Regency (Showerscreens & Wardrobes) Pty Ltd v Nadinic

Background

1. At the hearing of this appeal, Mr Burchett of counsel appeared for Regency and Mr Weightman of counsel appeared for Mr Nadinic. An affidavit of Regency's solicitor annexed all of the documents which were before the Local Court, the transcript of those proceedings and the judgment of the learned Magistrate. That material discloses the following.
2. On or around 28 November 2011, Maxstra made an application to Regency for trade credit on a form headed "Trade Credit Application" with the words "Guarantee and Indemnity" thereunder. In the "Defendant's Facts" filed in the Local Court and signed by Mr Nadinic's solicitor, Mr Nadinic agreed that, on 28 November 2011, Maxstra: "...applied for a Trade Credit Application Guarantee and Indemnity ("Credit Application") with the Plaintiff to enable Maxstra to purchase and organise the installation of [shower screens], wardrobes, mirrors, linen and pantry joinery [on] credit from the Plaintiff".
3. The first page of the Trade Credit Application required details of the applicant for credit. On the reverse side of the Trade Credit Application is a document headed "Terms and Conditions of Sale" which sets out Regency's terms and conditions of sale applicable to all transactions between it and its customers. The next page required further information to be provided by the applicant such as current trade references and bank details. The application then contains the heading "Trade Requirements". Under that heading, the applicant was asked to enter the "initial estimated value of credit required". The amount of $15,000 is entered by hand. The applicant was then asked to tick a box as to whether the credit was for a "single order" or "repetitive trade." The box next to "single order" was ticked. The applicant was then required to tick a box indicating whether there had been a previous account with Regency. The "no" box was ticked.
4. The next heading on the document was described as "Statement by Customer/Directors/Partners". It commences with a declaration that, inter alia, the signatory is authorised by the customer to execute the trade credit application on the customer's behalf. Eight conditions are then set out as being acknowledged and agreed to by the signatory. The first three conditions are in the following terms: "1. To accept REGENCY'S Terms and Conditions of Sale (as contained herein or as may be current at the time of accepting each quotation and/or the placing of such order). 2. That terms of payment are strictly [met] with full settlement due within 30 days of the month of supply (or such [lesser] agreed period) and if it any time monies are overdue then the whole account balance shall become due and owing. 3. That REGENCY reserves the right at its absolute discretion to (a) vary or withdraw without notice the level of credit granted and (b) change the period in which settlement is due." (emphasis added)
5. One of the headings on the next page of the document is "Credit Manager." In handwriting the word "Referees" appears with a tick next to it, as do the words "Personal Guarantee". A signature then appears, as does the date of 8 December 2011 and "10,000" appears in handwriting under the sub-heading, "Limit".
6. A separate document is headed "Personal Guarantee and Indemnity (Secured)". Mr Nadinic has signed this document. Although it is a guarantee and indemnity, I shall refer to it as a "guarantee". Although the part of the guarantee requiring the details of the company (Maxstra) was left blank, no issue was taken in relation to that oversight in these proceedings. By this document, Mr Nadinic personally guaranteed to Regency: "…without any limitation of liability, the due payment of all sums which may now or hereafter be or become due by THE CUSTOMER to REGENCY for the supply of goods and/or services and for monies which may now or hereafter be or become owing or payable by THE CUSTOMER to REGENCY on any account or in any manner whatsoever AND HEREBY INDEMNIFY REGENCY for any/all recovery expenses incurred should action to affect recovery of monies due prove to be necessary…" (emphasis added.)
7. The guarantee then lists ten conditions that Mr Nadinic agreed to. The first clause provides that: "This guarantee and indemnity shall be a continuing guarantee and indemnity and shall bind the Guarantors jointly and severally and their respective executors, administrators and assigns and shall not be determined as against remaining guarantors by the death or bankruptcy of any other guarantor." (emphasis added)
8. Clause 2 of the guarantee provides that: "This guarantee and indemnity shall not be discharged or impaired by reason of any time or indulgence granted by REGENCY to THE CUSTOMER or any composition arrangements or variation of the obligations between them or by reason of THE GUARANTORS not being given notice thereof." (emphasis added)
9. Although the guarantee was signed by Mr Nadinic, it was not dated. The Magistrate proceeded on the assumption it was signed on 28 November 2011 and no evidence was adduced to the contrary. The credit was subsequently approved on 8 December 2011.
10. In his affidavit in the Local Court, Mr Nadinic deposed that, when he was a director of Maxstra, the company traded with Regency on credit guaranteed by Mr Nadinic on a continuing basis, within the $10,000 limit. A credit history report provided by Regency to Maxstra is attached to his affidavit and shows that, after the application for credit was approved, Maxstra paid for the supply of goods and/or services on credit from Regency, as follows: $4,504.90 on 30 March 2012; $6,420.70 on 18 May 2012; $779.00 on 1 June 2012; $2,871.00 on 21 June 2012; $1,253.00 on 9 July 2012 and $1,952.00 on 26 October 2012.
11. On 2 April 2013, Eli McAllister at Maxstra sent an email to "Regency Cardiff Sales" seeking a quotation for works at the "Belmont Wharf Apartments due to be under construction within two months." The "prices" were required by "COB Wednesday 10th April". A request was made to "break down items such as mirrors, shower screens, glass handrails, splashback, wardrobes and any other items within your scope." A quote was subsequently submitted by Regency on 5 April 2013 which noted that the offer was based on, inter alia, "Regency's standard credit criteria." No further correspondence was entered into at that time.
12. On 12 March 2015, Mr Nadinic resigned as a director of Maxstra. This was nearly two years after the request for the quote from Regency for the works at Belmont Wharf Apartments. Mr Nadinic gave evidence in the Local Court that he arranged for his receptionist to send a letter to all trade partners/creditors of Commercial Builders advising of his resignation and stating that he would not accept liability for ongoing claims. However, Mr Wessel, the General Manager of Regency, also gave evidence on this point in the Local Court and asserted that no such letter had been received. The question of whether Mr Nadinic ever informed Regency that he had revoked his guarantee was a factual dispute which founded Mr Nadinic's primary defence to Regency's claim. The Magistrate was not satisfied that any such letter was ever sent by Maxstra or received by Regency. That finding forms no part of this appeal. Accordingly, I must consider this appeal based on the factual finding that the guarantee had not been revoked at the relevant time.
