The appeal against the Tribunal's second decision
44The reasons given by the Tribunal. As indicated above, the Tribunal's second decision was to the effect that the Statement of Defence filed by the Lessee in the later proceedings disclosed no defence in law to the Lessors' claim for arrears of rent plus interest, and that the Lessors were therefore entitled to summary judgment for the amount claimed by them, namely, $248,499.390.
45The principal question addressed in the decision was whether the Lessee would be entitled to set off its claim against the Lessors in the earlier proceedings - being for damages for breach of the covenant for quiet enjoyment, conduct derogating from the grant of the Lease and contraventions of sections 33 and 34 of the RL Act - against the Lessor's claim in the later proceedings.
46The position taken by the Lessors was that any right of set off arising under general equitable principles was excluded by clause 8.1 of the Lease. This stated:-
8.1 The Lessee must make payments under this lease to the Lessor (or to a person nominated by the Lessor in a notice to the Lessee) by the method the Lessor reasonably requires without set-off, counterclaim, withholding or deduction.
47In its decision at [8 - 11], the Tribunal held that a right of set off arose when the asserted set off went 'to the root of' or was 'essentially bound up with', so as to 'impeach the title of' the initial complainant. It expressed the view that it was 'well arguable' that the Lessee's claim in the earlier proceedings sufficiently impeached the Lessors' title. It then discussed a decision of the English Court of Appeal, Connaught Restaurants Ltd v Indoor Leisure Ltd [1994] 4 All ER 834.
48In that case, a claim by the lessee involved damage from water penetration and alleged breach of the lessor's covenant for quiet enjoyment. It was accepted that the lessee had the right of equitable set off against a claim for outstanding rent, even though the lessee covenanted in the lease to pay rent 'without any deduction'. The Court proceeded on the basis that a right of set off could be excluded by express words or necessary implication, but that any such exclusion must be effected by clear words. The Court's conclusion was that the words used were insufficient for this purpose.
49Paragraphs [12] to [14] of the Tribunal's decision contained a discussion of Australian decisions on this question of exclusion of the right of set off. The Tribunal quoted passages from two decisions in the Supreme Court, Batiste v Lenin [2002] NSWSC 233 (Bryson J) and Miwa Pty Ltd v Siantan Properties Pty Ltd [2010] NSWSC 1203 (Windeyer AJ). In both of them, a right of set off or 'recoupment' claimed by a lessee against a lessor's claim for rent was held to have been excluded by a clause similar to clause 8.1 of the Lease in the present case. The Tribunal also referred to a passage in the judgment of Sheller JA, with whom Giles and Santow JJA agreed, in Batiste v Lenin [2002] NSWCA 316 at [49]. In this passage, his Honour stated that he was 'not persuaded' of the correctness of Bryson JA's opinion regarding the effect of the clause purporting to exclude the right of set off, but that he did not need to consider the matter further.
50At [15], the Tribunal stated:-
In my view I am bound to follow the decision of Bryson J in Batiste. I note incidentally that the relevant covenant under my consideration is in much stronger terms than the one before Bryson J in that cl 8.1 of the lease refers expressly to "set off, counterclaim, withholding or deduction".
51Paragraphs [16] and [17] were concerned with a submission by the Lessee relating to rights of set-off as between a claim under NSW legislation regulating the building industry and a claim under Commonwealth trade practices legislation. The Tribunal held this submission to be irrelevant.
52At [18 - 19], the Tribunal held as follows:-
18 There is in my view no reason to suppose that the legislature intended in the absence of an express reference that the provisions of ss 33 and 34 of the [RL Act] would affect contractual obligations in relation to the payment of rent. Particularly is that so in this case where the respondent's [i.e. the Lessee's] right to continue with the earlier proceedings would remain unaffected by the making of the orders sought by the applicants [i.e. the Lessors]. There is in my opinion no inconsistency, as submitted by the respondent, between the provisions of sections 33 and 34 of the Act and the provisions of the lease, and as a consequence, s 7 of the Act does not apply.
19 It follows from what I have said that, as the matter was argued, no defence was disclosed which could operate in law as a defence to the applicants' claim.
53The Tribunal then went on to deal with an argument, which it invited the Lessee to put forward in supplementary submissions after the hearing, that it had a right of set off based on a possible claim against the Lessors under section 36 of the RL Act.
