Ankar Pty Ltd v National Westminster Finance (Aust) Ltd [1987] HCA 15; (1987) 162 CLR 549

Apple Computer Australia Pty Ltd v Mekrizis [2003] NSWSC 126; (2003 44 ACSR 518

Hancock v Williams (1942) 42 SR (NSW) 252

Jenkins v National Australia Bank (1999) ANZ ConvR 544

Papua and New Guinea Development Bank v Manton [1982] VicRp 101; [1982] VR 1000

1 MASTER NEWNES: The plaintiff applied by chamber summons dated 4 November 2003 for summary judgment in respect of money allegedly owing to it by the defendant under a guarantee. On 20 February 2004, I ordered that judgment be entered for the plaintiff for the amount claimed. I said I would provide reasons for my decision. These are those reasons.

2 By a deed of guarantee and indemnity dated 1 April 1997 (the "guarantee"), the defendant, among others, guaranteed the punctual payment of any money which at any time Emery Moore & Co Pty Ltd ("Emery Moore"), or any other Borrower, was liable to pay to the plaintiff or which could be debited to any account of Emery Moore with the plaintiff. By the guarantee, the defendant's liability extended to all moneys which Emery Moore which may become to pay to the plaintiff, including by way of damages, and the defendant agreed to indemnify the plaintiff against all losses, damages, costs, charges, liabilities and expenses which the plaintiff may incur in seeking to recover any of the guaranteed money from any person liable to pay that money (cl 2.2(e)). The guarantors agreed to pay interest on any guaranteed moneys that became payable, such interest accruing daily at the rates referred to in cl 4 of the guarantee.

3 The guarantee provided, by cl 5.2.1, relevantly, as follows:

"5.2.1 The obligations and liabilities of [the defendant] and the rights of [the plaintiff] under this agreement continue in respect of all money which it or becomes Guaranteed Money and are not affected by:

...

(d) [the plaintiff] taking, varying, wholly or partially discharging or otherwise dealing with or losing or impairing any security for Guaranteed Money;

...

(i) any other transaction or arrangement between [the plaintiff] and a Borrower or another person;

...

(o) anything else which might at law or in equity have the effect of prejudicing or discharging [the defendant's] liability under this agreement."

"5.3 Without limiting clause 5.2.1 [the defendant] agrees that [the plaintiff] may without notice to or the consent of [the defendant]:

(a) deal with a Borrower or any other person in any manner;

(b) vary or extend any agreement between [the plaintiff] and the Borrower;

and that Guaranteed Money may increase pursuant to any such dealing."

"5.4 Without limiting clause 5.3 [the defendant] agrees that [the plaintiff] may without notice to or without the consent of [the defendant] extend the time for repayment of Guaranteed Money by the Borrower or another Guarantor or increase the amount of Guaranteed Money advanced to the Borrower or vary the agreements between [the plaintiff] and the Borrower in any manner."

"9.2 Any statement, demand, certificate or notice to [the defendant] will be effectively signed on behalf of [the plaintiff] if it is executed or signed by [the plaintiff], any director or secretary or employee of [the plaintiff], or any solicitor engaged by [the plaintiff] in connection with this agreement."

7 The guarantee contained what is commonly known as a "Dobbs clause" at cl 9.4. It was in the following terms:

"9.4 Except in the case of manifest error, a written statement, certificate or determination by [the plaintiff] setting out the amount of money owing or any determination of an amount to be paid under this agreement or any component part, shall be conclusive evidence of the amount owing or the determination and will be binding on [the defendant]."

8 By a Facility Agreement dated 15 February 1999, the plaintiff provided to Emery Moore a fully-drawn advance facility of $566,000 and an overdraft facility with a limit of $900,000. Under the terms of the Facility Agreement, Emery Moore was required to repay the fully-drawn advance by minimum monthly payments of $14,167 and to pay the plaintiff interest, calculated daily, on all outstanding money under both the overdraft facility and the fully-drawn advance facility. If an event of default, as defined, occurred, all moneys owing by Emery Moore to the plaintiff under the Facility Agreement would be repayable upon demand. The Facility Agreement provided that, following an event of default, the plaintiff may in any manner and at any time it considers appropriate close any account of Emery Moore and transfer any credit balance to any other account.

