CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND
INTERPRETATION OF CONTRACTS - where the plaintiff sold shares to the
first and
second defendants by a share sale agreement - where the third and fourth
Source
Original judgment source is linked above.
Catchwords
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION ANDINTERPRETATION OF CONTRACTS - where the plaintiff sold shares to thefirst andsecond defendants by a share sale agreement - where the third and fourthdefendants guaranteed the first and second defendants’obligations underthe share sale agreement - where the plaintiff, by a loan agreement, advancedthe purchase price to the first andsecond defendants as borrowers - where thethird and fourth defendants were not parties to the loan agreement - where thethird andfourth defendants did not guarantee the obligations of the first andsecond defendants under the loan agreement - whether the first
and second
defendants covenanted in the share sale agreement to pay money owing under the
loan agreement - whether the third and
fourth defendants guaranteed any such
obligation
CORPORATIONS - FORMATION - REGISTRATION OR INCORPORATION - DEREGISTRATION -
VALIDATING ORDERS - where the plaintiff is an Australian
propriety company
limited by shares - where the plaintiff was deregistered - where the plaintiff,
while deregistered, purported to
enter into a loan agreement as lender - where
the plaintiff, while deregistered, purported to advance funds under the loan
agreement
- where, by the terms of the loan agreement, the borrower was to pay
interest - where the plaintiff’s registration was reinstated
- where the
making of the loan agreement was validated by the court - where the making
of the advance under the loan agreement was
validated by the court -
whether interest accrues against the borrower over the period the plaintiff was
deregistered
Corporations Act 2001 (Cth), s 601AB, s 601AH
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149
CLR 337, followed
Electricity Generation Corporation v Woodside Energy
Ltd [2014] HCA 7
(2014) 251 CLR 640, followed
In the
matter of ACN 063 346 708 [2018] NSWSC 1709, cited
Mount Bruce Mining
Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37
(2015) 256 CLR 104,
followed
Thorne Developments Pty Ltd v Laird [2022] QSC 085,
related
Judgment (132 paragraphs)
[1]
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - where the plaintiff sold shares to the first and second defendants by a share sale agreement - where the third and fourth defendants guaranteed the first and second defendants' obligations under the share sale agreement - where the plaintiff, by a loan agreement, advanced the purchase price to the first and second defendants as borrowers - where the third and fourth defendants were not parties to the loan agreement - where the third and fourth defendants did not guarantee the obligations of the first and second defendants under the loan agreement - whether the first and second defendants covenanted in the share sale agreement to pay money owing under the loan agreement - whether the third and fourth defendants guaranteed any such obligation
[2]
CORPORATIONS - FORMATION - REGISTRATION OR INCORPORATION - DEREGISTRATION - VALIDATING ORDERS - where the plaintiff is an Australian propriety company limited by shares - where the plaintiff was deregistered - where the plaintiff, while deregistered, purported to enter into a loan agreement as lender - where the plaintiff, while deregistered, purported to advance funds under the loan agreement - where, by the terms of the loan agreement, the borrower was to pay interest - where the plaintiff's registration was reinstated - where the making of the loan agreement was validated by the court - where the making of the advance under the loan agreement was validated by the court - whether interest accrues against the borrower over the period the plaintiff was deregistered
Thorne Developments Pty Ltd v Laird[2022] QSC 085, related
[9]
[1] The plaintiff, Thorne Developments Pty Ltd, applies for judgment in the proceedings against all defendants. Graham David Laird is both the first and third defendants. As first defendant, he is sued in his capacity as trustee of the Laird Family Trust (Mr Laird as Trustee).
[10]
[2] Transparent Enterprises Pty Ltd operated an adult entertainment club. It also held all the shares in, and therefore was the holding company of, various companies which can be described collectively as "the Showbar Group".
[3] The directors of Transparent Enterprises and each of the companies in the Showbar Group were Mr Laird and Bradley James Thorne.
[4] One half of the issued shares in Transparent Enterprises were owned by Thorne Developments and the other half was owned beneficially by Mr Laird.
[5] Thorne Developments is a company which, at all material times (except when it was not registered), was controlled by Mr Thorne. He was its only director. Later, Patrick Norman Casey became its director.
[6] Rick Williamson Investments Pty Ltd, the second defendant, is a company controlled by Richard John Williamson, the fourth defendant.
[7] From September 2011, negotiations proceeded between the Thorne interests, the Laird interests and the Williamson interests with a view to the Laird and Williamson interests buying out the Thorne interests in Transparent Enterprises.
[8] By December 2011, an arrangement had been agreed upon, namely:
[11]
(a) Thorne Developments would sell its shares in Transparent Enterprises to Mr Laird as Trustee and Rick Williamson Investments (jointly, "the Buyers");
(b) Mr Thorne would resign his directorship in Transparent Enterprises and each of the companies in the Showbar Group;
(c) the share price would be determined by Transparent Enterprises' accountant who would prepare a valuation.
[12]
[9] On 12 December 2011, Rick Williamson Investments paid $95,000 to the trust account of the solicitor acting for Thorne Developments. That payment was made in part payment of the anticipated purchase price, but was held in trust as a deposit.