13. On 15 May 2015, Justin Leaney, the "Contract Administrator" at Maxstra, sent an email to "Mailbox - Regency Cardiff Sales" addressed to "Scott". The subject matter of the email was "Belmont Wharf - Showerscreens". The email was copied to four people, including Frank Nadinic and Ben Isenhood. Mr Leaney sought a quote for the supply and installation of shower screens, wardrobes and mirrors to apartments under construction described at those apartments. The plans and architectural specifications were attached to the request showing that the supply and installation was required for six levels of the building. Mr Leaney noted that "semi frameless shower screens" were required, which "will have to be site measured along with the [m]irrors."
14. The 15 May 2015 email from Maxstra to Regency concludes with these words: "As discussed Maxstra in [H]awthorn Melbourne has an account with Regency." The only "account" Maxstra had with Regency at that time was as a result of the Trade Credit Agreement entered into on 28 November 2011, guaranteed by Mr Nadinic. A quote was subsequently sent by Mr Wessel to Mr Leaney on 18 May 2015 in the amount of $60,874.00 which again noted that the offer was based on, inter alia, "Regency's standard credit criteria".
15. On 20 May 2015, an email was sent by Mr Wessel to Mr Isenhood, who was Maxstra's project manager of the Belmont Wharf Apartments development, in which he confirmed that they had met that day and he had amended his quotation to the revised specifications. The email is then in these terms: "We are very keen to supply this project for you and you can rest assured we will do a good hassle free job for you. Our team of 16 professional installers will ensure your project is completed as required. Our warranty of lifetime on wardrobes and 7 years on screens (3 on glass) means as a builder we take care of any after sales issues. We have completed the other projects on the site so the developer can be assured of consistent quality and product range".
16. The quotation attached to the email dated 20 May 2015 is in the amount of $66,005.50 (including GST). It is again noted in quotation that Regency's offer is based on, inter alia, "Regency's standard credit criteria."
17. On 22 May 2015, Mr Isenhood sent an email to Mr Wessel in the following terms: "Hi Philip, I have reviewed all options see below what I propose to get you across the line. Delete the Vinyl Sliding Doors & Aluminium Side Jams to both the Linen & Pantries. And agree on a contract sum of $50,000.00 + GST. Regards Ben Isenhood"
18. These terms were subsequently agreed to and, on 25 May 2015, a contract was sent for signing by Mr Isenhood to Mr Wessel ("the sub-contract"). The agreement subsequently entered into between Maxstra and Regency is described on its coversheet as: "SUBCONTRACT: Showerscreens & wardrobes" and "PROJECT: Wharf Apartments Belmont - 58 Brooks Pde Belmont NSW".
19. The sub-contract is 22 pages long including annexures. Regency is described therein as the "subcontractor" and, under the heading "Background", the sub-contract states that Maxstra is the "head contractor of the project described on the front cover of this Subcontract, and has appointed the Subcontractor to perform the works briefly described in Item 6 of the Subcontract Particulars."
20. Item 6 of the Subcontract Particulars describes the "works", relevantly, as: "Supply & install Wardrobes, shower screens, mirrors, linen & pantry joinery Supply all labour, machinery, materials, design and certification for the installation of Wardrobes, shower screens, mirrors, linen & pantry joinery as required. All works must comply with drawings, specifications, Section J, Acoustics, relevant Australian Standards and contractors engineering specifications. Certification of installation must be provided with 24 hours of completion."
21. Clause 14.10 of the sub-contract is in these terms: "14.10 Entire Understanding (a) This document contains the entire understanding between the parties as to the subject matter of this document. (b) All previous quotations, tenders, negotiations, understandings, representations, warranties, memoranda or commitments concerning the subject matter of this document are merged in and superseded by this document and are of no effect. No party is liable to any other party in respect of those matters. (c) No oral explanation or information provided by any party to another: (i) affects the meaning or interpretation of this document; or (ii) constitutes any collateral agreement, warranty or understanding between any of the parties."
22. No additional guarantee and/or indemnity was entered into by any director of Maxstra at the time that the sub-contract was entered into.
23. An additional oral agreement for the supply and installation of kitchen glass splashbacks was made an 18 June 2015 with an additional cost of $11,230.00 plus GST.
24. There is no dispute that Regency did the work it was contracted to do. As required by the sub-contract, Regency submitted progress payment claims. The first claim of $11,667.48 was submitted on 24 June 2015 and paid on 9 August 2015. The second claim of $37,733.67 was submitted on 25 July 2015 and not paid. The third claim for $3,315.62 was submitted on 25 September 2015 and was also not paid.
25. The credit history report provided by Regency to Maxstra referred to above at [16] includes all of the trades between Regency and Maxstra on credit since the guarantee was signed by Mr Nadinic. In addition to the amounts noted above at [14], that credit history report includes numerous invoices issued on 12, 23, 26 and 30 June 2015, 2, 3, 6, 7, 10, 16, 22, 23, 24 and 30 July 2015, and 1, 22 and 25 September 2015 in various amounts ranging from $198 to $1529, and payment on 10 August 2015. These items are referable to the goods sold to Maxstra on credit under the sub-contract during that time.
26. On 16 February 2016, Maxstra was wound up and a liquidator was appointed by the Court. There is no prospect of Regency receiving any money owed to it in the winding up.
27. In the Local Court proceedings, the issues were narrow. Short evidence was given by Mr Wessell and Mr Nadinic. The only factual dispute was as to whether Mr Nadinic had revoked the guarantee. The legal dispute was whether the sub-contract was a variation of the terms of the guarantee and whether Mr Nadinic was liable for the $50,000 given the original credit limit under the Trade Credit Agreement was $10,000. Mr Nadinic also relied upon the "Ankar" principle: Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 559-560; [1987] HCA 15 at [18]-[19].