9 Events of default occurred in that between March 1999 and March 2000, Emery Moore failed to pay the monthly reductions on the fully-drawn advance. By a notice of demand dated 6 April 2000, the plaintiff demanded Emery Moore pay the sum of $1,812,808.28, being the amount outstanding under the Facility Agreement.

10 It appears that subsequently various securities held by the plaintiff were sold and a substantial portion of the debt recovered.

11 By a notice of demand dated 17 March 2003, signed by its solicitors, the plaintiff demanded from the defendant pursuant to the guarantee the sum of $304,367.93, being the amount said to be owing by the defendant as at 28 February 2003 under an overdraft facility, account number 551177646. That amount was made up of the sum of $301,532.85, being the amount outstanding as at 31 January 2003, interest at 12.25 per cent per annum on that amount from 31 January 2003 to 28 February 2003, being an amount of $2833.58, and costs and charges of $1.50. On the same date, the plaintiff's solicitors certified that, as at 28 February 2003, those respective amounts were due and payable by the defendant to the plaintiff under the said account.

12 An affidavit of an employee of the plaintiff, Rod David Lawless, sworn on 12 December 2003, was filed on behalf of the plaintiff. Annexed to Mr Lawless' affidavit is a certificate under cl 9.4 of the guarantee, signed by him as an employee of the plaintiff. It is dated 21 November 2003 and certifies that the sum of $304,367.93 was due and payable by the defendant to the plaintiff as at 28 February 2003 and as at 20 November 2003 the sum of $350,915.98 was payable by the defendant to the plaintiff under a fully drawn advance facility, account number 551177646.

13 The defendant did not pay the moneys claimed and the plaintiff issued the writ of summons in these proceedings on 28 July 2003. A statement of claim was filed on 19 September 2003. An amended statement of claim was filed on 24 November 2003. The amended statement of claim corrected a number of typographical errors and elaborated upon some of the provisions of the guarantee referred to in the original statement of claim. Its significant effect for present purposes, however, is that it pleaded that the moneys payable by Emery Moore were outstanding under the fully-drawn advance facility, rather than the overdraft facility as pleaded in the original statement of claim. In his affidavit, Mr Lawless explained that the account number, 551177646, referred to in the original statement of claim, was correct, but the account was incorrectly described as the overdraft facility, whereas it was the fully-drawn advance facility. Mr Lawless said the error occurred because of a misdescription of the account in the internal documentation of the plaintiff when the facilities were transferred from a Western Australian branch of the plaintiff to its New South Wales office.

14 In these proceedings, the plaintiff claimed the sum of $307,536.10, consisting of an amount of $304,367.93 being the balance outstanding under the fully-drawn advance as of 28 February 2003, an amount of $3,166.67 being interest at 12.25 per cent on the amount outstanding from 28 February 2003 to 31 March 2003 and an amount of $1.50 being costs and charges as at 31 March 2003. The plaintiff also claimed interest from 31 March 2003 until the date of payment.

15 The defendant contended that there was an arguable issue as to his liability to the plaintiff. In an affidavit sworn on 13 February 2004, Mr Emery set out the background to the Facility Agreement entered into in February 1999. It is not necessary for present purposes to canvass those matters in any detail. Suffice it to say that, in about May 1997, Emery Moore obtained funding from the plaintiff in the form of a fully-drawn advance of $704,537.89 and a cheque account overdraft in the sum of $9,550. Subsequently, the fully-drawn advance was increased to $850,000 and the overdraft facility to $375,000. By 27 May 1998, the cheque account had a debit balance of $921,000.