[10] In due course, the purchase price for the shares was determined. On or about 28 February 2012, two agreements were executed, namely a document styled, "Share Sale Agreement" and another styled, "Loan Agreement". Within the Share Sale Agreement were covenants by Mr Laird and Mr Williamson guaranteeing the obligations of Mr Laird as Trustee and Rick Williamson Investments. There is dispute as to the extent of those obligations.
[11] By the terms of the Share Sale Agreement, the purchase price was $1,871,775. The sum of $395,000 was to be paid on completion in exchange for the share transfers.[1] That sum consisted of the $95,000 deposit and a further amount of $300,000. The balance of $1,476,775 was to be paid pursuant to the Loan Agreement. This was a transaction of a type commonly known as "vendor finance". The lender under the Loan Agreement is Thorne Developments and the Buyers under the Share Sale Agreement are the borrowers.
[12] Unbeknown to the parties, about three months before the Share Sale Agreement and Loan Agreement were executed, Thorne Developments was deregistered pursuant to s 601AB(1) of the Corporations Act2001 (Cth). Pursuant to s 601AH(1) of the Corporations Act, Thorne Developments was reinstated on 4 September 2013.
[13] Contractual arrangements such as the Share Sale Agreement and Loan Agreement, which were entered into during the period of Thorne Developments' deregistration (and the steps taken pursuant to those agreements), are invalid unless validated by the Court under Thorne Developments commenced proceedings for validation of the agreements and recovery of the balance purchase price of $1,476,775 which remains unpaid.
[13]
(a) On a proper construction of the Share Sale Agreement and the Loan Agreement, Mr Williamson has not guaranteed the obligations of Mr Laird as Trustee and Rick Williamson Investments under the Loan Agreement.
(b) Mr Laird as Trustee is personally liable for the debts of the trust, subject to a right of indemnity from the trust property. Consequently, judgment may be entered against Mr Laird, but it is pointless to also enter judgment against him as trustee.
(c) During the period Thorne Developments was deregistered, none of the Laird interests nor the Williamson interests could have paid the loan money to Thorne Developments. It therefore follows, so it is submitted, that interest should not run over the period Thorne Developments was deregistered.
[14]
[18] As already observed, the parties to the Share Sale Agreement are Thorne Developments as the seller of the shares, and Mr Laird as Trustee and Rick Williamson Investments as Buyers. Transparent Enterprises, whose shares are the subject of the transaction is another party. Mr Laird and Mr Williamson are parties as guarantors.
[19] By the Share Sale Agreement, Transparent Enterprises makes various specific representations jointly with the Buyers[3] and agrees to indemnify Thorne Developments for loss suffered if the representations are untrue.[4] Transparent Enterprises is also bound by a confidentiality obligation.[5] Otherwise, there are no substantive obligations assumed by Transparent Enterprises.
[20] By clause 1 of the Share Sale Agreement, Thorne Developments agrees to sell the shares to Mr Laird as Trustee and Rick Williamson Investments who agree to buy the shares.
[21] The Share Sale Agreement contemplates a formal "completion" to occur on 28 February 2012,[6] the day of signing both the Share Sale Agreement and the Loan Agreement.
[22] Clause 4 identifies the parties' respective obligations on completion save payment of the purchase price. Clause 5 concerns the payment of the purchase price.
[23] Clauses 4 and 5 relevantly provide:
[15]
Completion will take place on the Completion Date on 28th February, 2012 at Brisbane, Queensland, Australia or such other time and place agreed in writing between the Seller and the Buyers.
[16]
(a) (transfers, Share certificates and approval) duly executed transfers in favour of the Buyers ( or as they may direct) of all the Shares, the share certificates for the Shares and written approval signed by the Seller in accordance with clause 32 of the Constitution;
(b) (bank authority) duly completed bank authorities directed to the bankers of the Company terminating the authority of Seller as signatory to the Company bank account;
(c) (resignations) written resignation of the Seller from the Board of the Company together with its acknowledgement that no money or other obligation is owed by the Company to the Seller and that it has no claims of any nature against the Company;
(d) (directors resolution of the Company) a certified copy of a resolution of the directors of the Company signed by the Seller resolving that:
(i) the transfer of the Shares will be entered in the company register; and
(ii) the resignation of the Seller from the board be accepted, all with effect from Completion.
[17]
(a) (written approval) written approval signed by the Buyers in accordance with Clause 32 of the Constitution;
(b) (directors resolution of the Company) a certified copy of a resolution of the directors of the Company signed by the Buyers Director resolving that:
(i) the transfer of the Shares will be entered in the company register; and,
(ii) the resignation of the Seller's Directors from the board be accepted, all with effect from Completion.
[18]
(a) the obligations of the parties under this agreement (and the agreements contained in the annexures) are interdependent; and
(b) unless otherwise stated, all actions required to be performed by a party at Completion are taken to have occurred simultaneously on the Completion Date.
[19]
(a) the Buyers will procure that consideration in the amount of $1,871,775.00 apportioned as set out in Schedule 1 be paid to the Seller, to be paid as follows:
(i) $95,000.00 paid into the Trust Account of Reardon & Associates on the 12th December, 2011;
(ii) $300,000.00 to be paid to Thorne Developments Pty Ltd upon the Completion Date;
(iii) $1,476,775.00 to be paid in accordance with the Loan Agreement between the Seller and the Buyers.