The judgment of Magistrate Clisdell

1. Magistrate Clisdell set out some but not all of the above history of the matter in his reasons for judgment. He found that, on the evidence before him, he could not be satisfied that the Mr Nadinic had revoked the guarantee, although it might have been his intention to do so.
2. At [12] his Honour noted: "[counsel for the defendant]… conceded that the fact alone of a contract in the sum of $50,000.00 when the approved limit was $10,000.00 was not in itself a reason for the guarantee to be revoked. [Counsel for the plaintiff] produced a number of authorities to the effect that where the credit limit is increased without notice to the guarantor, the increase is irrelevant if it is part of the course of dealing agreed upon and guaranteed (see Duffy Bros Fruit Market (Campbelltown) Pty Ltd v Gumland Property Holdings Pty Ltd; Gumland Property Holdings Pty Ltd v Pisciuneri & Anor). I accept that the quantum of the $50,000 is of itself not a reason to set aside the guarantee."
3. His Honour then considered the question of whether the guarantee applied to the sub-contract and if it did, whether the sub-contract was a course of dealing that was not anticipated by the Trade Credit Application. His Honour observed at [13]: "The subcontract signed by the Plaintiff on 26 May contained detailed terms and conditions substantially different to the terms of the Trade Credit Agreement. [Counsel for the defendant] submitted that Mr Nadinic's obligations as a guarantor were discharged pursuant to the principles in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (Ankar)."
4. His Honour then went on to discuss the "Ankar principle" and extracted [18] of that decision in his reasons. He then noted that the principle also applies to indemnities and cited Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424; [2004] HCA 28 in support of that proposition.
5. Magistrate Clisdell then outlined the submission of Regency that it was necessary to look at the guarantee first. His Honour noted the Regency's submission at [16] as follows: "…as it was a continuing guarantee and indemnity it covered all dealings between the parties. The Trade Credit Application provided that the guarantee and indemnity would…"2. not be discharged or impaired by reason of …indulgence granted by (the Plaintiff) to the Customer or any …variation of the obligations between them of [sic] by reason of (the Defendant) not being given notice thereof" and "5, (the Defendant) shall remain liable … for all goods and services supplied and obligations incurred in the name of the Customer..". As such [counsel for the plaintiff] said that the Ankar principle did not apply as this was simply a further provision of goods and services by Regency to Maxstra pursuant to the Trade Credit Application."
6. His Honour went on to identify the "real matter for determination" as being whether the Trade Credit Agreement applied in respect of the sub-contract. His Honour then noted: "There is no evidence before the Court of other dealings between the parties. The Trade Credit Agreement was clearly intended for single order matters of limited financial cost. It applied where the Plaintiff was the supplier on credit of goods and services with no additional contractual dealings. But the contract signed in May 2015 was an entirely different arrangement. Firstly, it was a subcontract and not a supply of goods on credit. Secondly, the parties entered into a formal subcontract after reasonably extensive negotiations, a contract that purported to be the entire agreement between the parties in relation to the "Belmont Wharf Apartments". Thirdly, the subcontract provided for progress payments. By virtue of the terms of that contract, the Plaintiff had to supply and install goods and then make a claim for payment. This is a significant departure from a supply of goods on credit."
7. Magistrate Clisdell went on to note that the sub-contract contained no provision for Regency to supply goods on credit nor did it incorporate the Trade Credit Agreement. His Honour then referred to the decision of Kunc J in Crane Distribution Ltd v Yang [2016] NSWSC 620 at [23] and went on to find the following: "The Plaintiff is bound by the terms of the subcontract in respect of the work carried out in Belmont. It was a departure from the usual arrangements between the parties. Given the nature of the supply of goods and services at Belmont and the further variation of that contract, there must have been detriment potential or actual to the Defendant if it was intended that the guarantee and indemnity was to apply to this work. Although an increase in credit does not per se lead to the voiding of a guarantee (see paragraph 12 above), in this case the size of the subcontract in its scope of works and quantum went beyond mere supply of goods on credit".
8. His Honour then referred to the decision of Goldring DCJ in Plasterboard Central Pty Limited v Blain [2009] NSWDC 44 and noted that at no time was Mr Nadinic consulted about the sub-contract following his resignation from the company. His Honour also observed that the increase in Mr Nadinic's potential liability was "over 400%". His Honour then made the following conclusion: "I find that the Trade Credit Agreement did not apply to the subcontract entered into in May 2015. It was an entirely different commercial arrangement, subject to progress payments after claim, and requiring compliance with other conditions such as completion in a proper and workmanlike manner and in accordance with the time constraints in the subcontract before payment was due. It was not a supply of goods on credit as anticipated by the Trade Credit Agreement. If however I am wrong in that assessment, I am satisfied that the Ankar principle would apply to that subcontract the basis of detriment to the Defendant identified in paragraphs 22 and 23 above."