16 In February 1999, the borrowings of Emery Moore were reorganised on the basis of the overdraft facility of $900,000 and a fully-drawn advance of $566,000 pursuant to the Facility Agreement. The moneys were secured by mortgages over certain land.

17 In a letter from the plaintiff to the defendant of 4 January 2000, the overdraft facility (account 551175755) was said to have a debit balance of $1,453,556.88.

18 In April 2000, Emery Moore went into liquidation. The defendant has annexed to his affidavit part of a statement of account of the fully-drawn advance, account 551177646, showing that as at 30 April 2000 that account had a debit balance of $1,784,249.18. The defendant says that the limit of the fully-drawn advance was $566,000 and he had not agreed to any variation in that amount.

19 The defendant says that, in July 2000, one of the secured properties was sold and the plaintiff received net proceeds of $1,633,807.97. The plaintiff applied those funds by allocating $73,162.67 to clear the balance of the overdraft facility and the balance of $1,560,645.30 was allocated to the fully-drawn advance facility. That left a balance owing on the fully-drawn advance facility as at 14 July 2000 of $236,764.18.

20 The defendant says that, in May 2003, the plaintiff issued a statutory demand to another guarantor, Graham Emery & Associates Pty Ltd, of which the defendant was, and is, a director. In the demand, the plaintiff claimed that the sum of $307,536.10 was owing to the plaintiff "under an overdraft facility ... with account number 551177646". The account number is, in fact, the number of the fully-drawn advance.

21 The defendant's counsel argued that there were obvious inconsistencies in the statements of account provided to the defendant and it appeared that the fully-drawn advance had been increased well beyond its limit without reference to the defendant.

22 It is, however, apparent from the statements of account annexed to an affidavit of Mr Lawless of 30 October 2003 that an amount of $1,505,000 owing to the plaintiff on the overdraft facility was transferred to the fully-drawn advance account on 21 March 2000, causing the amount of the fully-drawn advance to increase from $279,249.18 to $1,784,249.18. After the proceeds of the sale of the secured property of $1,560,645.30 were credited to the fully-drawn advance in June 2000 (rather than July 2000 as the defendant claimed), the balance was reduced to $223,603.88. By virtue of interest and other charges, as set out in the statements of account annexed to Mr Lawless' affidavit, that amount had increased to the sum of $236,764.18 by 7 July 2000 and to the sum of $304,367.93 as at 28 February 2003.

23 It is clear from the terms of the Facility Agreement that the plaintiff was entitled to transfer the moneys between the accounts as it did. The particular accounts on which the amounts were said to be owing by Emery Moore to the plaintiff were, of course, irrelevant to the defendant's liability under the guarantee for the outstanding indebtedness of Emery Moore. It is also clear that, under the terms of the guarantee, the plaintiff was entitled to vary or extend any agreement with Emery Moore and that the plaintiff was entitled, without notice to or the consent of the defendant, to increase the amount of the guaranteed money advanced to Emery Moore or to vary the agreements between the plaintiff and Emery Moore in any manner (cl 5.4).

24 I do not accept the submission made on behalf of the defendant that the various misdescriptions of account 551177646 as the "overdraft facility" indicate a confusion or uncertainty that would warrant summary judgment being refused. Mr Lawless has explained the error in his affidavit of 12 December 2003. On analysis of the various documents exhibited to the affidavits, the error in the description is apparent. There is, moreover, nothing in any of the documents that exhibits confusion about the amount owing by the defendant in respect of account 551177646. That much was conceded by counsel for the defendant, but it was submitted that other issues may arise if the defendant has the opportunity to avail himself of the processes of discovery and interrogatories. Counsel argued that the information currently available to the defendant, as a guarantor, in respect of the indebtedness of Emery Moore was limited.