(b) It is acknowledged that the proportion of consideration in clause 5.1(a)(i) has been paid into a bank account and is available to the Seller. ..." (emphasis added)
[20]
[24] For reasons which will become clear, clause 5.1, and in particular sub-clause 5.1(a)(iii), is critical to the resolution of the current question.
[25] Clause 7 concerns the effect of completion on the liability of the various parties. It provides:
[21]
Upon Completion, the Buyers and the Company release and indemnify (to the extent permitted by law) the Seller from any indebtedness or Claim that the Buyers or the Company may have against the Seller, except in relation to any breach of this agreement.
[22]
By executing this agreement the Seller accepts the benefit of release under clause 7.1 ("Buyers Release") and any other benefit under any other clause of this agreement.
[23]
Upon Completion, the Seller releases and indemnifies (to the extent permitted by law) the Buyers and the Company from any indebtedness or Claim that the Seller may have against the Buyers and the Company except in relation to any breach of this agreement.
[24]
By executing this agreement the Seller gives the release and jointly and severally indemnifies the Buyers and the Company in respect of any indebtedness or Claim that may be brought against them except in relation to any breach of this agreement." (emphasis added)
[25]
[26] Clause 14.19 is the grant of guarantees. It provides:
[26]
(a) Guarantees the obligations of the Buyers to pay any sums of money payable by the buyers under this agreement or to perform any other obligations under this agreement;
(b) Indemnifies the Seller against any loss or liability the Seller incurs arising from or connected with the failure of the Buyers to perform their obligations under this agreement; and,
(c) Charges the guarantor's real and personal estates with payment of all sums that may become payable by the guarantor.
[27]
(a) The guarantee contained in clause 14.19:
(i) is a principal obligation and will not be treated as ancillary or collateral to any other right or obligations however created or arising;
(ii) may be enforced against the Guarantor without the Seller first being required to exhaust any remedy the may have against the Buyers;
(iii) is a continuing guarantee and indemnity for the whole of the Buyers' obligations under this agreement and will be irrevocable and will remain in full force and effect until discharged; and
(iv) will not be considered as wholly or partially discharged by the performance at any time of any of the Buyers' obligations under this agreement or by any settlement of account or by any other matter or thing whatever and will apply to the present and future scope of the Buyers' obligations under this agreement.
(b) The liability of the Guarantor is absolute and will not be affected by any act, omission, matter or thing which but for this clause might operate to release or otherwise exonerate the Guarantor from the Guarantor's obligations in whole or in part including without limiting the generality of the foregoing:
(i) the grant to the Buyers or any other person of any time, waiver or other indulgence or concession, or the discharge or release of any other security held by the Seller in respect of the Buyers' obligations under this agreement;
(ii) any transaction or arrangement that may take place between the Seller and the Buyers, the Guarantor or any other person;
(iii) any or all of the Buyers becoming Insolvent;
(iv) the Seller exercising or refraining from exercising any other security or any of the rights, powers or remedies conferred on them by law or by this agreement or any other agreement with any person, or taking or failing to take any other security;
(v) the variation (including a variation which increases the Buyers' obligations under this agreement), extinguishment, unenforceability, failure, loss, release, discharge, abandonment or transfer either in whole or in part of this agreement, or any security now or in the future held by the Seller from the Buyers, the Guarantor or any other person;
(vi) the Buyers' obligations under this agreement or any part of them being or becoming wholly or partially illegal, void, voidable, or unenforceable;
[28]
[27] Clause 15 is a definition section. Of significance:
[29]
"Buyers means Graham David Laird as Trustee for the Laird Family Trust specified, and Rick Williamson Investments Pty Ltd (ACN: 120 400 456) as such in the 'Details'.
[30]
Completion means completion of the sale and purchase of the Shares in accordance with clause 4 ('Completion') and Complete has a corresponding meaning.
[31]
Completion Date means 28 February, 2012 or any other date agreed in writing by the Seller and the Buyers.
[32]
Guarantor to the buyer's means Graham David Laird and Richard John Williamson specified as such in the 'Details'.
[33]
Loan Agreement means the agreement between the Seller and the Buyers which provides for Seller Finance to assist the Buyers to purchase the Shares in the Company.
[34]
Seller means Thorne Developments Pty Ltd (A.C.N. 109 570 194) specified as such in the 'Details'."
[35]
[28] The parties to the Loan Agreement are Thorne Developments as Lender and Mr Laird as Trustee and Rick Williamson Investments jointly as Borrower. Mr Laird as Trustee is personally liable as a borrower. Mr Laird is only expressed as a party in his capacity as trustee. Mr Williamson is not a party to the Loan Agreement. There are no provisions in the Loan Agreement where guarantees are given.
[29] The Loan Agreement begins with a schedule entitled, "Particulars". In that schedule:
[36]
The amount of the loan is $1,476,775.00 plus all reasonable costs incurred by the Lender in relation to the Loan and this Loan Agreement. The Loan comprises the following amounts:-
[37]
(a) The sum of $1,476,774.00 relating to the sale by the Lender to the Borrower of one (1) ordinary shares owned by the Lender in the Company Thorne Developments Pty Ltd (ACN 109 570 194);
(b) The sum of $1.00 relating to the sale by the Lender to the Borrower of one (1) Class B shares owned by the Lender in the Company Transparent Enterprises Pty Ltd (ACN 123 992 325)."
[38]
The date of Settlement of the sale by the Lender as Seller to the Borrower as Purchaser of the shares referred to in Item 5 of this Loan Agreement."