Ground of Appeal

1. Ten grounds of appeal are identified in the summons as follows: 1. His Honour erred in law in his interpretation of "the Ankar principle", whereby he found it applicable to the instant continuing guarantee and indemnity in circumstances, where the guarantor had consented to the variation of the obligations of the principal debtor to the creditor without notice to him and guaranteed the payment of 'all sums...due….on any account or in any manner whatsoever' and agreed to liability for all goods or services supplied to and obligations incurred by the debtor [14]-[16]. 2. His Honour erred in law in misconstruing the guarantee as applying only to the 'single order' supply agreement in the Trade Credit Application, when in fact and law (and it had been conceded by the Defendant in submissions that) it was a distinct transaction and in its terms applied to all debts created by subsequent supply agreements. 3. His Honour erred in law by asking himself the wrong question [17]; namely whether the "Trade Credit Agreement" applied in respect of the sub-contract, rather than whether the guarantee applied to the debt created by the later sub-contract. 4. His Honour misdirected himself, that there was 'no evidence before the Court of other dealings between the parties' (than a 'single order') [18], when the Plaintiff's statements of account showed numerous orders and indeed it was accepted by the Defendant in submission, that there were numerous dealings between creditor and debtor, other than the 'single order'. 5. There was no basis for his Honour's conclusion [18] (and it was irrelevant in any event to the application of the 'all sums' guarantee), that the 'Trade Credit Agreement' (apparently referring to the guarantee) was intended for 'single order matters' without 'additional contractual dealings'. 6. His Honour erred in law in failing to give effect to the express terms of the guarantee permitting 'variation of the obligations between [debtor and creditor]' and covering 'sums owing on any account or in any manner whatsoever'. 7. His Honour erred in law by misconstruing the sub-contract and misdirecting himself, that the sub-contract was a 'significant departure' from the guaranteed credit supply [19], [20] & [24]; in particular that: 1. it was not a supply of goods (and services) on credit, when in law it was and in any event 'all sums' howsoever owed were guaranteed, 2. it included an entire agreement provision, when it was irrelevant, because the guarantee was between different parties, 3. it required progress payment claims, which were irrelevant, and 4. it did not incorporate the terms of the 'Trade Credit Agreement' and included other conditions, but the guarantee [i]ncluded agreement by the guarantor to any variation of the terms of trade and no restriction on the terms, pursuant to which any guaranteed debt arose. 1. His Honour erred in finding (in effect), that the guarantee did not apply to the debt arising from the subcontract [24]. 2. There was no evidence to support his Honour's alternative finding or assumption of 'detriment potential or actual to the Defendant' by reason of any perceived difference between the debtor's obligations under the sub-contract from the 'Trade Credit Agreement' [(22)-(23) & (25)]. 3. His Honour erred in law in concluding that any such detriment was relevant to the instant guarantee in light of: 1. the debtor's consent in the guarantee to the variation of such obligations without notice to him, and 2. the Defendant's concession in submissions (which was correctly made as a matter of law) that the [i]ncreased credit exposure of the sub-contract did not affect the enforceability of the guarantee.

Regency's submissions

1. Regency's central complaint made was that his Honour erred in law in his construction of the various documents. Regency's principal position was that Mr Nadinic's guarantee was expressed to be "continuing" and covered the supply of all goods and services on credit to Regency. The sub-contract was for the supply of goods and services and therefore the guarantee applied to it.
2. It was submitted that nothing turns on the fact that the box in the Trade Credit Application was ticked suggesting this was a one-off transaction given that there was evidence that subsequent transactions were conducted between Regency and Maxstra.
3. It was submitted that there is authority for the proposition that, although there was an application for trade credit, it was a separate contract to the guarantee itself. Reliance was placed on the decision in Duffy Bros Fruit Market (Campbelltown) Pty Ltd v Gumland Property Holdings Pty Ltd; Gumland Property Holdings Pty Ltd v Pisciuneri & Anor (2007) ANZ ConvR 153; [2007] NSWCA 7 ("Duffy Bros Fruit Market") in support of the proposition that, although it is permissible to examine surrounding documents in order to construe a guarantee, it is the terms of the guarantee itself that must be examined. He submitted that there was nothing to suggest that the sub-contract was not contemplated by the guarantee.
4. It was submitted that there was no construction available of the Trade Credit Agreement, whether defined as "the account" or "the guarantee" or both, which limits it to "single order matters of limited financial cost". It was stated to be for the supply of "goods and services with no additional contractual dealings". Clauses 2 and 5 were also relied upon.
5. It was further submitted that there was no evidence that the initial supply agreement did not follow similar negotiations to the sub-contract, that there was no significant departure from "a supply of goods on credit" and that there was no basis for the conclusion that the sub-contract was "a departure from the usual arrangements between the parties".
6. As for the alternative basis upon which the learned Magistrate determined this matter, it was submitted that there was no finding of any breach of any term of the underlying agreement with Regency which is the foundation of the Ankar principle. To the extent that there was any possibility of detriment, such detriment was accepted by Mr Nadinic in entering into the guarantee in its terms, thus the possibility of detriment could have no effect on his liability.

Mr Nadinic's submissions

1. It was conceded that the fact that the contract was in the sum of $50,000.00 and the guarantee was for $10,000.00 was not in itself a reason for the guarantee to be revoked. Rather, reliance was placed upon the "entire understanding" clause in the sub-contract and the fact that there was no accompanying guarantee and indemnity to the sub-contract.
2. It was submitted that the guarantee only applied to the Trade Credit Agreement and the sub-contract was a completely different agreement with different terms and conditions. It was submitted that whereas the initial Trade Credit Agreement was only for the supply of goods on credit the sub-contract involved major works involving the supply of both goods and services.
3. It was submitted on behalf of Mr Nadinic that no error is disclosed in relation to his Honour's findings in relation to the Ankar principle. In this regard, significant reliance was placed on a decision of Goldring DCJ in Plasterboard Central Pty Ltd v Blain [2009] NSWDC 44. It was submitted that the guarantee did not apply to any debts arising under the sub-contract, and in the alternative, Regency accepted a new contract altering Mr Nadinic's rights without consultation for which he cannot be liable under the Ankar principle.