25 I do not consider that summary judgment should be refused simply because the defendant does not have complete information on the indebtedness of Emery Moore to the plaintiff. If, on the material before the Court, there is no real issue to be tried, and no reason to believe that upon further investigation matters might be discovered that would provide the defendant with a defence, then the plaintiff is entitled to judgment. In those circumstances, it is no answer for a defendant simply to say that if he is given the opportunity to rummage through all of the plaintiff's records something might turn up.

26 It was also argued on behalf of the defendant that there were grounds to believe that a separate liability of Dr Moore, one of the directors of Emery Moore, had increased beyond its original limits with the knowledge of the plaintiff and that the securities which secured both Dr Moore's personal liabilities and the liabilities of Emery Moore had been used by the plaintiff first to discharge Dr Moore's liabilities and then allocated to the liabilities of Emery Moore. It was suggested that, in that way, the position of the guarantors had been prejudiced because the amount available to reduce their liability had been used first to reduce Dr Moore's personal liability. The argument for the defendant was put on the basis that the plaintiff had sacrificed or impaired a security thereby entitling the guarantor to be credited with the deficiency by way of a reduction in his liability. Counsel referred in particular to Buckeridge v Mercantile Credits Ltd [1981] HCA 62; (1981) 56 ALJR 28.

27 I am not satisfied that any arguable defence has been made out on that basis. In the first place the factual basis for it does not appear to rest on anything more than conjecture on the defendant's part. I also accept the submission of counsel for the plaintiff that Buckeridge v Mercantile Credits Ltd does not assist the defendant. If it can be said there has been a sacrifice or impairment of the security in the present case, as postulated on behalf of the defendant, the effect is dependant upon the terms of the guarantee. In Buckeridge v Mercantile Credits Ltd, Brennan J (with whom Gibbs CJ, Murphy and Wilson JJ agreed) said [at 34]:

"In a case where the act of a creditor does not discharge a surety, but the creditor has nonetheless sacrificed or impaired a security, or by his neglect or default allowed it to be lost or diminished, the surety is entitled in equity to be credited with the deficiency in reduction of his liability (Williams v Frayne per Dixon J [1937] HCA 16; (1937) 58 CLR 710 at p 738). The surety's entitlement is lost, however, if he bargains away his right to complain of the act which occasions the deficiency."

28 To the extent it might be said that there was in this case any sacrifice or impairment of a security, the plaintiff's rights are preserved by cl 5.2.1(d) of the guarantee.

29 If, as suggested by the plaintiff's counsel, the defendant's argument was in fact concerned with the marshalling of securities, the plaintiff's position is preserved by cl 5.5 of the guarantee which provides:

"5.5 [The defendant] agrees that [the plaintiff] may enforce this agreement irrespective of whether it has made a demand on a Borrower or has enforced any other security for Guaranteed Money. The Guarantor waives any right to require the marshalling of any securities held by [the plaintiff] for the Guaranteed Money."

30 The defendant also contended that the "Dobbs clause" relied upon by the plaintiff, cl 9.2 of the guarantee, was not conclusive evidence of the amount owing by the defendant. In the end, I do not think it is necessary for the plaintiff to rely on the Dobbs clause to make good its case, but as the matter was argued at some length, it is appropriate that I deal with it.

31 Such clauses take their name from the decision in Dobbs v National Bank of Australasia Ltd [1935] HCA 49; (1935) 53 CLR 643. In that case, there was a clause in the guarantee in the following terms:

"A certificate signed by the manager or acting manager for the time being of your head office or any other office of your bank at which the banking account of a customer shall for the time being be kept stating the balance of principal and interest due to you by the customer shall be conclusive evidence of the indebtedness at such date of the customer to you."