54So far as relevant, section 36 states:-
36 Damaged premises
(1) A retail shop lease is taken to provide for the following if the shop or the building of which the shop forms part is damaged:
(a) The lessee is not liable to pay rent, or any amount payable to the lessor in respect of outgoings or other charges, that is attributable to any period during which the shop cannot be used under the lease or is inaccessible due to that damage.
(b) If the shop is still useable under the lease but its useability is diminished due to the damage, the lessee's liability for rent and any amount in respect of outgoings attributable to any period during which useability is diminished is reduced in proportion to the reduction in useability caused by the damage...
55At [22 - 26], the Tribunal said:-
22 The applicants' further submissions pointed to the circumstances that their claim is for rent dating back to May 2007 which with interest amounts to nearly $250,000 that a defence based upon s 36 of the Act has never been raised or sought to be raised, that Mr Craig Kelly on 6 April 2011 told the Tribunal that the respondent had in effect no funds and would be unable to satisfy the costs order made on 22 March, that on 25 March 2011 Mr Craig Kelly ceased to be a director of the respondent, that the making of orders against the respondent upon the present application will not affect its rights to continue the proceedings numbered 085095, that s 36 can have no material application in light of the absence of evidence that the premises could not be used or were inaccessible for the whole or a substantial part of the period of 60 days for which rent is being claimed, that at its highest evidence filed on the part of the respondent claimed that the useability of the premises was diminished for no more than 13 days of the relevant period and that s 36 does not permit a lessee simply to withhold rent absent agreement with the lessor (see Sarip Investment Pty Ltd v Uno Uno Pty Ltd [2004] NSWADT 27).
23 The respondent in its submissions in reply referred to the defences already pleaded including alleged breaches of the covenant for quiet enjoyment and of ss 33 and 34 of the Act. It submitted that it "has additional grounds of defence arising from the same factual matrix as is the evidence already filed under the provisions of ss 36, 62B and 62D of (the Act)".
24 For reasons given earlier I reject the proposition that the respondent is entitled to defend these proceedings by way of set off relying on asserted breaches of the covenant for quiet enjoyment and ss 34 and 34 of the Act.
25 If I gave leave for a defence based on s 36 to be raised then on the material before me it could only relate to a small part of the period for which rent is claimed. The utility of allowing that course would thus be very limited and potentially wasteful of the resources of both this Tribunal and the parties, particularly as the applicants are separately represented in the two proceedings. The balance of convenience overwhelmingly in my opinion favours the course of requiring the respondent to agitate all its complaints in matter 085095 where it is the applicant. Its rights in the meantime can be effectively protected by a stay granted in these proceedings.
26 In my opinion I should refuse the respondent leave to raise by way of set off a defence based on s 36 of the Act.
56The Tribunal's reasons concluded as follows:-
27 Pursuant to s 72(1)(a) of the Act I propose to order that the respondent pay to the applicants the sum of $248,499.30 inclusive of interest to 22 March 2011. I will reserve costs until the other proceedings are disposed of and I will grant a stay of the order for payment of $248,499.30 for a limited period during which I would anticipate that the respondent will take steps to have matter 085095 once more listed for hearing.
57The period of the stay that the Tribunal granted was 30 days.
58As indicated above, the Lessee put forward eight grounds of appeal relating to this decision. We will consider them in turn.
59Ground 1: Inconsistency between clause 8.1 of the Lease and section 72 of the RL Act. Mr Kelly argued that the Tribunal erred in not ruling that clause 8.1 was overridden by the combined operation of section 72(1)(a) and (b) and section 7 of the RL Act.
60Section 72 is headed 'Powers of Tribunal relating to retail tenancy claims'. Subsection (1) commences as follows:-
(1) In proceedings for a retail tenancy claim lodged with the Tribunal under this Part, the Tribunal is empowered to make any one or more of the following orders that it considers appropriate:
(a) an order that a party to the proceedings pay money to a person specified in the order, whether by way of debt, damages or restitution, or refund any money paid by a specified person,
(b) an order that a specified amount of money is not due or owing by a party to the proceedings to a specified person, or that a party to the proceedings is not entitled to a refund of any money paid to another party to the proceedings...
