offer made to it by Origen in accordance with the Application Form, the Guarantee would take effect. In this context it was necessary to determine the effect of term 3 upon the proposed agreement for guarantee. If term 3 was a representation to Bleyer, it was held to be one intended to have contractual effect. It would be of such significance to a prospective guarantor that it would be intended to have contractual effect. If alternatively, term 3 was intended to be a term of the Guarantee contract when it came into effect, it would be a condition of that contract. It followed that the plaintiff's failure to enforce that condition released Bleyer as guarantor from the Guarantee Contract. 31 In conclusion, Mahoney JA stated that "a stipulation in terms of term 3 would have led a prospective guarantor to understand that such obligations as he was proposing to undertake were conditional upon the other directors undertaking similar obligations". This suggests that his Honour dealt with the contractual arrangements solely as per the documents, albeit that the communications between Hutchings and Bleyer showed at the very least that Bleyer was relying upon such rights as they conferred upon him. 32 Hope JA approached the matter somewhat differently, setting out in detail the conversations between Bleyer and Hutchings as well as the written terms of the Application and Guarantee. His Honour noted that: Facts of the kind relied upon by the defendant, if established, might arguably give rise to a defence at law or in equity. At law, the defendant might be able to establish that it was an express or implied term of his contract of guarantee that the other directors should sign guarantees and that he would not be liable unless they did: James Graham & Co (Timber) Ltd v Southgate-Sands [1986] 1 QB 80; Marston v Charles H Griffith & Co Pty Limited (1985) 3 NSWLR 294. Alternatively, he might seek to establish a Pym v Campbell (1856) 6 El & Bl 370; 119 ER 903 term that the form of guarantee should not bind him unless and until the other directors approved. Whether or not a guarantee has the express or implied condition to which I have referred, a guarantor, even though liable at law, may be relieved of his obligation in equity in a number of circumstances, of which those relevant to the present proceedings are if he enters into the guarantee on the basis of a belief or understanding, induced in whole or in part by some statement or other act by or on behalf of the creditor, including the terms of any document provided by the creditor: Hansard v Lethbridge 8 TLR 346 at 347, per Fry LJ that another person or other persons will also guarantee the debt: Evans v Bremridge (1855) 2 K & J 174; 25 LJ Ch 102; 69 ER 741; (on appeal; (1856) 8 De G M & G 100; 25 LJ Ch 334; 44 ER 327); The National Provincial Bank of England v Brackenbury (1906) 22 TLR 797.

33 Hope JA noted that a defence based upon a Pym v Campbell term had not been argued. This meant that he approached the matter on the basis that there was a guarantee contract at law. 34 His Honour construed term 3 of the Credit Terms as operating, inter alia, as a representation by the plaintiff to a prospective guarantor asked to sign one of the forms on the back of the Application. There being no evidence that Bleyer had ever been told that guarantees by the other directors would not be required or that Bleyer waived that requirement, he was, Hope JA held, entitled reasonably to believe that the plaintiff would require guarantees by the other directors before granting credit to Origen. 35 Hope JA then referred to the conversations between Bleyer and Hutchings. In view of that evidence it followed that: Upon the basis of what appeared in the plaintiff's printed form, the defendant signed the document on the condition that the other directors would also give guarantees, that the defendant did not become aware of the absence of other guarantees, the requirement for which he had not waived , until shortly before the litigation commenced and inferentially that he would not have given the guarantee had he known that he was to be the only guarantor. (emphasis added) 36 Hope JA considered that it was very arguable that the Application and Guarantee should be read together, in which event it would be an express term of the Guarantee that the other directors should likewise give guarantees. In reaching this tentative conclusion, he referred to the fact that the Guarantee was printed on the same piece of paper as the Credit Application; the granting of credit was the consideration for the giving of the Guarantee; and the Credit Terms themselves. His Honour held that, if it was not an express term, then the facts would seem to support the implication of the term in the Guarantee by application of the business efficacy test. In explaining why the well-known principles in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 283 were satisfied in the present case, Hope JA referred to the relevant matrix of facts. At the time the defendant signed the Guarantee he regarded it as necessary that guarantees be obtained from the other two directors, and that the Credit Application would not go forward nor consequently would the Guarantee operate, if those other guarantees were not given. (I read this as reference to what was communicated between Bleyer and Hutchings, not just what was in Bleyer's mind.) 37 Hope JA concluded that Bleyer entered into the Contract upon this basis. "The Guarantee was part of a transaction of granting credit to Origen upon the basis that all the directors of Origen, as well as Origen itself, should be liable for any indebtedness. Unless that basis was changed, each guarantee was also given on the basis that the other directors would also give guarantees" (emphasis added). 38 Ultimately Hope JA did not find it necessary to decide whether there was such an express or implied term in the Contract. That is because he was satisfied that Bleyer was entitled to rely on the equitable defence discussed in cases such as Stramit Industries Ltd v Reinhardt (1985) 1 Qd R 562. Since Bleyer executed the Guarantee upon the basis, induced by the plaintiff's document, that the other directors would also sign guarantees, and since Bleyer did not waive this requirement, the conditions for relief in equity were satisfied. 39 The third member of the Court (Kirby P) adopted Hope JA's reasons for concluding that Bleyer was entitled to rely on the equitable defence. His Honour added: It is quite possible, as Hope JA has explained, that a defence might exist in law either on the basis that the approval of the other directors to the guarantee was a pre-condition to the liability of the appellant coming into effect or (as Mahoney JA has concluded) that a term of the guarantee was that the appellant would only be liable if the other directors, and all of them, should sign the guarantee, as they did not. But it is not necessary for me to decide these questions. It is sufficient to confine my reasons to the application of the equitable defence. 40 Only the reasons of Mahoney JA provide direct assistance to the present appellant. And even those reasons should be read against the background that what passed between the parties prior to execution of the documents amounted to clear evidence that each represented to the other the intention that the documents the Credit Terms would apply to the guarantee according to their terms. There could be no suggestion that Bleyer had waived rights derived from the terms of the documents. As indicated, Kirby P and Hope JA decided the case on an equitable basis stemming from the fact that the creditor had induced a particular belief in Bleyer. Hope JA expressed fairly firm support for the alternative legal defence, although it was in the final analysis unnecessary to reach a concluded view on that matter. Nevertheless, his Honour was at pains to spell out (with reference to both the legal and equitable defences) that there had been no waiver on Bleyer's behalf nor had the basis of Bleyer's understanding based upon the documents and the conversations with Hutchings ever changed.