[39]
REPAYMENT - the Borrower will pay the Loan in the sum of $1,476,775.00 by way of the following instalments:-
[40]
(a) $540,888.00 on or before the 31st day of March, 2012;
(b) $935,887.00 on or before the 31st day of August, 2012.
[41]
EARLY REPAYMENT - the Borrower will have the right to make early repayment of the whole of the loan at any time."
[42]
(a) The Seller will be entitled to hold in escrow the share transfers relating to the transfer of the shares referred to Item 5 of this Loan Agreement.
(b) A registered second mortgage over Lots 2 and 4 on SP 180674 being all of the interest in land contained in Certificate of Title Reference 507112954 and 50712956."
[43]
[30] The particulars are followed with recitals, relevantly here:
[44]
"The Lender has advanced the sum of money in Item 5."
[45]
[31] Various terms are defined in Clause 1.1. Of some importance:
[46]
"Event of Default means any event or occurrence mentioned in clause 7".
[47]
[32] Clause 1.2 is an interpretation clause. Of importance:
[48]
"A party which is a trustee is bound both personally and in its capacity as trustee".
The loan has been advanced by the Lender to the Borrower."
[51]
[34] Clause 3 concerns interest on the sum loaned. The loan is interest free until "the Expiry Date"[8] and then interest accrues at the rate of twelve per cent (12%) per annum on monthly rests.
[35] Clause 4 provides that the loan must be repaid on the expiry date.
[36] Clause 7 concerns rights upon default. It provides:
[52]
If an Event of Default occurs or is deemed to have occurred, then at the Lender's option, without any demand or notice:
[53]
(1) all of the Secured Money immediately becomes payable;
[54]
(2) the Lender may demand the Guarantors pay all the secured money; and
[55]
(3) the Lender may decline to provide any part of the Loan which has not already been provided.
[56]
(1) the Borrower fails to pay any of the Secured Money when due;
[57]
(a) this agreement;
(b) any Collateral Security; or
(c) any other agreement, instrument or document between the Borrower and the Lender.
[58]
(3) any warranty or representation made or deemed to have been made under this agreement, any Collateral Security or any other written agreement between the Lender and the Borrower proves to have been untrue or misleading when made or deemed to have been made;
[59]
(4) this agreement becomes wholly or partly void, voidable or unenforceable;
[60]
(5) an order for payment is made or a judgement is entered against the Borrower, any related body corporate of the Borrower or any guarantor of the Secured Money or any part of it and is not satisfied within seven (7) days;
[61]
(6) any creditor of the Borrower levies, or attempts to levy, any distress or execution against any property of the Borrower;
[62]
(7) the Borrower or any guarantor, being a body corporate, becomes an externally-administered body corporate under the Corporations Act;
[63]
(8) steps are taken by any person towards making the Borrower or any guarantor an externally-administered body corporate;
[64]
(9) the Borrower is taken to have failed to comply with a statutory demand within the meaning of section 459F of the Corporations Act;
[65]
(10) a person holding a security interest in assets of the Borrower enters into possession of or takes control of any of those assets or takes any steps to enter into possession of or take control of any of those assets; or
[66]
(11) the Borrower dies or becomes lunatic or insane or a protected person within the meaning of any relevant legislation in that behalf." (emphasis added)
[67]
[37] Clause 8 concerns the liability of persons who have assumed liabilities as trustee and it provides:
[68]
Where a Borrower has executed this agreement in its capacity as trustee of a trust ('Trust'), whether or not the fact that the Borrower is a trustee is disclosed to the Lender, the Borrower acknowledges that this agreement is binding on the Borrower personally and in its capacity as trustee of the Trust and that he Lender's right of recourse extends to both the assets of the Borrower personally and the assets of the Trust."
[69]
[38] Clause 10 is an interpretation provision. It provides:
[70]
So far as is possible, this agreement must be read together with the Mortgage, any Collateral Security, and all other agreements or documents entered into in connection with this agreement and, in the event of inconsistency, the provision most favourable to or which confers the greatest benefit on the Lender prevails."
[71]
[39] Clause 10.7 is an entire agreement provision. It provides:
[72]
This agreement and the Collateral Securities represent the entire agreement between the parties and all prior or contemporaneous representations, statements and agreements (if any) made by the Lender or the Lender's representatives are emerged in this agreement."
[73]
[40] The dispute between the parties is well defined.
[41] Mr De Waard of counsel, who appears for, relevantly to the present issue, Mr Williamson, submits that Mr Williamson's guarantee is of the obligation of Mr Laird as Trustee and Rick Williamson Investments under the Share Sale Agreement, not the Loan Agreement. He submits that on a proper construction of the Loan Agreement and the Share Sale Agreement, the obligation of the Buyers under the Share Sale Agreement has been discharged upon completion. Upon payment of the purchase price, any liability of Mr Laird as Trustee and Rick Williamson Investments is not to pay money under the Share Sale Agreement, but rather to repay the loan pursuant to the Loan Agreement. Those covenants under the Loan Agreement have not been guaranteed by, relevantly, Mr Williamson.
[42] Mr Land, on behalf of Thorne Developments, submits that the Share Sale Agreement and the Loan Agreement must be read together and on a proper construction of the Share Sale Agreement, both Mr Williamson and Mr Laird as Trustee have covenanted to repay the money owing under the Loan Agreement. That being a covenant under the Share Sale Agreement, it is guaranteed by Mr Williamson.