61Under the heading 'This Act overrides leases', section 7 states:-
This Act operates despite the provisions of a lease. A provision of a lease is void to the extent that the provision is inconsistent with a provision of this Act. A provision of any agreement or arrangement between the parties to a lease is void to the extent that the provision would be void if it were in the lease.
62Mr Kelly's argument was along the following lines: (a) section 72(1)(a) and (b) of the RL Act confers power on the Tribunal to order (amongst other things) that a rent obligation should be reduced by way of equitable set off; (b) clause 8.1 is in conflict with this power; (c) section 7 provides that where any conflict arises between a term of a retail lease and a provision of the Act, the Act should prevail.
63This argument clearly fails. As Mr Hynes pointed out, section 72(1) merely confers power on the Tribunal to make orders, such as those defined in paragraphs (a) and (b), in the exercise of its jurisdiction under the RL Act. It does not prescribe the circumstances in which any particular orders must be made. There is therefore no inconsistency between these paragraphs within section 72(1) and a clause such as clause 8.1 of the Lease.
64Ground 2: Batiste v Lenin not applicable. The proposition that the Lessee advanced here was that because the decision in Batiste v Lenin [2002] NSWCA 316 related to a commercial lease, not a retail lease governed by the RL Act, the Tribunal erred in following it. In support of this Ground, the Notice of Appeal maintained that 'the intention behind' this Act, including section 7, was to 'safeguard the powers of the Tribunal to make appropriate orders in disputes between lessors and lessees, including orders that a specified amount of money claimed as owing under a lease, is not due or owing either in part or full, without the Tribunal being restricted... by such clauses as 8.1 contained in the lease'.
65This submission is flawed for the same reasons as its predecessor. Indeed, it does little more than rephrase that submission. It does not point to any provision of the RL Act that is incompatible with clause 8.1 and for this reason triggers the operation of section 7.
66Furthermore, neither Batiste v Lenin nor Miwa Pty Ltd v Siantan Properties Pty Ltd [2010] NSWSC 1203, both of which received consideration by the Tribunal, contained any express or implied indication that a lease falling under the RL Act would be subject to a different ruling on this question. The same can be said of a detailed analysis of the law conducted by the Full Federal Court in a case to which Mr Hynes referred us, Norman: Re Forest Enterprises v FEA Plantation Ltd (2011) 280 ALR 470; [2011] FCAFC 99 at [180 - 202].
67In the course of this analysis, the Federal Court commented at [194] that while 'the weight of appellate authority... does not support the view that "without deduction" excludes equitable set off', it nevertheless saw 'considerable force' in the observations of Bryson J in Batiste. The Court went on to hold at [199] that the phrase in the lease that it was considering - 'without any deductions whatsoever' - could not be 'consistent with an entitlement to maintain an equitable set off'. At [200], it said that it regarded as important the presence of 'the emphatic word "whatsoever"'.
68Mr Hynes argued that, as the Tribunal had noted at [15], the phrase in clause 8.1 of the Lease - 'without set-off, counterclaim, withholding or deduction' - was also 'stronger' than the phrase 'without deduction' that had been the subject of Bryson J's ruling in Batiste.
69Ground 3: Inconsistency between clause 8.1 of the Lease and section 33 of the RL Act. Section 33 requires that, except in an emergency, a lessor must give at least two months' notice in writing to a lessee before commencing any alteration or refurbishment of the building or shopping centre where the leased premises are located, if the alteration or refurbishment is likely to affect the lessee's business adversely.
70Mr Kelly submitted along the same lines as under Ground 1. He claimed that the power conferred by section 72(1) to make orders for the payment of damages under section 33 was inconsistent with clause 8.1 of the Lease and should have been held by the Tribunal to override this clause, by virtue of section 7.
71This Ground fails for the same reason as Ground 1. In addition, as Mr Hynes observed, the Amended Application filed by the Lessee did not appear to allege any conduct by the Lessors contravening section 33.
72Ground 4: Inconsistency between clause 8.1 of the Lease and section 34 of the RL Act. So far as relevant, section 34 states:-
34 Lessee to be compensated for disturbance
(1) A retail shop lease is taken to provide that if the lessor:
(a) inhibits access of the lessee to the shop in any substantial manner, or
(b) takes any action that would inhibit or alter, to a substantial extent, the flow of customers to the shop, or
(c) unreasonably takes any action that causes significant disruption of, or has a significant adverse effect on, trading of the lessee in the shop, or
(d) fails to take all reasonable steps to prevent or put a stop to anything that causes significant disruption of, or which has a significant adverse effect on, trading of the lessee in the shop and that is attributable to causes within the lessor's control, or
(e) fails to rectify any breakdown of plant or equipment under the lessor's care or maintenance, or...
and the lessor does not rectify the matter as soon as reasonably practicable after being requested in writing by the lessee to do so, the lessor is liable to pay the lessee reasonable compensation for any loss or damage (other than nominal damage) suffered by the lessee as a consequence.