Consideration

1. This appeal turns on the question of whether the learned Magistrate erred in his construction of the guarantee. His Honour's primary finding was that the guarantee did not apply to any debts arising under the sub-contract. His alternate finding was that the sub-contract altered Mr Nadinic's rights without consultation such that the Ankar principle applied and Mr Nadinic is no longer liable for the debt. Both findings involved a construction of the guarantee as forming part of the Trade Credit Agreement rather than being a separate continuing "all moneys" guarantee. His Honour proceeded on the basis that, if the Trade Credit Agreement did not apply to the sub-contract, then neither did the guarantee.
2. Grounds 2, 3, 6 and 8 all assert error on the part of the Magistrate in finding that the guarantee was part of the Trade Credit Agreement which did not apply with respect to the sub-contract. It is convenient to consider those grounds together.
3. The starting point is to consider the terms of the guarantee. Guarantees in trade or commerce generally take two forms: either they are expressed to only apply to a specific transaction or they can be expressed to apply to all transactions, or a "course of dealing" between the creditor and the debtor. The Magistrate concluded that the guarantee in the present matter took the first of these two forms whereas Regency's position is that it took the form of the latter.
4. The guarantee entered into by Mr Nadinic on 28 November 2011 is expressed in very wide terms. It is clearly stated to cover "without any limitation of liability, the due payment of all sums which may now or hereafter be or become due by [Maxstra] to REGENCY for the supply of goods and/or services and for monies which may now or hereafter be or become owing or payable by [Maxstra] to REGENCY on any account or in any manner whatsoever" (emphasis added). Moreover, it is described as being a "continuing" guarantee. The inclusion of this "all sums" clause in the guarantee indicates that Mr Nadinic's guarantee extended to all moneys owed by the principal debtor (Maxstra) to Regency for the supply of goods and services thereafter.
5. Given the plain language in the guarantee, I see no basis to limit it to the initial supply only. The terms of the guarantee itself do not permit such a construction. It is true that there was only one application form seeking the relevant trade credit, which included provision for entering into a personal "Guarantee or Indemnity" at the same time, but it does not follow from this that only one agreement was entered into as a result of that application. Rather, it seems to me that two separate agreements were entered into at that time. The first agreement was between Maxstra and Regency for the latter to provide goods and services on credit to the former. The second agreement was between Mr Nadinic and Regency for the former to guarantee, on a "continuing" basis, sums owed for the supply of any goods and/or services on credit thereafter.
6. Ground 4 contends that his Honour erred in finding at [18] that there was "no evidence before the Court of other dealings between the parties ([other] than a 'single order')" after the initial Trade Credit Agreement. Mr Nadinic's evidence in the Local Court was that there were in fact subsequent transactions on various dates between March and October 2012 after the initial trade credit was approved on 8 December 2011, albeit all in credit amounts under $10,000. Those transactions are referred to above at [16].
7. Similarly, ground 5 contends that his Honour erred in concluding at [18] that the "Trade Credit Agreement" was intended for "single order matters of limited financial cost." It is to be accepted that the box next to the words "single order" was ticked in the Trade Credit Application and not the box next to the words, "repetitive trade." But the question of which box in the Trade Credit Application was ticked takes the matter no further in circumstances where Mr Nadinic admitted in his evidence in the Local Court that there was ongoing trade thereafter and annexed a credit history report to support this contention. That report shows that there was clearly subsequent trade between Regency and Maxstra. It was at no time suggested by Mr Nadinic that the guarantee did not extend to those trades. Furthermore, when the negotiations for the sub-contract recommenced in 2015, the email from Mr Leaney of Maxstra to Scott Dawson of Regency, dated 15 May 2015, stated that Maxstra already had an account with Regency (see above at [20]). The only account Maxstra had with Regency was the credit account entered into on 28 November 2011.
8. In concluding that the "Trade Credit Agreement" was intended for "single order matters of limited financial cost", his Honour made no reference to the fact that it was a term of that agreement that the amount of credit could be changed without notice to Mr Nadinic nor to the fact that he guaranteed "all sums" owing on "any account" to Regency.
9. Similarly, ground 2 asserts that his Honour erred in misconstruing the guarantee as applying only to the "single order" supply agreement in the Trade Credit Application, when it was a distinct transaction and, in its terms, applied to all debts created by subsequent supply agreements. The wording of the guarantee does not permit this limited construction.
10. Ground 6 contends that his Honour erred in law in failing to give effect to the express terms of the guarantee permitting "variation of the obligations" between the debtor and the creditor and covering "sums owing on any account or in any manner whatsoever." His Honour did not refer to these terms of the guarantee in his reasons. He did, however, at [16] of his reasons, refer to Regency's submission that it was necessary to first examine the terms of the guarantee. In referring to that submission, his Honour referred to two of the terms of the Trade Credit Application which are, in fact, conditions 2 and 5 of the guarantee. Although his Honour referred to this submission made on behalf of Regency in the Local Court, he did not make any specific findings in relation to any of the terms of the guarantee.
11. His Honour's reasons do not address how clause 2 of the guarantee, which permitted variation of the obligations between the debtor and the creditor, was not relevant to his consideration. Nor did his Honour refer to the fact that the guarantee covered "sums owing on any account or in any manner whatsoever."
12. I am satisfied that his Honour misconstrued the guarantee in failing to construe it as an agreement guaranteeing all amounts owed for the supply of goods and services in trade on a continuing basis rather than forming part of a single order Trade Credit Agreement.
13. Ground 7 relied upon error in his Honour's finding that the sub-contract was a "significant departure" from the guaranteed credit supply such that the guarantee did not apply to it. His Honour concluded this for a number of reasons as follows.