[43] There can, in my view, be little doubt that Mr Williamson has guaranteed the performance of covenants under the Share Sale Agreement, but not covenants under the Loan Agreement. Clause 14 of the Share Sale Agreement[9] expressly and consistently refers to the guarantee of obligations "under this agreement".[10] Even if the Share Sale Agreement is an "agreement ... entered into in connection with"[11] the Loan Agreement, there is nothing remotely resembling a covenant by Mr Williamson guaranteeing any obligations under the Loan Agreement.
[44] If Mr Williamson is to be liable as guarantor to pay the money due under the Loan Agreement, there must be a covenant in the Share Sale Agreement obliging the Buyers to repay the loan under the Loan Agreement. Mr Williamson would then be liable as guarantor of that obligation.
[45] The only clause possibly creating such an obligation is clause 5.1 of the Share Sale Agreement and, in particular, clause 5.1(a)(iii) which is set out at paragraph [23] of these reasons. Clause 5.1 creates obligations which fall on the "Buyers", namely Mr Laird as Trustee and Rick Williamson Investments. Any obligations under clause 5.1 which fall on the "Buyers" have been guaranteed by Mr Laird and Mr Williamson.
[74]
"49 However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'.[21] It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
[75]
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations.[22]"
[76]
[53] Here, there are various circumstances which are non-contentious and which provide context:
Both the Share Sale Agreement and the Loan Agreement were executed on the same day.
The day of execution of the two agreements was the day of completion of the Share Sale Agreement.
The day of execution of the two agreements was the day the sum was advanced under the Loan Agreement.
There was no physical action required to advance the sum under the Loan Agreement. It was effected by acknowledgments in the Loan Agreement.
The clear purpose of the two agreements was to effect a transfer of the shares to the Buyers with an immediate payment of $395,000 with the real and substantial payment to be effected over time as provided by the Loan Agreement.
One of the Buyers was Mr Laird, in his capacity as trustee, and one was a company controlled by Mr Williamson.
The Share Sale Agreement is referred to in the Loan Agreement.[23]
The Loan Agreement is referred to in the Share Sale Agreement.[24]
The Share Sale Agreement defines the term, "Guarantor" as Mr Laird and Mr Williamson. In the Loan Agreement, there are references to "the Guarantors" and "any guarantor",[25] but those terms are not defined in the Loan Agreement and no guaranteeing parties are identified.
[54] The general structure of the transaction evidenced by the Share Sale Agreement is the transfer of shares to two entities whose moving minds then provide guarantees. That is part of the commercial context. It might be logical to think that the ultimate payment of the consideration through repayment of the loan might be guaranteed. That though is not the point. The objective intention of the parties must be ascertained from the text interpreted against relevant context.
[55] The parties intended the execution of the two agreements and completion under the Share Sale Agreement to all occur simultaneously with the execution of the documents. Thorne Developments submits that if, as is submitted on Mr Williamson's behalf, the obligation of the Buyers in relation to the purchase price is discharged upon "Completion", the guarantees have little effect. That may be so as it relates to the purchase price. However, there are other obligations of the Buyers which are guaranteed, for example, the Buyers' indemnity given by clause 6.7 and the nature of confidentiality by clause 9.1. Further, security is to be given under the Loan Agreement, perhaps nullifying the commercial need for guarantees.
[77]
"Secured Money includes the Loan and all other money which the Borrower agrees to pay under any provision of this agreement including interest."[31]
[78]
[66] Despite the term, "Secured Money" appearing with a lower case "s" and "m" in clause 7.1(2), I can see no reason to read the term otherwise than as defined. This is especially so when clause 7.1(2) is read with clause 7.1(1).
[67] Clause 7.1(1) is an acceleration clause. In clause 7.1(1), the term, "Secured Money" appears with a higher case "S" and "M". The clear intention of clause 7.1(1) and (2) is that upon default, the "Secured Money", as that term is defined, becomes payable and demand for payment of that money can be made on the Guarantors.
[68] Assuming that "the Guarantors" are Mr Laird and Mr Williamson, the meaning of clause 7 is that if Mr Laird as Trustee and Rick Williamson Investments[32] fail to pay an instalment due under Item 8 of the Loan Agreement:[33]
the "Secured Money" becomes payable by Mr Laird as Trustee and Rick Williamson Investments;[34] and
Mr Laird and Mr Williamson become liable for the "Secured Money".[35]
[69] However, nowhere do Mr Laird or Mr Williamson covenant to pay the "Secured Money". They guarantee only the obligations of the Buyers under the Share Sale Agreement. That is, relevantly here, payment of the purchase price.
[70] Mr De Waard was, during argument, unable to explain why "Guarantors" would be mentioned in clause 7.1 of the Loan Agreement. It is unsatisfactory not to be able to attribute any meaning to clause 7.1(2). Perhaps, like clause 7.2(7), it has been introduced as a standard clause having no meaning in the circumstances of there being no guarantors.