73Invoking the same reasoning as he had advanced with reference to Grounds 1 and 3, Mr Kelly argued that section 'took precedence' over clause 8.1. He indicated that the provision within section 34 on which the Lessee chiefly relied was paragraph (e) of subsection (1).
74For much the same reasons as Grounds 1 and 3, this Ground fails. We note in addition that the Lessee would appear to be unable to sustain any claim under paragraph (c) or (d) of section 34(1). These paragraphs allow for claims for disruption to, or adverse effects on, 'trading of the lessee in the shop'. As stated above at [8], it was the Franchisee, not the Lessee, that conducted business in the premises pursuant to the Lease.
75Ground 5: Availability of a claim under section 36. The relevant provisions within this section have already been quoted.
76According to Mr Kelly, the Tribunal erred in three ways in rejecting the Lessee's arguments deriving from section 36. First, it erred in law in refusing leave for a defence based on the section to be raised by way of set off. Secondly, it erred in finding that the disturbances of which the Lessee complained rendered the premises totally unusable for periods totalling 13 days, whereas it was clear from the filed evidence that in fact they had been unusable for periods totalling 22 days. Thirdly, it erred by not taking account of the provision in section 36(1)(b) that when the useability of the premises was 'diminished' by damage to them, the lessee's liability for rent and outgoings was reduced in proportion to the reduction in useability caused by the damage.
77As to the first of these matters, we agree with Mr Kelly in so far as the language of the Tribunal suggested that the question to be considered was whether a defence by way of 'set off' should be permitted. As we read section 36, a lessee who invokes subsection (1) or (2) does not claim a 'set off'. The claim is instead that, for the relevant period of time, the lessee either has no liability to pay rent or has a reduced liability. In these ways, the contractual liability to pay rent is varied by statute, for the lessee's benefit. It is not a matter of the lessee responding to a claim for unpaid rent by putting forward a claim of a wholly different nature, such as a claim for damages for conduct by the lessor disrupting its trading.
78At [22], the Tribunal referred to Sarip Investment Pty Ltd v Uno Uno Pty Ltd [2004] NSWADT 27 in support of its decision. In his submissions in the appeal, Mr Hynes also cited this case. The relevant passage (at [21]) is as follows:-
21 ... Section 36 refers to damage to the demised premises or to the building of which the premises forms part. The Respondent pleaded (as I understand it) that the shop was "still useable under the lease but is useability is diminished due to the (alleged) damage and therefore the Respondent's liability for rent and in amount in respect of outgoings attributable to any period during the useability is diminished caused by the damage". There is no doubt that there was damage and disturbance caused to the Respondent's business by the development of the adjoining property - there is a wealth of letters from the solicitors for the Applicant to the adjoining owners and others. But that of itself does not necessarily amount to a claim under section 36. Although it is true that section 36(1)(b) permits a reduction in rent where useability of demised premises is diminished, there is nothing in that section that would permit a lessee to somehow or other simply withhold rent (absent agreement with the lessor) and expect that by some magical process the amount withheld would equal the lessee's reduced liability. It would seem uncontested that the Respondent commenced withholding rent from or on or about 25 December 2002 and if it had not been for the Applicant filing its Application on 12 August 2003 then there was not put in place by the Respondent any magical process that would have determined, or even touched upon, the amount of its reduced liability. It seems to me that the actions of the Respondent were quite unwarranted and effectively caused the Applicant to seek relief in this Tribunal in circumstances where it should have been the Respondent applying to this Tribunal for a reduction in rent due to the alleged diminished useability...