Analysis 41 In Marston, Powell J said (at 300-1) that his consideration of the authorities led to the following conclusion (among others): if a parol contract of guarantee which is executed by an intending surety is drawn in a form showing another or others as intended joint and several sureties, it will be presumed, in the absence of acceptable evidence to the contrary, that the execution of that other, or three others, was a condition precedent to the surety who signed the guarantee becoming liable under it, and their failure to execute the guarantee will afford to the intending surety who executed the guarantee a defence at law to an action on the guarantee.

42 Here there was evidence to the contrary, which showed that the single guarantee was executed by the appellant and proffered by him on the basis that it was offered for acceptance as the sole collateral support for the credit terms sought by the principal debtor. The two interrelated documents were each dated 14 September 1994 and were faxed back together that day to the creditor. Without further communication, credit was thereafter provided. 43 Evidence of the subjective intention of the parties is not admissible to construe their contract, particularly their written contract. However, it is permissible to have regard to the "objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting" (Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 per Mason J. See also Prenn v Simmonds [1971] 1 WLR 1381 at 1385 per Lord Wilberforce ("matters known to the parties at or before the date of the contract"). 44 This is not a case where there was proof that all parties intended subjectively not to enter into immediately binding contracts (cf Air Great Lakes Pty Ltd v KS Easter Pty Ltd (1985) 2 NSWLR 309). Indeed, there was no direct evidence as to the subjective intention of any party apart from inferences capable of being drawn from the objective events. Reasoning by reference to such inferences illustrates the confluence of subjective and objective analyses on the present facts. 45 On this basis it is relevant to have regard to the fact that there were no pre-contractual discussions about personal guarantors (CB 244), and that the composite document seeking $30,000 credit was forwarded to the respondent with the appellant's knowledge and authority (RB 24) in a form that contained a single completed guarantee. Some time later, the offers implicit in the forwarding of the completed documents were accepted by conduct, without further communication as to terms. These facts require the rejection of the appellant's alternative submissions that no contract of guarantee was ever formed and that, if it were, it contained a condition in accordance with the third of the Credit Terms. 46 The appellant submits that the accepted offer was to the effect that the proffered guarantee would have no effect unless and until identical guarantees were received from the appellant's wife. This strikes me as unrealistic and uncommercial. It ignores the fact that the single guarantee and the application were each dated and sent on 14 September 1994. It treats the printed Credit Terms as a procrustean straitjacket, whereas each of the three terms (par 5, above) is capable of being read as a reservation of right by the company to which there was an "application for credit account". The circumstances in which all parties dealt with each other prior to acceptance of the credit application disclose those associated with the principal debtor, Australian Catalogue Corporation Pty Ltd proceeding on the basis that only one guarantee was offered, effectively on a "take it or leave it basis". None of this reasoning involves reference to purely subjective intentions. Nor does it contradict the written terms of the guarantee, assuming for the purpose of argument that the third of the Credit Terms is part of the guarantee. That is because the guarantee contract that was formed upon acceptance of the principal debtor's credit application did not (when construed in the light of its manner of formation) itself stipulate that such guarantee was conditional upon execution of an identical guarantee by the appellant's fellow director. 47 My own preference is to see the third Credit Term as different in nature to the six printed conditions of the proffered guarantee. In my view, it was no more than the reservation of a right to decline to treat with the principal debtor unless the minimum number of guarantees were proffered. But let it be assumed that I am wrong. Even if clause 3 were (as Mahoney JA in Bleyer) a term of the proposed contract between the creditor and the principal debtor, that term never became part of that contract because the creditor accepted the proffered counter-offer from the principal debtor. That counter-offer was represented by the company's Application which was accompanied by a single guarantee in circumstances inviting acceptance on that basis. In Bleyer, the pre-contractual communications stressed adherence to clause 3 of the Credit Terms. In the present case, they demonstrated departure. 48 Herron DCJ distinguished Bleyer and rejected the appellant's principal argument on the basis that the appellant's intention was obviously to give a guarantee in the way he indicated and that he did not intend that his fellow director should sign a guarantee. I agree with this conclusion of fact and with this point of distinction from Bleyer. However, I have thought it necessary to express my reasoning differently because of my understanding of the rules excluding certain types of extrinsic evidence in construing contracts. 49 The appeal should be dismissed with costs. 50 PRIESTLEY JA: I agree with Mason P. 51 BEAZLEY JA: I agree with Mason P. **********

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