[71] The first construction is the correct one. The obligation of the Buyers under the Share Sale Agreement is to procure the payment of the purchase price "on Completion". That includes procuring the advance under the Loan Agreement. Once that is effected (as it was), the obligation of the Buyers under clause 5.1(a)(iii) has been discharged. Repayment by the Borrowers pursuant to the Loan Agreement is not an obligation guaranteed by Mr Laird or Mr Williamson. Mr Laird is liable as a borrower. He assumed that liability as trustee. However, the proceedings against Mr Williamson fail.
[79]
Should judgment be entered against Mr Laird in two different capacities?
[80]
[72] Mr Laird as Trustee is both a Buyer under the Share Sale Agreement and a Borrower under the Loan Agreement. In his personal capacity, he was a guarantor of the obligation to pay the purchase price under the Share Sale Agreement. For the reasons already explained, that obligation has been discharged. He is not a guarantor of obligations under the Loan Agreement.
[73] Whether judgment is entered against him as "Graham David Laird" or as "Graham David Laird as Trustee of the Laird Family Trust" really makes no difference. That is because a trustee is personally liable for debts incurred in their capacity as trustee. The trustee then has a right to seek indemnity from the trust assets.
[74] Consistently though with the pleadings, it is appropriate that judgment be entered against him as "Graham David Laird as Trustee of the Laird Family Trust".
[81]
Does interest run while Thorne Developments Pty Ltd was deregistered?
[82]
[75] Section 601AH of the Corporations Act2001 (Cth) empowers this Court to validate anything done by a company during the period it is deregistered.
(1) ASIC may reinstate the registration of a company if ASIC is satisfied that the company should not have been deregistered. ...
[84]
(2) The Court may make an order that ASIC reinstate the registration of a company if:
[85]
(a) an application for reinstatement is made to the Court by:
(i) a person aggrieved by the deregistration; or
(ii) a former liquidator of the company; and
(b) the Court is satisfied that it is just that the company's registration be reinstated.
[86]
(a) ASIC reinstates the registration of a company under subsection (1) or (1A); or
(b) the Court makes an order under subsection (2);
[87]
(c) validate anything done during the period:
(i) beginning when the company was deregistered; and
(ii) ending when the company's registration was reinstated; and
(d) make any other order it considers appropriate. ...
[88]
(5) If a company is reinstated, the company is taken to have continued in existence as if it had not been deregistered. A person who was a director of the company immediately before deregistration becomes a director again as from the time when ASIC or the Court reinstates the company. Any property of the company that is still vested in the Commonwealth or ASIC revests in the company. If the company held particular property subject to a security or other interest or claim, the company takes the property subject to that interest or claim. ..." (emphasis added, legislative notes removed)
[89]
[77] By order of 16 June 2022, Bradley J validated:
the making of the Share Sale Agreement;
the making of the Loan Agreement;
the steps taken under the Share Sale Agreement and the Loan Agreement by Thorne Developments to perform its obligations thereunder;
"[The] powers [bestowed by s 601AH] enable the court to bring the things that were done during the unregistered period into alignment with the statutory effect of reinstatement under s 601AH(5)."[37]
[91]
[79] The discretion bestowed by s 601AH(3) is a wide one and would include modifying the ordinary effect of reinstatement.[38] The Loan Agreement was validated by Bradley J unconditionally. The effect of the orders is that the Share Sale Agreement and the Loan Agreement have effect as if the company was never deregistered.[39]
[80] By clause 3 of the Loan Agreement:
[92]
The Borrower is not required to pay interest provided that the Loan is paid on or before the Expiry Date. In the event that the Loan is not paid or not paid in full on or before the Expiry Date then, interest shall accrue at the rate of twelve percent (12%) per annum on monthly rests."
[93]
[81] Consequently, Thorne Developments is entitled to interest at the rate of twelve per cent per annum on monthly rests from the "Expiry Date", namely 31 August 2012.[40] There is no basis upon which Thorne Developments could be denied interest over the time it was deregistered.
[94]
[82] Thorne Developments seeks a total of 24 orders consequent upon the judgment of Bradley J validating the Share Sale Agreement and the Loan Agreement. A draft order was produced.
[83] Draft Order 1 seeks judgment for Thorne Developments against Mr Laird as Trustee and Rick Williamson Investments under the Loan Agreement for:
$1,476,775 plus interest at 12 per cent per annum on monthly rests from 9 September 2012;
costs "on a full indemnity basis" to 30 June 2017;
"all expenses incurred by the Plaintiff thereafter".
[84] For the reasons I have already given, judgment should be given against Mr Laird as Trustee and Rick Williamson Investments for the sum of $1,476,775 plus interest at twelve per cent per annum on monthly rests from 31 August 2012. The parties can calculate the total interest and have liberty to apply if agreement cannot be reached.
[85] The question of costs and "expenses" is problematic. Thorne Developments was represented by lawyers up to a point. There is a discretion in the Court to award it those costs. However, it has failed in its proceedings against Mr Williamson. Mr Williamson may seek costs. Mr Williamson though may struggle to achieve a substantial costs order in his favour. He ultimately successfully defended the proceedings upon the construction of two documents, the Share Sale Agreement and the Loan Agreement. He could have raised that argument and had it determined years ago. Instead, he sat back while Thorne Developments expended costs pursuing him and he also incurred costs himself.
[86] A claim is also made for expenses incurred by Thorne Developments after the lawyers had withdrawn. The precise expenses claimed will have to be identified and arguments about their reasonableness distilled.