79To the extent that this passage could be read as indicating that the only way in which a lessee may establish entitlement under section 36(1) or (2) to an exemption from rent or a reduction in the amount payable is by applying to the Tribunal, we would respectfully disagree. In contrast to section 34 or indeed section 33, the type of benefit that these subsections of section 36 potentially confer on a lessee facing a claim for arrears of rent goes further than providing grounds for a cross claim seeking damages. As stated above, they extinguish, or reduce the amount of, the lessee's liability to pay rent. If a lessee, relying on either or both of them, pays less rent than the lease requires and for this reason is sued for arrears of rent, it may raise section 36(1) and/or (2) by way of defence, and if it has withheld no more than the court or tribunal hearing the case determines to be warranted by the circumstances, its defence will be successful.
80Although at [26] the Tribunal used the term 'set off', the approach that it adopted at [25] displayed, on our understanding, a recognition that a question of set off, strictly so called, did not arise and that the effectiveness of clause 8.1 in precluding a set off was not in issue at this point in the proceedings.
81The Tribunal stated instead (at [25]) that the scale of the reduction in rent that might be available to the Lessee was relatively small and that for this reason in particular it was preferable, having regard to the 'balance of convenience', that the Lessee's claim under this section should be dealt with in what we have called the earlier proceedings, alongside its other claims against the Lessor. The Tribunal apparently assumed that the stay of those proceedings would be lifted, following payment by the Lessee of the costs that had been ordered. Accordingly, the Tribunal (at [27]) stayed its order that the Lessee pay arrears of rent and outgoings (plus interest) for 30 days, to provide an opportunity to the Lessee to resuscitate the earlier proceedings.
82The remaining matters that Mr Kelly raised in arguing Ground 5 of the appeal concerned directly the factual basis of this aspect of the Tribunal's decision. As far as can be discerned, the Tribunal proceeded on the assumption, stated in [22], that 'at its highest evidence filed on the part of the respondent [Lessee] claimed that the useability of the premises was diminished for no more than 13 days of the relevant period'.
83Mr Kelly asserted that the Lessee's evidence showed that the periods when the premises were totally unusable on account of damage - not merely in a state where their useability was 'diminished' - amounted to 22, not 13, days. From our reading of relevant parts of the evidence filed in the matter, we have ascertained that this is only correct if all the disruptions alleged by the Lessee to have caused damage to the premises are taken into account. But as stated above at [14], the period in respect of which the Lessors claimed arrears of rent and outgoings commenced in May 2007, about eight months after the first of the alleged disruptions.
84The Lessee's evidence further alleged as follows: (a) the most significant disruption before May 2007 occurred on 6 September 2006; (b) it rendered the premises totally unusable for a period of ten days (between 10 and 20 September); and (c) the Lessors granted an abatement of rent amounting to $7,233.35, on account of this disruption. This amount of abatement seems appropriate under section 36(1), given our understanding that the amount payable for monthly rent and outgoings at that time was about $16,000.
85For these reasons, we do not accept Mr Kelly's submission that the Tribunal's quoting of a total of '13 days during the relevant period' was erroneous. But we do agree with him that according to the Lessee's filed evidence these were days where the useability of the premises was nil, not merely diminished.
86We agree also that the Tribunal did not appear to take into account the Lessee's filed evidence suggesting that in addition to these 13 days there were other periods when the useability of the premises was 'diminished' within the meaning of section 36(2).
87With regard to the period from May 2007 onwards, that evidence described four specific incidents causing disruption, occurring on 24 October 2007, 18 November 2007, 28 March (or in the alternative 28 April) 2008 and 23 June 2008. They principally involved leakage of water from the ceiling, which in one instance (the earliest) caused the floor to buckle. The evidence also alleged disruption caused by electricity outages during September and December 2007.
88The descriptions of these incidents did not, however, suggest that significant 'diminution' in the 'useability' of the premises over any significant period occurred as a result of these incidents.
89In its submissions on section 36(2) to the Tribunal, the Lessee argued that rent paid to the Lessors before May 2007 should also be regarded as excessive and held liable to be refunded, on account of diminution in useability caused by disruptions. Leaving aside the occurrence on 6 September 2006, outlined above, the Lessee's evidence alleged disruptions on 2, 6 and 8 November 2006 and on 24 March 2007. They mostly involved flooding, but there was also vibration and excessive noise.
90Again, however, the 'useability' of the premises appears not to have been diminished for any significant period. In addition, we are not persuaded that, in the particular circumstances of this case, the Lessee could invoke section 36(2) to claim, in effect, a refund of rent already paid.