14. First, his Honour found that the sub-contract was not a supply of "goods" and "on credit". The express terms of the guarantee state that what Mr Nadinic guaranteed was "sums due" for the "supply of goods and/or services." The fact that the sub-contract was for the supply of goods and services rather than the supply of goods alone is irrelevant. Clause 1 of the Trade Credit Agreement refers to the acceptance of "each quotation" from Regency. The fact that the sub-contract was for the supply of goods and services is consistent with the terms of the guarantee. Moreover, those sums were expressed to be for monies "which may now or hereafter be or become owing or payable by THE CUSTOMER to REGENCY on any account or in any manner whatsoever".
15. Second, his Honour relied upon the fact that the sub-contract included an "entire understanding" provision. His Honour set out this clause (cl 14.10 - extracted above at [27]) in his reasons. This clause was clearly a matter which significantly influenced his Honour's determination. But that clause refers to the sub-contract forming the entire understanding between the "parties" as to the "subject matter" of that document. The subject matter is the supply and installation of the shower screens and other items. Clause 14.10(b) refers to all of the other documents concerning the negotiations for the sub-contract being merged into the sub-contract but makes no reference to any guarantee. The guarantee forms no part of the "subject matter" of the sub-contract.
16. The third matter relied upon by his Honour to conclude that the Guarantee did not extend to the sub-contract was that it required progress payments. Again, this finding by his Honour fails to have regard to the fact that Maxstra noted from the outset of negotiations that it already had an account with Regency (covered by the guarantee). Nor is it consistent with Regency requiring a guarantee before trading with the company from 2011 onwards and then changing its position in regard to the particular supply of goods and services set out in the sub-contract. All of the items quoted to be supplied and installed for the Wharf Apartments Belmont were supplied on credit as the credit history report relied upon by Mr Nadinic in the Local Court confirms (see above at [16]).
17. The fourth matter relied upon by his Honour to conclude that the guarantee did not extend to the sub-contract was that the sub-contract did not expressly incorporate the Trade Credit Agreement. However, the guarantee included agreement by the guarantor to any variation of the terms of trade and no restriction on the terms pursuant to which any guaranteed debt arose.
18. I am satisfied that none of the matters identified by his Honour permit a construction of the guarantee that the sums due under the sub-contract were anything other than "all sums… owing… on any account." In addition to the matters his Honour did take into account in construing the guarantee, his Honour failed to have regard to the fact that the initial request for the quote for the Belmont apartments was made at a time when Mr Nadinic was still a Director of the company. That request was made on 2 April 2013 (see [17]-[18]), only six months after the most recent dealing between Regency and Maxstra in October 2012, as set out in the credit history report (see [16] above). That initial quote was for the specified items of wardrobes, shower screens, pantry, mirrors and linen/cupboards.
19. After the first request for a quote in 2013, nothing further was pursued until 15 May 2015, at which time there was an email request for a re-quote. Again, the request was for the installation of shower screens, wardrobes and mirrors. It was this email which noted that the company "has an account" with Regency. The subsequent correspondence was all concerned with negotiations over the supply of goods and services flowing from the initial request.
20. As the High Court noted in Ankar at [21]: "At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris and that ambiguous contractual provisions should be construed in favour of the surety." I have had regard to this principle but I am not satisfied that there is sufficient ambiguity in the guarantee to render it applicable.
21. I am thus satisfied that grounds 2, 3, 4, 5, 6 and 7 have been established. Although it is not necessary for me to consider the alternate argument, I propose to do so in the event that I am wrong in relation to the primary basis upon which his Honour determined this matter in the Local Court.
22. The alternate basis upon which his Honour found in favour of Mr Nadinic is that he was satisfied that Mr Nadinic's obligations as guarantor were discharged pursuant to the principles derived from the decision of the High Court in Ankar. His Honour extracted [18] of that decision at [14] of his reasons. Grounds 1, 9 and 10 all deal with this alternate finding.
23. Ground 1 asserts that his Honour erred in his interpretation of the Ankar principle. Ground 9 asserts that there was "no evidence" for the alternate finding of "detriment potential or actual" to Mr Nadinic by reason of his obligations under the sub-contract. Ground 10 relies upon error in concluding that any such detriment was relevant to the instant guarantee in any event. These grounds can be deal with together.
24. The principle derived from the decision in Ankar.is to the effect that the obligations of a surety, such as Mr Nadinic, are discharged if there has been conduct on the part of the creditor which has the effect of altering the surety's rights (without notice to him) unless the alteration is insubstantial and not prejudicial to the surety: see Ankar at [18].
25. In Commonwealth Bank of Australia v McArthur [2003] VSC 31, Dodds-Streeton J analysed the "special principle" in Ankar. The analysis by her Honour is also applicable in this appeal and I respectfully adopt it as follows at [194]-[197] (footnotes omitted): "The special principle has application in cases where a particular liability is guaranteed, but it is altered or varied without consent, or the surety has certain contractual rights which are disregarded. Limitations upon, or reservations concerning, the special principle endorsed in Ankar Pty Ltd v National Westminster Finance Australia Ltd have been applied. For example, in The Wardens and Commonality of the Mystery of the Mercers of the City of London v New Hampshire Insurance, Phillips J considered that the principle applies only in relation to obligations arising under a specific contract which are guaranteed and not to obligations arising from a future course of dealings. Accordingly, if there is a guarantee in respect of all loans without reference to any particular contract, the creditor and principal could conclude a new loan and proceed to vary its terms without that variation operating to discharge the guarantor. A further exception to the variation principle is where the contract of guarantee or third party mortgage expressly permits variation. In the present case, the CBA mortgage by clause 9.12 expressly provided for the mortgagee's right to vary advances and accommodation. Similarly, the principle has no application to a subsequent independent agreement, as distinct from the variation of the terms of a particular original agreement. Whilst discharge will result from variation of the terms of a particular agreement unless it is unsubstantial and unprejudicial or the guarantor consents, the guarantor will remain liable in relation to entirely independent contracts, provided that they are within the scope of the guarantee." (emphasis added)