[87] Directions should be given for the exchange of submissions and material in relation to both the question of costs and expenses.
[88] Draft Order 2 seeks a declaration as to the assets of Mr Laird as Trustee and Rick Williamson Investments which are available to satisfy the judgment. I decline to make a declaration in the terms sought. Such questions ought to be determined in the process of execution of the judgment if they actually arise.
[89] Draft Orders 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 all seek judgment in different alternative terms to that in Draft Order 1. For the reasons explained, the judgment should be entered against Mr Laird as Trustee and Rick Williamson Investments only, so the application for those orders need not be considered further.
[95]
"21. An order that a Deed of Guarantee and Indemnity signed sealed and delivered by Patrick Norman Casey of 19 Dennis Street, South Mackay, Qld 4740 on 28th day of August 2015 in favour of the Defendants in this proceeding be delivered up and cancelled.
[96]
An order that the restraining order against Patrick Norman Casey set out in paragraph 2 of the court's Order dated 14 August 2015 be discharged forthwith.
An order that Caveat No 716729201 dated 2 September 2015 over Lot 34 on RP727939 in the County of Carlisle, Parish of Howard with Title Reference 20940205 be removed forthwith."
An order that the Order of Byrne SJA dated 14 August 2015 be discharged."
[97]
[94] The Deed of Guarantee and Indemnity given by Mr Casey and the restraining order concern orders made by Byrne SJA on 14 August 2015. The caveat also relates to those orders.
[95] Byrne SJA, on 14 August 2015, ordered that:
[98]
"1. The Plaintiff provide security, within 14 days, for the defendants' costs pursuant to rule 670 of the UCPR by the Plaintiff's director, Patrick Norman Casey providing the Defendants with a written guarantee and indemnity whereby he agrees to be personally liable for any costs order made against the Plaintiff in these proceedings except the Costs Orders dated 18 May 2015 and 9 June 2015.
[99]
The Plaintiff's director, Patrick Norman Casey, be restrained until further order, from disposing of or encumbering the property situated at 19 Dennis Street, South Mackay in the State of Queensland, more particularly described as Lot 34, on RP 727939, being that land contained in title reference 20940205."
[100]
[96] Those orders were made pursuant to a security for costs application brought by the defendants.
[97] It is premature to make orders about the security provided. Mr Williamson has been successful in his defence of the proceedings. If he does obtain an order for costs, he may seek access to the security.
[98] Directions should be given for the exchange of submissions in relation to the orders made by Byrne SJA on 14 August 2015.
[101]
[99] For the reasons given, the orders are as follows:
[102]
Judgment against Graham David Laird as Trustee of the Laird Family Trust and against Rick Williamson Investments Pty Ltd in the sum of $1,476,775 plus interest at the rate of twelve per cent (12%) per annum calculated on monthly rests from 31 August 2012 to today.
2. The parties are to agree on the calculation of interest and submit a draft order forthwith and, failing agreement, each of the plaintiff, first and second defendants have liberty to apply.
3. The counterclaim of the first and second defendants is dismissed.
4. By 4.00 pm on 28 October 2022, the plaintiff file and serve upon the solicitors for the first and second defendants:
[103]
(a) a list of expenses claimed over the period when the plaintiff was not represented by lawyers;
>
> (b) any affidavits in support of the claim for such expenses;
>
> (c) written submissions:
>
> > (i) in support of the claim for expenses;
> >
> > (ii) in support of any application for costs over any period when the plaintiff was represented by lawyers;
> >
> > (iii) in defence of the fourth defendant's claim for costs;
> >
> > (iv) in support of any claim to discharge the security given for the defendants' costs of the proceedings;
>
> (d) any affidavits in support of the costs submissions.
[104]
By 4.00 pm on 25 November 2022, any defendant wishing to be heard on costs or expenses and/or the fate of security offered by the plaintiff, shall file and serve on all other parties:
[105]
(a) written submissions:
>
> > (i) in response to any submissions filed by the plaintiff;
> >
> > (ii) in support of any costs orders sought;
> >
> > (iii) as to the fate of the security provided by the plaintiff.
>
> (b) any affidavits in support of the submissions.
[106]
By 4.00 pm on 8 December 2022, the plaintiff file and serve any affidavits and written submissions in reply.
2. After 8 December 2022, any party who has filed and served written submissions on costs or expenses may have the matter listed for further hearing before Davis J.
[107]
[1] And steps by Thorne Developments Pty Ltd to perfect the transfer of the shares.
[14] On 18 October 2021, I ordered that the application for validation be determined as a separate issue to the debt claim.
[15] On 16 June 2022, Bradley J validated the agreements and the various steps taken to vest Thorne Developments' shares in Transparent Enterprises to the Buyers.[2]
[16] Thorne Developments then brought the current application. It submits that all its contractual obligations have been performed. It seeks judgment under the Loan Agreement for $1,476,775 plus interest against Mr Laird as Trustee and Rick Williamson Investments. It says that Mr Laird and Mr Williamson have guaranteed that indebtedness to it and judgment is sought against them. Various other ancillary orders are sought.
[17] The Laird and Williamson interests submit:
(vii) the failure by the Seller to give notice to the Guarantor of any default by the Buyers under this agreement;
(viii) any legal limitation, disability, incapacity or other circumstances related to the Buyers; or
(ix) the failure of any Guarantor to lawfully execute this agreement to grant the guarantee or the granting of this guarantee by any Guarantor being or becoming void or voidable.