32 At 651-4, Rich, Dixon, Evatt and McTiernan JJ said:

"The bank could recover without the production of a certificate if, by ordinary legal evidence, it proved the actual indebtedness of the customer. But the clause, if valid, enables the bank by producing a certificate to dispense with such proof. It means that, for the purpose of fixing the liability of a surety, the customer's indebtedness may be ascertained conclusively by a certificate. It was contended, however, for the appellant that, upon its true construction, the clause did not make the certificate conclusive of the legal existence of the debt but only of the amount. It is not easy to see how the amount can be certified unless the certifier forms some conclusion as to what items ought to be taken into account, and such a conclusion goes to the existence of the indebtedness. Perhaps such a clause should not be interpreted as covering all grounds which go to the validity of a debt; for instance, illegality ... But the manifest object of the clause was to provide a ready means of establishing the existence and amount of guaranteed debt and avoiding an inquiry upon legal evidence into the debits going to make up the indebtedness. The clause means what it says, that a certificate of the balance due to the bank of a customer shall be conclusive evidence of his indebtedness to the bank. ... We think the certificate of the officer of the bank is conclusive upon the parties of the amount and existence of the customer's indebtedness."

33 Counsel for the defendant argued that the certificates in this case were defective in that, first, the authority of the solicitors and Mr Lawless to sign the respective certificates on behalf of the plaintiff was not apparent. That contention, however, overlooks cl 9.2 of the guarantee, which specifically authorises any "certificate or notice" to be signed on behalf of the plaintiff by any employee of the plaintiff or any solicitor engaged by the plaintiff.

34 The second proposition was that the certificate did not state what amount was owing at the date of the writ. I do not consider there is any requirement that it do so. All that the certificate is required to do is to state the amount owing and the date on which it is said to be owing. The certificates in this case do that.

35 Thirdly, it was argued that in its terms the certificate was not conclusive evidence of the indebtedness of the defendant to the plaintiff but only of the amount owing if such indebtedness was otherwise proved. That is the same argument that was put and rejected in Dobbs case and I would reject it for the same reasons.

36 Fourthly, it was submitted that by reason of the matters set out in the defendant's affidavit, there appeared to be manifest errors in the certificates such that they should not be relied upon.

37 What amounts to manifest error was considered in Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203, where Sheller JA described a "manifest error" as an error such that there were powerful reasons for considering, on a preliminary basis, without prolonged adversarial argument, that it was, indeed, an error. That dicta was referred to with approval by Einstein J in State Bank of New South Wales Ltd v Chia [2000] NSWSC 552; (2000) 50 NSWLR 587, at 607 - 608.

38 In my view, there is nothing in the material before me that indicates any error, let alone manifest error, in the certificate of Mr Lawless of 21 November 2003 under cl 9.2. The errors in various earlier documents of the description of the account concerned as an "overdraft facility" have been explained and, upon analysis, are obvious.

39 Finally, it was argued on behalf of the defendant that the application must fail because the plaintiff had not deposed that there was no defence to the plaintiff's claim as set out in the amended statement of claim.

40 In his affidavit of 30 October 2003, prior to the amendments to the statement of claim, Mr Lawless had deposed, on behalf of the plaintiff, to a belief that the defendant had no defence to the plaintiff's claim. The plaintiff's claim, as appears by the indorsement on the writ and from both the original statement of claim and the amended statement of claim, is for the sum of $307,536.10 owing by the defendant to the plaintiff pursuant to the guarantee. The plaintiff has therefore deposed to a belief that the defendant has no defence to that claim. In my view, it is immaterial that subsequently amendments were made to the statement of claim to correct the misdescription of account 551177646 as an "overdraft facility" and to correctly describe it as a "fully-drawn advance facility". The defendant's liability remained unaffected, whatever type of account it was.

41 It is well established that the power to order summary judgment should be exercised with caution and should not be exercised unless it is clear that there is no serious question to be tried: General Steel Industries Inc v Commissioner of Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129-130; Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87 at 99.

42 I was satisfied that in this case there was no issue or question in dispute which ought to be tried or any other reason that the matter should proceed to trial. Accordingly, I ordered that judgment be entered for the plaintiff for the amount claimed.