26. There was no dispute on this appeal that, given the terms of the guarantee, the increase in the amount said to have been guaranteed from $10,000 to $50,000 was not "in itself" a reason for the guarantee to be "revoked". So much was conceded by Mr Nadinic in the Local Court and accepted by Magistrate Clisdell at [12] of his reasons. Nor was it disputed on this appeal that, as a matter of principle, even if the credit limit is increased without notice to the guarantor, the guarantee still operates if it is part of the course of dealing agreed upon and guaranteed. His Honour referred in his reasons to the decision in Duffy Bros Fruit Market at [12] in support of this proposition. As Giles JA observed in Duffy Bros Fruit Market at [229]: "…it is necessary to determine what was guaranteed before it can be said that there has been variation in what he has guaranteed. If what was guaranteed extended to the varied principal contract, then there is no occasion for the guarantor to be discharged from liability. Indeed, a similar approach underlies provisions commonly found in guarantees to the effect that the guarantor is not discharged by any variation of the principal contract. These provisions preserve the guarantor's liability. They extend what was guaranteed to the varied principal contract."
27. The Ankar principle only applies where a particular agreement is altered or varied without consent or certain contractual rights are disregarded; it has no application when subsequent independent contracts are entered into so long as they are within the scope of the guarantee. Thus, if, as a matter of construction, the guarantee was a continuing one and guaranteed the payment of "all sums… due… …on any account or in any manner whatsoever" and also permitted variation, then the Ankar principle does not apply. It can only apply if it can be established that the sub-contract was a variation to what was agreed in the guarantee or went beyond the "course of dealing" guaranteed.
28. Mr Nadinic did not dispute this statement of principle but, rather, contended that the sub-contract went beyond the "course of dealing" contemplated at the time the guarantee was entered into and/or was a breach of the initial agreement.
29. Mr Nadinic's argument that the Trade Credit Agreement had been altered to his detriment without his consent proceeds on the assumption that the guarantee pertained only to the "single order" Trade Credit Agreement. This argument found favour with the Magistrate but, for the reasons stated above, I am not satisfied of that categorisation of the guarantee. Nor am I satisfied that there had been a breach of a term of the agreement on the part of Regency to Mr Nadinic's detriment.
30. It seems to me that both Mr Nadinic's primary argument and the alternate argument both rise and fall on the same question: whether the guarantee covered all credit transactions for the supply of goods and services between the parties or just the initial "one off" Trade Credit Agreement entered into in November 2011.
31. The learned Magistrate held, despite the terms of the guarantee referred to above, that the Ankar principle was applicable in this matter and that Regency had changed a condition of the agreement to Mr Nadinic's detriment. In doing so, his Honour accepted that the increase in the amount was not determinative. That is, his Honour's identification of "detriment potential or actual to the Defendant" under the sub-contract was not based on the increase in the size of the amount to be guaranteed. Rather, his Honour found (at [22]) that the "size of the Sub-Contract in its scope of works and quantum went beyond a mere supply of goods on credit". It is difficult to see how, putting to one side the increase in the credit limit, the "scope" of the works was to Mr Nadinic's detriment; his guarantee covered "all sums... owing... on any account" to Regency. His Honour did not provide reasons to explain how the scope of the works increased his risk or detriment other than in the amount owed on credit. In any event, any "detriment" arising from his increased exposure is something he agreed to when he signed the guarantee.
32. It is to be presumed that the reason a personal guarantee was required before Regency would provide trade credit to Maxstra was because of the latter's status as a company with limited liability. There is nothing in the correspondence to suggest that a different approach was taken by Regency when the supply of goods and services was for a greater amount.
33. In invoking the Ankar principle, one of the factors the Magistrate relied upon was that Mr Nadinic had not been consulted about the sub-contract following his resignation from Maxstra: at [23]. The difficulty with this finding is that the terms of the guarantee did not require notice to be given. His Honour no doubt considered it to be to Mr Nadinic's detriment that he be made liable for amounts owed after he ceased to be a director of the company but the source of that potential "detriment" is a result of Mr Nadinic's failure to revoke the guarantee when he resigned as director. If he had revoked the guarantee he would not have been liable. Up until that time he remained liable under the broad terms of the guarantee he was willing to enter into in 2011. He continued to be liable for "all sums… owing... on any account" to Regency.
34. I am satisfied that grounds 1, 9 and 10 are established. His Honour misapplied the Ankar principle, and found detriment in the absence of any evidence to that effect and in circumstance in which it was not relevant in any event given the terms of the guarantee.
35. I propose to allow the appeal. The summons filed by Regency sought orders, in the event that the appeal was allowed, that the verdict, judgment and costs order of the Local Court be set aside and in lieu thereof, judgment for Regency of $42,281.02 plus interest, pursuant to s 100 Civil Procedure Act 2005 (NSW), be entered and orders made that Mr Nadinic pay Regency's costs both in this Court and the Local Court.