(c) The guarantee provided by the Guarantor extends to cover the Buyers' obligations under this agreement as amended, varied or replaced, either with or without the consent of the Guarantor.
(d) If any or all of the Buyers becomes Insolvent, the Guarantor authorises the Seller to prove for all monies which the Buyers or any other person will have paid under this agreement and to retain and to carry into a suspense account and to appropriate at the discretion of the Seller any dividends received in the insolvency of the Buyers and all other moneys received in respect of the Buyers' obligations under this agreement until the Seller has been paid in full in respect of the Buyers' obligations under this agreement." (emphasis added)
[46] Clause 5.1(a)(iii) is somewhat ambiguous. It clearly refers to the balance purchase price of $1,476,775. However, the term, "to be paid in accordance with the Loan Agreement between the Seller and the Buyers"[13] could mean:
the advance of the money in discharge of the purchase price[14] (the first construction); or
repayment of the money advanced[15] (the second construction).
[47] If the first construction is the preferred one, then the obligation under clause 5.1(a)(iii) has been discharged and there is no obligation upon Mr Williamson to guarantee the repayment, he not having guaranteed the Buyers' (Borrowers') obligations under the Loan Agreement.
[48] If the second construction is the preferred one, then the Buyers have, by the Share Sale Agreement, covenanted to ensure repayment under the Loan Agreement and, as Mr Williamson has guaranteed that obligation, he is liable under the guarantee.
[49] The aim is to objectively ascertain the intention of the parties from the text they chose to adopt,[16] and not from an assessment of what the parties actually subjectively intended by the words they used.[17]
[50] The objective meaning of the text is determined by the words used and their context. Context in this sense includes the contract as a whole, any documents referred to in the contract and the purpose of the contractual arrangements.[18]
[51] Part of the context against which a commercial contract is to be construed is that it is a bargain between two or more commercial parties. Ultimately, the test will be "what a reasonable businessperson would have understood those terms to mean".[19]
[52] As to the relevance of external materials to the construction exercise, French CJ, Nettle and Gordon JJ observed in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd:[20]
[56] Clause 5.1 is entitled, "Payment on Completion". That suggests that clause 5.1(a)(iii) refers to the payment of the purchase price "on Completion", not repayment of the sum loaned at some point after "Completion". However, by clause 15.3, headings do not affect the interpretation of the contract.
[57] Clause 5.1 commences with the words, "On Completion" and a list of payments then appear at sub-paragraphs 5.1(a)(i), (ii) and (iii). If the payment in clause 5.1(a)(iii) is to be made "on Completion", then that is a factor favouring the first construction. Payments under the Loan Agreement are not made "on Completion". They are to be made months later.
[58] The sum identified in clause 5.1(a)(i) is a payment of $95,000 paid to a solicitor's trust account over two months previously. The payment into the trust account was not made "on Completion". However, what is clearly meant is that the Buyers will "procure" the money held on trust to be released to the sellers "on Completion".
[59] The sum payable "on Completion" is the balance purchase price, namely $1,476,775. On no possible construction of clause 5 of the Share Sale Agreement could the Guarantors be liable for interest owing under the Loan Agreement. Therefore, if clause 5.1(iii) imposes an obligation upon the Buyers to repay "in accordance with the Loan Agreement", the Guarantors have guaranteed some, but not all of, the Borrowers' obligations.
[60] Read literally, clause 5.1 strongly favours the first construction.
[61] That construction is supported by clause 7.3[28] of the Share Sale Agreement. By that clause, any indebtedness is discharged "upon Completion". Therefore, the obligation to pay the purchase price is discharged, leaving the Buyers' (Borrowers') only obligation (relevantly here) to pay money due under the Loan Agreement.
[62] However, clause 7 of the Loan Agreement, as already observed, concerns default. Clause 7.1 identifies the rights of Thorne Developments on default and clause 7.2 identifies the events of default. In two places in clause 7, there is mention of "Guarantors", that being in clause 7.1(2) and 7.2(7).[29]
[63] Clause 7.2(7) is not significant. It refers to "any guarantor" who may be a body corporate. Neither of the two guarantors to the Share Sale Agreement are bodies corporate.
[64] Clause 7.1(2), when read with clause 7.2, provides:
if "the Borrower fails to pay any of the Secured Money when due",[30] then
an "Event of Default" has occurred, and
"the Lender may demand the Guarantors pay all the secured money".
[65] In clause 7.1(1), the term, "Secured Money" appears with a higher case "S" and "M", whereas in clause 7.1(2), the same term appears with a lower case "s" and "m". The term "Secured Money" appears as a defined term with a higher case "S" and "M" as follows:
[90] Draft Orders 16, 17 and 18 concern execution of any judgment against Mr Laird and Mr Williamson. No judgment has been obtained against Mr Williamson. As to rights of execution against property of Mr Laird, any such issues can be dealt with later during the execution of the judgment if they actually arise.
[91] Draft Order 19 seeks the dismissal of the counterclaim brought by Mr Laird as Trustee and Rick Williamson Investments. That order is not opposed and should be made.
[92] Draft Order 20 seeks costs and expenses in relation to the counterclaim. That should not be ordered now, but the costs of the counterclaim should be dealt with as part of the costs of the proceedings.