91The outcome of these considerations is that the Tribunal appears to have under-estimated the scale of the claim under section 36 that the filed evidence of the Lessee, taken 'at its highest', might have supported. The question for us is whether this aspect of its decision-making undermines the validity of its conclusion that this claim by the Lessee should not be imported as a ground of defence against the Lessors' claim for unpaid rent and outgoings, but should instead be 'agitated' by the Lessee, along with its other claims, in the earlier proceedings.
92We have not found this issue easy to resolve. But even when the matters that we have outlined are taken into consideration, it appears to us that the scale of any claim by the Lessee under section 36 could not have been substantial. The Tribunal, by staying its second decision for 30 days, gave the Lessee an opportunity to keep the claim alive. That opportunity was not taken up.
93For these reasons, Ground 5 of the appeal against the second decision fails.
94Ground 6: Failure to consider evidence that the Lessors agreed to rent being withheld. As formulated in the Notice of Appeal, this Ground was to the effect that an agreement was implicitly reached for the withholding of rent. The evidence for this was that the Lessors (a) allowed the Lessee to remain in occupation for a full year (i.e., between May 2007 and May 2008) while not paying any rent and (b) refrained from taking any action to enforce the payment of rent. For this reason, it was argued, the requirement (suggested in the passage quoted above from Sarip Investment Pty Ltd v Uno Uno Pty Ltd [2004] NSWADT 27 at [21]) that there must be an agreement for the withholding of rent if section 36 is to operate was in fact satisfied.
95At the hearing of the appeal, however, Mr Kelly acknowledged that no argument along these lines was put to the Tribunal in the Lessee's submissions.
96For this reason alone, this Ground fails. We also accept a contention by Mr Hynes that the relevant parts of the evidence filed by the Lessee do not support any claim that there was an agreement permitting rent to be withheld.
97Ground 7: Refusal to permit allegations of breaches of sections 62B and 62D. This Ground comprised a claim that the Tribunal erred in refusing to grant leave to the Lessee to amend its defence to the later proceedings by pleading that the Lessors had breached sections 62B and 62D of the RL Act.
98Under sections 62B and 72AA of the RL Act, a lessee under a retail shop lease who has established unconscionable conduct by the lessor may obtain (a) an award of damages against the lessor, (b) an order that 'a specified amount of money is not due or owing' by the lessee to the lessor, or (c) an order that the lessor is 'not entitled to a refund of any money paid to' the lessee. Under sections 62D, 62E and 72, a lessee may recover damages from the lessor on the ground of misleading or deceptive conduct.
99The Lessee sought leave along these lines in the supplementary submissions that it filed (see [17] above) following the Tribunal hearing on 6 April 2011. But the only references to sections 62B and 62D in its submissions were in a statement that it had 'additional grounds of defence arising for the same factual matrix as the evidence already filed, under the provisions of s36, 62B and 62D of the Retail Leases Act'. While it developed further its arguments relating to section 36, it said nothing more about the other two sections.
100This Ground fails, in our opinion, for essentially the same reasons as Grounds 3 and 4. Like sections 33 and 34, and in contrast to section 36, the relief available to a lessee under sections 62B and 62D does not take the form of elimination or reduction of its liability to pay rent. What the Lessee sought was leave to raise a cross claim for monetary relief, which it was not entitled to set off against the arrears of rent because of the presence of clause 8.1 in the Lease.
101Ground 8: Failure to take account of money drawn on the Lessee's bank guarantee. The Lessee claimed that in awarding the sum of $248,499.30 to the Lessors, the Tribunal erred in failing to take account of the Lessors' receipt of the sum of $40,000 under a bank guarantee provided by the Lessee at the commencement of the Lease. The Lessors drew down this sum pursuant to an interlocutory order of the Tribunal.
102Mr Hynes pointed out, however, that in the affidavit of debt on which the Tribunal's award of $248,499.30 to the Lessors was based, the Lessee was shown to have been credited with a payment of $45,000 on account of 'the application of the bank guarantee'. This payment was indicated as occurring in December 2010. On the 20th day of that month, the Tribunal made an interlocutory order dissolving an injunction previously granted to restrain the Lessors from having recourse to this guarantee. It noted that in consequence they were entitled to call on the guarantee.
103We see no reason to doubt this evidence. Ground 8 is therefore not made out.