36. Under s 41(1) of the Local Court Act, this Court can determine an appeal under s 39(1) in one of four ways. Section 41(1) provides: "The Supreme Court may determine an appeal made under section 39 (1) or 40: (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal."
37. This appeal did not turn on any findings of fact. Rather, it turned on the construction of the guarantee. I have construed that guarantee in favour of Regency. Any magistrate re-hearing this matter would be bound by that finding. In those circumstances, there is no basis for remitting this matter to the Local Court for a re-hearing under s 41(1)(c). The question is whether s 41(1)(a) of the Local Court Act permits me to finally determine the controversy between the parties following a successful appeal on a question of law under s 39(1) of the Local Court Act by "varying the terms of the judgment or order" within s 41((1)(a) of that Act.
38. In Thaina Town (On Goulburn) Pty Limited v City of Sydney Council (2007) 71 NSWLR 230; [2007] NSWCA 300 ("Thaina Town"), the Court of Appeal considered whether the terms of s 57(2)(b) of the Land and Environment Court Act 1979 (NSW), which provided that the Supreme Court could "make such other order in relation to the appeal as seems fit", included a power to award costs pursuant to s 69(2) of that Act. Spigelman CJ observed at [103]: "This Court must be concerned that the course of administration of justice in this State does not impose unnecessary cost burdens on parties by adopting a narrow interpretation of statutory powers conferred upon the Court to ensure the just and efficient administration of justice. Where no new findings of primary fact are required to be made, this Court should exercise a power conferred upon it in wide terms so as to ensure that the costs of legal disputation is minimised and thereby apply the guiding principle in s 56 of the Civil Procedure Act 2005 to the exercise of powers conferred by an Act other than that Act or by Rules of Court, so as to facilitate the just, quick and cheap resolution of the issues in dispute in civil proceedings."
39. The Court of Appeal subsequently considered its powers on an appeal under an analogous provision to s 39 of the Local Court Act in B & L Linings Pty Limited v Chief Commissioner of State Revenue (2008) 74 NSWLR 481; [2008] NSWCA 187 ("B & L Linings Pty Limited"). Section 119(1) of the Administrative Decisions Tribunal Act 1997 (NSW) ("the ADT Act") permitted an appeal from an Appeal Panel of the Administrative Decisions Tribunal on a "question of law". The Court, (Allsop P, with whom Giles and Basten JJA agreed) held that s 119 of the ADT Act does not authorise the Supreme Court to engage in fact finding on the merits of the decision of the Tribunal.
40. In B & L Linings Pty Limited, Basten JA had regard to s 75A of the Supreme Court Act but noted that it must, in accordance with s 75A(4), have effect subject to any other Act such as, in that case, the ADT Act (at [149]). His Honour went on to observe at [150]: "The function of this Court, exercising jurisdiction in relation to an appeal brought under s 119 of the ADT Act, is limited to the identification of an erroneous answer in respect of a question of law. For that purpose it is not required, and indeed is not entitled, to embark upon any review of the decision-making process of the Tribunal beyond that necessary to answer the appropriately identified questions of law. Thaina Town is not inconsistent with that conclusion."
41. The above decisions were relied upon by Bellew J in Getex Pty Limited v Reed Business Information Pty Limited [2013] NSWSC 1161 to conclude that there is no power under s 41(1) of the Local Court Act to review the merits of the case on appeal. His Honour concluded at [100]: "The provisions of s 39 of the LCA confer a right of appeal upon a party only on a question of law. The powers of the court, on the hearing of the appeal, are set out in s 41. In the circumstances of the present case, and consistent with the decision in B and L Linings (above), those provisions cannot be read as conferring a power upon me to review the merits of the case, or to otherwise expand the scope of the appeal which is conferred by s 39, so as to allow me to make a series of new findings of fact over and above those made by the Magistrate…"
42. In Getex Pty Limited, Bellew J concluded that he could not finally determine the matter because it would have required him to make new findings of fact. No such limitation applies in the present appeal. In circumstances where I have determined a question of law, being the construction of the guarantee, a Magistrate would be bound to follow it. This means that he or she would be bound to arrive at the same conclusion in any event. I have had regard to the observations of Spigelman CJ in Thaina Town extracted above that, where no new findings of primary fact are required to be made, this Court should exercise a power conferred upon it in wide terms to ensure that legal costs are minimised. I am not satisfied that it would be in the interests of justice to remit the matter to the Local Court for a re-hearing. I would thus propose to make the orders sought in reliance on s 41(1)(a) of the Local Court Act.
43. No submissions were made on behalf of Mr Nadinic as to the appropriate orders under s 41(1) of the Local Court Act. Despite this, he did submit that, in the event that Regency was successful, I would order a certificate pursuant to s 6 of the Suitors' Fund Act 1951 (NSW). Section 6(1) of the Suitors' Fund Act provides that: "(1) If an appeal against the decision of a court: (a) to the Supreme Court on a question of law or fact, or (b) to the High Court from a decision of the Supreme Court on a question of law, succeeds, the Supreme Court may, on application, grant to the respondent to the appeal or to any one or more of several respondents to the appeal an indemnity certificate in respect of the appeal."
44. No reasons were advanced by Regency as to why the court's discretion should not be exercised under s 6 of that Act and I propose to grant a certificate under that provision. I would also propose to make the orders sought by Regency set out above at [86] unless it was submitted by Mr Nadinic that some other orders should be made.

ORDERS

1. I make the following orders: 1. The appeal is allowed. 2. That the verdict, judgment and costs order of the Local Court be set aside and that judgment in the amount of $42,281.02 plus interest (pursuant to s 100 Civil Procedure Act 2005 (NSW)) be entered for the plaintiff. 3. That the defendant pay the plaintiff's costs with respect to the proceedings before this Court and the Local Court. 4. That a certificate under s 6 of the Suitors Fund Act 1951 (NSW) be provided to the defendant with respect to the proceedings in this Court.

Amendments 28 February 2018 - 28/02/2018 - coversheet correction - File Number "2016/44751" changed to File Number "2016/135248" 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: 28 February 2018